Bamidele Famoofo
Industrial goods stocks are sure bet for stock market investors given their positive fundamentals and opportunities for expansion in Nigeria’s infrastructure segment.
A report released by Cordros Research indicates that the cement industry which is a key player in the sector is positioned for solid growth in 2025E, supported by resilient demand, pricing strength, improved cost dynamics, and a more stable macroeconomic backdrop.
According to the stock analysts, operators are set to benefit from sustained construction and infrastructure activity, with additional support from relative currency stability and stronger operational efficiency. While risks around fiscal policy execution and regulatory oversight persist, we believe the sector is transitioning into a more stable and fundamentally driven phase.
“Across our coverage, we maintain a “BUY” rating for Lafarge Africa Plc (WAPCO; NGN104.71/share), supported by (1) a strong revenue outlook, (2) anticipated EBITDA margin expansion, (3) low leverage, and (4) a healthy balance sheet.
“Meanwhile, we upgrade Dangote Cement Plc (DANGCEM; NGN542.98/share) to a “BUY” rating, reflecting our expectations for EBITDA margin expansion, a decline in FX losses and earnings acceleration.
“Lastly, we upgrade BUA Cement Plc (BUACEMENT; NGN75.87/share) from “SELL” to “HOLD” given expectations of subdued cost growth, EBITDA margin expansion, and lower FX losses,” Cordros noted.
The experts anticipate an uptick in cement volumes in 2025E, driven by increased government infrastructure spending and a gradual recovery in private real estate investment. They argued that the implementation of public-private partnership (PPP) frameworks for major road and infrastructure projects is expected to enhance execution with a positive ripple effect on demand.
Additionally, the 69.9 per cent y/y increase in the FG’s capex to N23.40 trillion (with NGN5.99 trillion earmarked for infrastructure), alongside expanded infrastructure budgets at the sub-national level, underpins our positive outlook for cement demand in 2025E.
“As such, we project sales volume to grow collectively by 7.0 per cent y/y to 33.94 million tonnes per annum – Mtpa (WAPCO: +27.1% y/y to 6.41 Mtpa | DANGCEM: +1.8% y/y to 18.00 Mtpa | BUACEMENT: +12.9% y/y to 9.53 Mtpa). Meanwhile, average cement price/t is expected to rise by c.24.0% y/y in 2025E (vs. 54.4% y/y in 2024), providing additional support to revenue growth. Thus, we estimate revenue growth of 40.7% y/y for WAPCO, 21.4% y/y for DANGCEM, and 40.6% y/y for BUACEMENT in 2025E,” the report disclosed.
The experts expect earnings growth to outpace revenue in 2025E, supported by cost optimisation initiatives (i.e. increased use of alternative fuels, local raw material sourcing, adoption of CNG trucks, and process automation) as well as a more stable FX environment. These measures are expected to moderate growth in COGS and OPEX, thereby supporting gross and EBITDA margins expansion across all listed players. As a result, we forecast strong EPS growth for WAPCO (+110.0% y/y to NGN13.06), DANGCEM (+80.3% y/y to NGN53.61), and BUACEMENT (+295.9% y/y to NGN8.64) in 2025E.
Cordros Research investment case for Nigeria’s cement sector is anchored on (1) resilient infrastructure-led demand, supported by federal and subnational capex commitments, greater adoption of concrete technology, and private-sector construction growth, (2) strong pricing momentum, with double-digit price growth expected to support revenue expansion, (3) easing cost pressures and enhanced efficiency gains from moderating energy costs and fuel substitution efforts, and (4) relative currency stability and low FCY debt exposure, expected to significantly reduce FX-related losses. The combination of these drivers points to a positive outlook for the sector in 2025E. While risks around fiscal policy execution and regulatory interventions persist, they believe the positive tailwinds significantly outweigh the headwinds, hence their bullish stance.
The cement industry recorded a positive earnings growth in the financial year ended 2024 despite the economic turmoil in Africa’s most populous country.
Analysis of the performance of the three key players in the industry namely: Dangote Cement Plc, BUA Cement Plc and Larfarge ( WAPCO) Plc during the financial year ended December 31, 2024, showed that the average Nigerian who patronized these companies incurred an average 74 per cent increase in price to purchase their products.
Increase in the price of cement clearly added to the living pressure on Nigerians who are battling to survive hardships caused by rising inflation, especially food inflation and effects of removal of petroleum products subsidies and the increasing energy cost that arose due to the removal. The weak strength of the Naira among others have caused the ordinary citizen of the most populous black nation in the world a nightmare since the government of President Bola Tinubu came onboard in May 29, 2023.
Nigeria’s headline inflation rose to 24.23 per cent in March 2025, up from 23.18 per cent recorded in February, according to the data released by the National Bureau of Statistics in March.
The figure represents a 1.05 percentage point increase, marking a sustained rise in the general price level across the country.
On a month-on-month basis, inflation rose sharply by 3.90 per cent in March, compared to 2.04 per cent in February, indicating that the average price level increased at a faster pace.
The statistics office noted that the major drivers of the year-on-year inflation rate were food and non-alcoholic beverages, which contributed 9.28 percentage points; followed by restaurants and accommodation services (2.99 per cent), transport (2.47 per cent), and housing, water, electricity, gas, and other fuels (1.95 per cent).
The increase in cost of sales in the cement industry was primarily driven by higher energy costs, and operation & maintenance service charges, reflecting inflationary pressures, elevated energy prices, and currency depreciation.
Despite rising operational costs and declining profit margin, Cement manufacturers continue to thrive, recording appreciable increases in revenue and profit. Analysis of the financial figures of key players in the industry for the FY 2024 showed that aggregate revenue rose to N5.15 trillion, Dangote Cement being the largest contributor at N3.58 trillion, accounting for about 70 per cent of industry revenue. The largest cement maker in Africa grew its revenue by increasing the price of its products by 57 per cent in Nigeria. BUA Cement recorded a revenue growth 90.5 per cent as a result of price adjustments (c.85.7% y/y), yielding an all-time high revenue of N876.47 billion. Larfage (WAPCO) did not miss out in the price largesse as its revenue grew by about 72 per cent to N697 billion.
Aggregate profit (net) in the sector at the end of the 2024 financial year stood at N677.16 billion. Dangote Cement Plc was the largest contributor to profit at N503.25 billion representing about 74 per cent of industry aggregate. Larfarge increased profit to N100 billion with a 96 per cent growth while BUA Plc grew by 6.4 per cent y/y to N73.91 billion.
Profit margin suffered a setback due to high cost of operations in the industry with average figure standing at 13.15 per cent. The implication is that only about 13kobo of very 100kobo deployed into business by players in the period was converted to profit for shareholders.
