Dwarfing Competitors with Innovation, Regional Expansion

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INDUSTRY ANALYSIS

Jonathan Eze writes that a superior business strategy, with regional and global expansion goals in focus, has set Dangote Cement miles apart from its competitors

The successes recorded by Dangote Cement Company (DCN) and other subsidiaries of the Aliko Dangote’s business empire are product of constructive thinking, a global perspective and approach to doing businesses laced with an uncommon goal to be the best and pacesetter in their different product lines.
Companies that lack international perspective are often timid about moving into new markets. Fear of the unknown is normal but the ability to see beyond things and business ideas that are obvious and keying into them, has been the greatest asset of the richest man in Africa. This is however, the albatross of the Dangote Cement competitors.
They struggle to prioritise global expansion, because they are not convinced they need to diversify geographically in order to scale.
But for Dangote, global marketing and localisation, are not seen burden but huge advantage against competitors. The company believes that these enable it to attract customers in other markets, serve them better, and convert them into advocates for their brands.

It is a common knowledge that businesses with unimpressive global trajectories make the common mistake of diluting the importance of international growth, either by placing ownership at lower levels of their organisation that cannot influence strategy or within multiple silos across the organisation but such is not the case with the drivers of the DCN.
When globalisation becomes decentralised and has no clear owner, the business struggles to coordinate all the moving parts and drive international strategy forward.
On the other hand, when proper support for globalisation is in place, the end result is a “global first” culture. Employees throughout the company begin to display a globally minded attitude, which spills over into business processes. This undoubtedly is the reason behind the astronomic rise of the Dangote brand.
Just last week, Dangote Cement Plc confirmed plans to acquire the entire share capital of South Africa’s leading cement firm, PPC Limited.‎
In a notification signed by the Company’s Secretary, Mahmud Kazaure, which was sent to the Nigeria Stock Exchange (NSE), the board of directors of Dangote Cement revealed that it had communicated its interest to acquire the PPC’s share capital to the board of directors of the South African firm.
The company, however, added that the acquisition talks are still at the preliminary stage.
“This communication is still at the preliminary stage. Further details will be published subsequently, as appropriate,” the notice read.
Dangote Cement has been on an aggressive move to expand its operations to other African countries.

The company posted a revenue of N412.7 billion for the half year ended June 30, 2017, up by 41.2 per cent from N292.2 billion in the corresponding period of 2016.
It ended the first half with profit before tax (PBT) of N155.5 billion, with an increase of 24 per cent from N124.8 billion in 2016.
It achieved massive revenue increase across Nigeria and other African countries. The company posted a 12.6 per cent increase in sales volume across Africa, showing a growing capture of Pan-African market as Dangote Cement continues to gain grounds.
Revenues from operations in Nigeria increased by 34.5 per cent to ₦291.4 billion while Pan-Africa revenue increased by 63.7 percent to ₦124.4 billion from ₦76.0 billion mainly as a result of increased volumes and foreign exchange gains when converting the sales from country local currency into Naira.
Analysis of the half year result revealed that sales volumes of African operations increased by 12.6 per cent to 4.7 million metric tonnes with Sierra Leone making a 53 kilo tonnes maiden contribution.
Record of sales from its operations scattered around the African continent revealed that a total of 1.1million ‘metric tonnes of cement was sold in Ethiopia, almost 0.7 million metric tonnes sold in Senegal, 0.6 million metric tonnes sold in Cameroon, and 0.5 million tonnes in Ghana.

Also, 0.4 million metric tonnes of cement was sold in Tanzania and 0.3 million tonnes in Zambia. Sales volumes from Nigerian operations reportedly fell from 8.8Mt to 6.9Mt, occasioned by the onset of rains which stalled many construction projects.
Reflecting on the half year results, Dangote Cement’s Chief Executive Officer, Onne van der Weijde, expressed satisfaction that the company’s revenues have continued to grow despite low sales from the Nigerian operations noting that the revenues grew on the strength of sales from other African operations
“Our revenues have continued to grow despite the lower volumes seen in Nigeria, especially because of the recent heavy rains. Our margins have improved significantly, helped by improved efficiencies and a much better fuel mix in Nigeria.
“We are using much more gas and increasing our use of coal mined in Nigeria, thus reducing our need for foreign currency and supporting Nigerian jobs.
”Our Pan-African operations are growing well and increasing market share. We saw our first sales from Sierra Leone in the first quarter and our new plant in the Republic of Congo will be in production soon, further increasing our footprint across Africa and strengthening our position as its leading manufacturer of cement.”

The company reported that it estimated that Nigeria’s total market for cement was 10.2 million tonnes (Mt), 23.2% lower than the estimated 13.3Mt sold in Nigeria in the first half of 2016. Of total market sales in the first half of 2017, just 0.1Mt was imported.
“As a result of the slower market, our Nigeria operation sold nearly 6.9Mt of cement, down 21.8% on the 8.8Mt sold in the first half of 2016. We estimated our market share to have been about 64.5% during the first six months of 2017.”
Dangote Cement is also a delight to its millions of shareholders. It is a high-growth, low-debt, internationally diversified company that has just paid a dividend amounting to nearly 75 per cent of 2016 net profits to shareholders.
“The recent publication of our credit ratings highlights the financial strength we have achieved through our unwavering focus on the profitable expansion of the business, underpinned by our belief that we must remain prudent in our financial management,” Mr. Weijde stated.
The growth of the Dangote firm has been systematic. When it commissioned a cement factory in Okpella, Edo State worth $1bn, it didn’t come as a surprise to industry watchers because Dangote has continued to show his plans to expand across several African countries by 2019.
However, prior to the inauguration of the Okpella cement factory, it was announced that Dangote commenced the construction of a 3 million metric tonnes per annum (MMTPA) grinding plant in Ivory Coast.

Currently, Dangote Cement is present in almost all the regions in Africa that are rich in limestone deposits, which is an essential component for the production of cement.
Dangote has established cement plants of over 43 MMTPA capacity across sub-Saharan Africa, while being fully operational in about many African countries. Its ambitious strategy for Africa, and the company is now targeting a total capacity of 75 MMTPA by 2019.
This is due to the fact that there is currently no other cement producing company that has its foot prints across Africa with a capacity higher than Dangote Cement.
Dangote Cement in Nigeria controls about 65 per cent of the market and over 30 per cent of the Nigerian Stock Exchange. According to Dangote, the group’s cement production had surpassed Nigeria’s average total consumption of 20 million metric tonnes.
In terms of market capitalisation, Dangote Cement is competing so highly.
In a recent interview for the 2017 KPMG CEO Outlook, the President of Dangote Group, revealed the secret of his business successes. He said the group was focused on aggressive growth.

“I think really, the future is looking very, very bright,” he said.
When it comes to entering a new geography or a new business line, Dangote said he has a very specific point of view.
Rather than entering a new market through acquisition, he said the company is always focused on building a business from scratch and then “start competing with a lot of existing players.”
“Areas where some of our competitors have been, for 50 years before us, we’ve gone there, we’ve struggled with them, we’ve taken more market share … with no advertisements, nothing,” he added.
Another key element behind the group’s impressive growth is its relentless focus on quality.
“What we’re doing is making sure the quality is unquestionable,” he said, adding that when “you’re providing the highest quality product in the market, you’re able to attach a very good price to that product.”
For instance, he explained that when the company entered the cement business, he realised the burning question was whether they’d be able to produce cement that rivalled the quality of the established and only other cement producer operating in Nigeria at that time.

He said: “We concentrated on quality. We knew customers would not trust our brand because they’d been used to one brand for over 50 years. That’s how we came out to have the best quality ever.”
On the topic of leadership, for any company to be successful, Dangote said: “The main objective for any CEO is to make sure there’s ownership. Some of our competitors are not doing well because there is nothing like ownership in their businesses.
“What we try to train our people on is that they must be committed and they must have ownership of the business. Don’t take it as something that you’re doing just to earn a salary. I think that kind of outlook can bring a major change in any business that you operate.”