Cement oligopoly posts ₦1.7tr profit but 2027 capacity surge threatens margins
Nigeria's three cement giants — Dangote, BUA, and HBM (formerly Lafarge) — booked ₦1.7 trillion after-tax profit in nine months to September, up 38% year-on-year. A bag now sells above ₦12,500. Revenues rose 20-25% while costs lagged, but the numbers hide structural distortions.
Dangote's "historic" ₦51bn net cash swing relied on stretching plant lives from 25 to 40 years (cutting ₦47bn depreciation) and capitalising ₦31bn interest in Q3 alone. Strip both and pre-tax growth drops from 41.5% to ~33%. The net cash figure excludes ₦62bn accrued interest, ₦25bn leases, and ₦269bn unpaid supplier capex — meaning Dangote owes roughly ₦300bn more than it holds. Shares at ₦1,420 now trade at 17x trailing earnings versus 14x in September.
BUA shows the strongest operations: 53% EBITDA margin (highest of three) and bulk cement growing from zero to ₦67bn. But its 17% tax rate halves peers' 34% — at normal rates, earnings would be 20% lower and its 19x multiple becomes 24x. BUA paid ₦339bn dividends from ₦176bn free cash flow, borrowing the difference; with 2.3% free float, nearly all went to the chairman.
HBM is the warning sign: Q3 sales down 5%, profit down 15%, maintenance costs doubled. It paid ₦354bn dividends (130% of prior year earnings) while cash crashed ₦388bn to ₦103bn. Capex runs at 7x depreciation.
The real story is 2027: ~14.5Mt new capacity coming online (HBM 5.5Mt, Dangote 6Mt, BUA 3Mt) — nearly 25% more supply. HBM is already recruiting deep-pocketed distributors to grab share. Margins this fat rarely survive that kind of oversupply.
If you hold these stocks, are you pricing in 2026 earnings or 2027's capacity glut?