BUA Cement Plc (BUACEMENT) Earnings Call Transcript & Summary

Good day ladies and gentlemen, and welcome to the BUA Cement presentation to analysts and investors for the full year 2023. [Operator Instructions] Please also note that this event is being recorded. I will now hand over the conference to the Managing Director and Chief Executive Officer, Mr. Yusuf Binji. Please go ahead, sir.

Good day, everyone, and welcome to BUA Cement's Full Year 2023 Conference Call for Analysts and Investors. My name is Yusuf Binji, the Managing Director, CEO; and presenting with me on the call is Mr. Jack Piekarski, the Chief Financial Officer; and Mr. Finn Arnoldsen, the Group Chief Operating Officer for the company. Let me apologize for our inability to hold this conference call last week due to some network glitches that have affected parts of Africa. We are deeply sorry for that but we are glad we are holding it today. So I will go straight into the presentation, the copies which I'm sure must have been shared much earlier with the participants. The operating environment in 2023 was largely challenging but we still afforded of some joyous moments. As you are aware, we faced quite a few headwinds ranging from the currency redesign policy, with its impact on currency and circulation are also the devaluation of naira. Obviously, we launched the main addition of the BUA Cement scratch-and-win promo. We commissioned the new 3 million metric tons per annum at Sokoto and Obu. We activated the 70-megawatt gas power plant at the Sokoto plant. We took delivery of additional trucks. Finally, we maintained a steady rise in market share, which resulted in continued revenue growth. Speaking of revenue, if you will turn with me to Slide 10, you will see that net revenue rose by 27.4%, NGN 460 billion, from NGN 361 billion in the prior year, sustained by volume and price increase. But overall, performance was muted following the devaluation of the naira and its intended impact on prices and also inflation. EBITDA increased by 9.6% to NGN 169.3 billion, from NGN 154.5 billion in 2022. EBITDA contracted by 6 percentage points, owing to the high inflationary environment. In view of these together with foreign exchange losses, profit after tax declined by 1.2% to NGN 69.5 billion from NGN 101 billion in 2022, with earnings per share, equally down by 1.2% to 205 kobo from 295 kobo (sic) [ 298 kobo ] in 2022. During the year, we sustained our drive towards the environment, the safety of our staff and our community. Furthermore, we have begun taking active steps to align our reporting with S1 and S2 IFRS sustainability disclosure standards. Turning to Slide 11. We show the impact of the rising cost environment and our response to their own. Revenue per ton increased by 18.7% to NGN 68,293 from NGN 57,511 in 2022 due to price increase. It is important to highlight here that though we instituted an ex-factory price cut from October 1. Ideally, the price got hardly a retrospective effect because we extended the gesture to customers with undelivered orders under time. Following our decision to price less aggressively considering rising cost of sales, EBITDA margin contracted by 6 percentage points to 36.8%, and from 42.8% in 2022. Again, as I mentioned during the last conference call, we believe we can leverage the interest volumes from the newly commissioned plants, drive further efficiencies across our operations and improve the contribution margin. EBITDA for the period increased by 9.6% to NGN 169.3 billion, up from NGN 154.5 billion in the preceding year. Turning to Slide 12, you will see the evolution of EBITDA. Revenue increased by NGN 99 billion to NGN 460 billion due to price and volume increases. Cost of sales increased by NGN 78.1 billion to NGN 276 billion, from NGN 197.9 billion due to price pressure. Major items accounting for the increase were energy costs, operation and maintenance service charge, for the -- repair and maintenance expenses, staff costs and depreciation charges. The net selling, distribution and administrative expenses increased by NGN 6.2 billion to NGN 14.7 billion from NGN 8.5 billion in 2022 due to ForEx losses, distribution costs resulting from higher fueling cost and increased fleet size, the depreciation of PPE, et cetera. Moving to Slide 13. We show the movement across the cost heads in a per ton business. Cost of sales per ton decreased by 30% to NGN 40,983 of NGN 31,535 in 2022. Energy cost per ton increased by 26% to NGN 18,301 from NGN 14,527, a result of price increase and devaluation of the naira. Selling, distribution and administrative expenses increased by 28% to NGN 6,141 from NGN 4,799 in 2022 due to an increase in fuel prices and cost from an enlarged fleet trucks, depreciation of our PPE also. On Slide 14, we provide an update on our strategic intents. So far, the new plants Sokoto and Obu were completed and fully commissioned as of the end of 2023. Hot commissioned was expected to take place in January 2024. And indeed, it has been achieved. The 70-megawatt gas plant at Sokoto is operational and the sales automation and payment integration projects have been completed. So we look forward to the 70-megawatt gas power plant at Obu been operational by April 2024. Slide 15 highlights our environment and social impacts for the year. Considering the acquisition of additional quarry on-site vehicles and increase in production, greenhouse gas emissions increased by 1%, although production increased by 9%, increased efficiency among the production processes led to improvement in energy use while enhanced monitoring our reporting led to improvement in water management. In addition, we achieved a 63% increase in our social impact initiatives by implementing 49 initiatives across the local communities addressing their needs in education, health, infrastructure and empowerment. We also created employment opportunities with over 21% jobs locally contracted and Obu provided specialized services to the projects. I will now ask for the telephone lines to be open, so that we can take your questions.

[Operator Instructions] So we have no questions on the conference call at the moment. And I would like to hand over to Ladipo for the webcast questions.

Thank you, Chris. Good afternoon, everyone. My first question is from Dumebi Obiago, AFC. Her first question -- she has two questions and first one reads, how sustainable is the government's recent directive to peg the price of cement? And what impact will this decision should [indiscernible] have on the company's performance? The second question goes, what percentage of foreign debt versus local debt does the company currently have?

Okay. Thank you very much, Obiago. I will answer the first question, and then I will let the CFO answer the second question on the percentage of the foreign debt. Regarding the government's decision to peg the price of cement, I'm not sure that exactly was the right word to use. It wasn't peg, do we -- just the manufacturers who are invited for a meeting by the government, over concerns about increased prices of cement and we expand our position and we also reached a conclusion with the government that we saw no reason why the price of cement should not -- should exceed NGN 8,000 per bag, in fact, it should be between NGN 7,000 to NGN 8,000 per bag retail in the market because considering the ex-factory prices, and the government actually raised it, which was -- and that's why the government came up with that statement saying that we have agreed, and we will put in place monitoring devices to ensure that undue advantage of the consumers has not been taken by some middlemen or some retailers to exploit the consumers during the peak period, January is high season for cement. So I think some people exploited that, but it wasn't that the government pegged the price of cement, I don't think such a thing exist because the cement manufacturers definitely have to have some margin on their investments. They need to have some returns. Mr. Jack can you answer the second part of the question?

Good afternoon, ladies and gentlemen. So the percentage of foreign debt versus local debt is about 90%.

Ladipo, we can go to the next question here.

The next question is from Abeeblahi Rufai, He says, Hi, my name is Abeeblahi from CardinalStone Partners. I would like to ask a few questions. First, I would like to note about the volumes for full year 2023, also which portion of that volume was exported and how much the BUA earn from exports? Also, there is the issue of price, there was an agreement on price with the Federal Government on retail factory prices again, the House of Reps invited the top players last week for questioning. How are you managing political pressure? And what are the implications? Also what are your projections outlook for prices this year? In addition, when are you commissioning the new 6 million metric tons plant, what is the volume expectation based on this new addition, will you be getting additional pioneer tax on the new plant? What is your ex-factory price as of full year 2023? Have you made any changes or increases in the price -- since the price announcement in October last year? And if not, would there be any changes in response to the general macroeconomic environment?

Mr. Rufai, a heavily loaded question. So I don't know where to start. okay. I think Mr. Jack will give the exact figures for the full year product for 2023. But regarding the exports, let me just say, there was a military intervention in Niger Republic which happened to be our major gateway for exports from our Sokoto plant. As we are aware, the export is only done through the land borders in Sokoto through Niger Republic into Burkina Faso. So midyear there was the embargo are imposed on that country and the borders were closed. And if I am correct, I think the borders were only recently opened in the last few days, so there has not been any substantial export during that period. Just to also remind ourselves is that we only carry out export when the Nigerian market is fully satisfied with cement, so we export our excess capacity. And before the closure of the border, we were in the peak season. So majority of our cement was for domestic consumption here at Nigeria. So I think little export was done during the first half of 2023. Regarding prices, and again, you referred to the payment, I'm sure it's good you said agreement with the [indiscernible], it was our understanding. It was like a kind of an MOU. We know exactly what the ex-factory prices are and what should be tenable in the market, and we inform the government definitely the tendency for exploration. Of course, it was must be checked. And I'm very happy after that meeting both our customers and dealers, retailers understood our result to ensure that there was no profiteering. And definitely, the prices now as of today are nowhere where they were been quoted to be about a month ago. The price range that was an advisory by both the manufacturers and the government I think has been met, and I concordantly confirm that if you go to markets, you will definitely find cement selling within this price range that was stated. And in fact, in some of the home markets and by home markets, I refer to markets that are in close proximity to our plants, you will find cement are being selling below NGN 7,000. So that is it. I have not received any summons from the House of Reps regarding anything. Once I do, definitely, we'll oblige, I will go and explain ourselves. But of course, I read something in the newspaper so we leave it at that. The outlook for prices during the year, these are detained by so many things and not the least, the exchange rate, which has a big impact on our cost of sales because even though, as has been mentioned by so many people that our raw materials are majorly obtained here there are a lot of inputs that go into the cement making process that have -- that are linked to the price of the dollar, and I will use this medium to really clarify. For example, the major cost of production in a cement plant is the energy. Now this energy can come whether in the form of gas that you use in powering our turbines or generators and also powering our pyro process line. Then in the case of our Sokoto plant, we are using LNG that is being brought all the way from Port Harcourt. Now even though we pay for these energy sources in naira, the contracts are denominated in dollar at the prevailing NAFEM or NAFEX exchange rate it did of invoicing. And if you have been following the trend, the NAFEX has gone up by probably 300% to 400% in the last one year. So these prices in naira that we were paying have risen also by the same proportions. So definitely, if there is any significant downward review in the exchange rate, that will lead to us also easing up on prices commensurate with the proportion of the energy contribution to our cost of sales. As of today, probably energy is accounting for between 50% to 60% depending on the plant and the type of energy. So that is it on the outlook for prices. Regarding the two new lines, we have mentioned several that we were constructing 3 million metric tons per annum plants in Sokoto and Edo states. I'm happy to announce that these two new lines have been completed, one in Sokoto been fully hot commissioned and has gone into commercial operation. The one in Edo, I will say it has been 95% commissioned. The remaining [ lap ] will come up in the next few weeks. What that plan has also been showing out bulks of cement into the market. And I believe the impact has been phenomenon. Now you can find cement everywhere in the market, especially while we operate in the all of the Northern part of Nigeria and the South -- and the Southeast, and we have also made some precautions recently into the Southwest. So these two new lines have each capacity of 3 million metric tons per annum. So you should expect at least when they are operating fully by the time we ramp them up to full production, such volumes should go into the market immediately. The ex-factory price last at the end of 2023, and I say this categorically from what our price was NGN 3,500 a bag of cement. We made a commitment to Nigerians on the first of October that we are going to lower the prices and which we did, and we sustained it for about 4, 5 months. We by then had thought that things, especially the exchange rate will have been much more favorable. But unfortunately, it turned out the opposite way. Secondly, the price of AGO, [indiscernible] as diesel, which we use in transporting cement to various destinations across Nigeria, also as a detail, we made -- our commitment was like NGN 600 a liter and now is almost NGN 1,400. And so many other things have changed. Some of the products that we buy, the gypsum we import the explosives we use in blasting at the quarry to bring out the limestone, they import most of these things. All the prices have gone up 2x or 3x. So it became really inevitable for us to sustain that price. And in addition, as we mentioned in earlier statements also, we did our own part, and it was our hope that also other manufacturers would come along with us in this journey to make the price affordable for Nigerians. Unfortunately, we didn't see that. We were sort of left alone, been a alone player in this game of nationalism and people took advantage of our very extremely low ex-factory prices to profiteer. And people who are selling the cement at almost the double what we were selling to them. So the benefit did not really get to the people, it was intended to. And in view of the horizon cost, we were forced to consider our decision to -- for the price flash, and we made adjustments that were commensurate with our cost of production, also a decent profit margin for our shareholders. Jack, can you give us the exact production in 2023?

Yes. So the sales volume for last year was 6.6 million tons. And in terms of export, until the coup in Niger, we exported approximately 74,000 tons and the revenues are about $7.4 million for this export. And after that, these exports have seized.

Thank you very much, Jack. I hope we have been able to ask Mr. Rufai's questions. We can go ahead in the next set of questions, either from the webcast or from the live audience.

Okay, sir. Thank you, sir. I hope everybody can hear us. The next is from Tarek Karam from 337 Frontier Capital. His first question reads, how do you plan on taking prices in 2024 after the devaluation? And his second question reads, what are your kilns running on? Gas or coal? And what is the expected increase in cost of goods sold following the FX devaluation?

Thank you very much Mr. Tarek Karam. I wouldn't like to repeat all what I've said before because I think two of these questions have been answered in my reply to Mr. Rufai of CardinalStone. So regarding the fuel, we are using basically natural gas for our turbines at our plant in Edo. The same natural gas is also used to power our kiln, while in Sokoto, we are using LNG because there are no gas pipelines grown in up north. So LNG is being used to power our generators, and we are using a combination of LNG and coal in our kilns. I hope that answers your questions Mr. Tarek.

The next question is from Isaac Osaro from WSTC Financial Services. His first question reads, please, is the total capacity now 17 million metric tons per annum, and what is the breakdown? The second question, what was the utilized capacity in 2023? And the third question, what was the total volume showed in 2023?

Yes, I will -- the total production is 17 million tons. Yes, I think also I will allow Mr. Finn, he's the expert in this, he was part of -- we set up all the lines. So you can give you a breakdown of the respective capacities in each of the plants. Confidently, I can say we have 17 million tons now. We have talked about the prices before so not really go to that. Maybe he can -- if it's related to market, maybe Mr. Finn can chip in some few words here. Thank you. Finn, are you with us or -- are you muted?

No. I mean, sorry -- I'm also on the mute. Yes. Thank you...

Finn, I think you are still muted Because I can't hear you.

Now you can hear me, I hope.

Yes. Yes. Sure, sure.

Sorry, it was on the mix up here on the front page. Yes. So good afternoon to everybody. Concerning the capacities as the MD was also indicating with the two new lines, all 3 million tons each, one in Sokoto and one in Edo, we have a capacity of 17 million tons. This is what we call the nominal capacity. So that means the capacity we had during last year is around 11 million tons. So that is reflecting actually the volumes we were able to produce during 2023. We produced roughly as was said, 6.6 million, 6.7 million production was pretty close to 6.8 million tons. So that means we are on a kind of operational efficiency, which is around 70%. So over utilization during the year was -- is quite okay because when you are calculating utilization of your production, you have to take also seasonal variations into consideration. Last year, we had a relatively tough year in the first quarter, when the rainy season came and we had increasing volumes coming in Q3 and also in Q4 was also a very great quarter for us. So we were up to 90% operational efficiency, for instance, during Q4 last year. So obviously, we were running roughly on 70%, and this is actually above average if you compare to our competitors in the country. So for the capacity on each of the plant is that we had 6 million tonnes in Obu, in Obu Cement, two lines by 3 million tonnes in 2023. And then we had 5.5 million we will have now we had in 2023 in Sokoto. So we had a slightly higher capacity in Obu. The operational efficiency generally is better when you have fewer lines, somehow easier to handle than if you have a fuller range. So the operational efficiency last year in Obu was slightly above Sokoto. So this is roughly about the utilization of the let's say, of the capacity generally. I will also mention another thing here because what is interesting for us is to see -- to compare ourselves with others. We also look into the volume's development during the last two years. As we can recall the volumes in 2022 was around 29 million tonnes, close to 30 million tonnes for the country as a whole. Last year, it went slightly down to around 28 million tonnes totally. And the main reason for this, of course, is what we indicated. There was some challenges during the first quarter. The rainy season came in relatively heavy, and the last two quarters was quite good. So it's more or less balanced to the -- during these two years, 5% down, roughly 4% to 5% down. But for our own sales actually went up from around 5% to 6% compared to the year before. So we are pretty happy. And the main increase came then and overproduction was facilitated very well during Q3 and Q4. So I think that was my input. Thank you, [ Andy ].

The next question is from [ James Boladishaw ], Chapel Hill Denham. Please, can you provide guidance on your utilization rate for the new power plants? And the second question is export strategy with the additional capacity on the opening of the border?

Can you come again on the first one, Ladipo?

The first question, please, can you provide guidance on the utilization rate for the new power plants? And the second question, the export strategy with the additional capacity and the opening of the border. Thank you.

Okay. Thank you very much. The -- our plants is many, so that's what I'll say , en masse, but let me just give you an input. The Sokoto, we have two power plants, operational that are entirely running on gas. We have the 50-megawatt power plant, which has been fully utilized. So I am not sure what is the utilization for two is. The power all the time [ ditches ], are running 24/7. Then we have the new 70-megawatt power plant, but we don't really need that power. So I think only 60-megawatt has been generated or utilized. I think the remaining 10 is just of those. And we also have 10-megawatts of rented capacity from Aggreko lying in the plant just as a backup. When you go to Edo, we have 72 megawatts turbines that are running. We have the SGT 500. Three of them of 60 megawatts each can give 27-megawatt SGT, 700 from CMS. They are all running. We also have additional 20 megawatts from Aggreko. We are in the last stages of commissioning the 70-megawatt power plant. That was the remaining 5% to 10% that I said is yet to be accomplished. But we hope by April the 70-megawatt power plant will be up and running also in Edo. So I would say we are entirely dependent on internally generated captive power, and we have assured we have redundant capacity. We will not have need to look for power elsewhere. I hope that answers the questions from [ James Boladishaw ] and his side. Then, our export strategy? Yes. Mr. Finn can comment. There was a question on export strategy now that the borders have been reopened.

Yes. Thank you, MD. Yes, all this export strategy is, of course, as the MD was explaining, our priority is always to fulfill obligation towards the domestic markets. But of course, it's also important for us, in particular, with the very nice location we are having with Sokoto, just few miles away from the Niger border to pursue other possibilities towards the hinterlands, that means towards near Chad and also to Burkina Faso. So we will with our new capacity for sure, be able to pursue volumes into these countries, in particular, to Niger as we were doing before the unfortunate situation there. And with the border open now and we still have other dealers located mainly in EMEA. So they are ready, what they have communicated to reactivate our business. And we are also trying also to assess opportunities elsewhere with our neighbors. That is Cameroon. It's a lot of volumes, not only for cement but also other commodities moving from Borno into Chad and also into northern part of Cameroon. So we are trying also to pursue export into these areas. Benin, a public opening as well is a possibility. Additionally, it has been not so easy to export volumes from Nigeria into Benin. They have been very -- let's say, insolvent in order to protect their own cement industry, but we will also look into these possibilities. Even from Obu Cement, which is pretty far away from the coast, but also there, due to Obu facilities we already have import hard work. We will also assess the possibility to export maybe not cement, but it could be clinker to, for instance, a market like Cameroon into Douala, which is not very far away. So we are really working hard in order to secure volumes for the export and also to assess all possibilities for the future. And this is also due to the expansion we are having. The 17 million tonnes capacity will not be swallowed immediately in the country. Also, we have -- so far this year, we have realized a nice growth, but for sure, we will have some surplus for all the purposes as the export.

The next question is from Olayinka Adesanya, SBG Securities. One, on debt. Are there any metrics you use to monitor your sustainability? Two, what percentage of your cost is linked to FX? Three, on energy usage, what percentage of your fuel was gas in 2023? And what is your current usage of gas? Four, What do your wells compare on cost? Can you give a comparative cost ratio for gas, coal and alternative fuel?

Thank you very much. Mr. Jacques, can you answer the question on the debt and percentage cost? ForEx linked to our cost of sales? And then I will take the last two.

On the first question, the metrics, we do not have so to say metrics what our debt is primarily used for the expansion and the expansion of the plant includes sustainability measures. So we have a plan about our sustainability. We are also reporting some results like you see ambitions, et cetera, according to international standards. So this is what we do. . On the FX components in our cost of sales, as MD mentioned before, we have a quite substantial amount of energy products and also some maintenance that are either dollar denominated or they are dollar based, and then we apply or the supplier applies the NAFEM exchange rate. So these are quite substantial, actually for last year. The FX component of our cost of sales was about 65%.

Regarding the gas usage. Gas from SD quite indeed is the most readily available source of energy in Nigeria. Our factory in Edo utilizes glass for [ woodfire ] generation and also [ anti-chill ]. And I pursue the availability of gas was in excess of 95%. I think a few times, we didn't have gas, and we had to resort to the use of heavy fuel oil, it was a very minimal. Same thing with our Sokoto plant, I think our power plant run entirely on LNG in the whole of last year. So I will say that was 100% except for some few instances in which you have a trip and the engines, which were automatically to the back of fuel which is [ disappeared ]. But majorly, I think it was almost 100% on gas. Then what the kiln itself uses a mixture of LNG and coal. But we never had sufficient LNG. This case -- days. Sokoto quite a lot of energy. And we never have sufficient LNG, I think, to run as we would have loved. So it was majorly the kilns are running majorly on coal. Regarding the comparative price advantages with the various fuels. Like we mentioned, we have fuels whose prices are denominated in dollars. And of course, whenever the Naira is devalued, even though we'll take a big hit and most of our processes are multi-fuel. So we do the economics all the time and we can switch over to the cheapest fuel, whether natural gas, whether LNG, whether coal or whether [ LPF1 ], also depending on which fuel is available. But generally, those fuels whose prices are indexed to the dollar tend to be more expensive than fuels that we pay for in Naira and [ tanned- mined ] coal which is locally mined and we pay for it locally. So it remains the cheapest source of energy. So it has a comparative price advantage over the other fuels that are denominated in dollar.

The next question is from [ Tony Hadley ]. First question, please could you think about the USD to your presentation, you fundamentally run a USD business, CapEx, energy, et cetera. His next question is you're proposing to keep prices down versus competition to fuel increased market share. This would trigger a price war given average branches like utilization and apparently at -- approximately at 50%. Is the 50% driven by market or operational issues? Thank you.

Thank you very much. I will very much love to go and to present results for financials in USD, but unfortunately, we cannot because it is more stable than our Naira in the last one year, but definitely the laws and the currency of reporting is Naira. So that's why our results are in Naira. I don't know Jacques, can you add something to this? Why we can't be making any presentation in USD?

Yes. Well, anything is possible and anybody can translate local currencies into dollars. But normally, if you look at all companies are listed in Nigeria, I mean the ones that I know they're all reporting in Naira. Naira is the local currency, is the currency that is known by different analysts, local analysts and stock exchange and FRC and SEC and these people, they're thinking and they want to see Naira so it's always possible, but then I think the analysts and our financial institutions, if they like this, they can easily translate the Naira to dollars. But for Nigerian companies, the reporting currency and also from a statutory point of view is Naira.

Thank you, Jacques. Mr. [ Hadley ], let me comment probably it was a wrong notion. It was never our intention to trigger a price war. We did it out of patriotism. I'm in the belief that things will get better and with our additional capacity permitting. So that was why our Chairman and the company itself and their directors made a commitment to Nigerians that yes, definitely, we will pass some of these benefits for large-scale production to them once we commission our new lines. We also saw the need in order to strategize, to capture more market share in view of the significant volumes that were expected to come on stream. So that informed our decision way back in October 2023 to reduce prices downward significantly in the face of pricing cost of production. But like we said, it was not our intention to trigger a price war. We had only hoped that other manufactures will join in this disruptive intent to make cement available and affordable to Nigerians so that you could start also reaping the benefit of the 100% local production of cement. 20 years ago, it was a different story altogether. We were importing more than half of what we were consuming in terms of cement. But like I said, unfortunately, also this situation, the genuine intention and the commitment we made to lower the price, which we sustained for about 5 months was not followed by other manufacturers and other people, already to their advantage are still selling the cement at a very exorbitant price to the consumer. So unfortunately, very few benefited from that good gesture and in light of the further deterioration in the value of the Naira, we were forced to readjust also in order to go to continue our business. So thank you.

Just as a little bit comment because [ Tony Hadley ] also mentioned that there's a lot of surplus capacity. Yes. Mr. [ Tony ], on paper, it looks like it's a lot of surplus capacity. But when you start to analyze each operator here and the concentration of capacity, you will soon realize that it's -- with increased number of production lines, your operation efficiency is coming down. So when you see the huge increase which has from the last 10 years in capacity, we talk around 60 million tonnes. The sales is around 30 on paper is only half the capacity. But one is the concentration of so much capacity, which impact everything from logistics to supply of energy and a lot of thing will impact upon this. Secondly, you also have a lot of seasonal variations here. The market is tougher of course during the remaining season and normally, January to March, Q1 and Q4 is the really good months and I can guarantee you all -- normally, all the operators, even us with the new lines coming up is almost on max capacity, which we can handle. So it sounds relatively low if you look into normal -- nominal design capacity. But you should also be aware that design capacity is not based upon 42.5 cement this system more, say, the majority of the products sold into this market is a high-quality product, and that means these 3 million tonnes for that specific product range will come down to maybe 2.5. So there's a lot of things surrounding these things, sir. So in money, like in the warm seasons, everybody is more or less on maximum practical capacity taken into consideration the local condition. What will happen in the future is hard to say. But we should also realize that we will not talk so much about this Q1 because that is for the next call, but we all have seen, despite price increases, that the market is very sustainable, and it really takes the volumes -- we don't know the details of the other over the comparison competitors. But as we can see from our own figures and also what we get from the market is that everybody is pushing more or less as much they can during this first quarter, at least January, February and now into half of March. So we -- for sure, we could have done better generally the country as such, but it's a lot of factors which is the limiting the practical capacity.

The next question is from [ Ikmi Nein, but it will be quick ] from German Investment Corporation. Could you please confirm capacity utilization, production and sales volume for full year 2023? Thank you.

Okay. These have already been answered. The capacity utilization and volumes for 2023.

Thank you, sir. I would just send out the transcripts after the call for everybody, anybody that needs clarification. But the next question is from Isaac Ossaro, WSTC Financial Services. Is long-term borrowing climbed by 158% to NGN 409 billion. Do we expect the same trend in 2024?

No, certainly not. But Jacques are you?

Yes, this is absolutely correct. The -- our long-term debt was to finance this expansion. So this was predominantly for that. And after this, we will not need -- unless there is a future expansion where we may need to borrow. But for the time being, with all it is now, it is we're going to, of course, serve the debt as it should. And then we will generate enough internal cash flow for future investments and any major ones then, of course, then you have to see if we need to borrow again. But for the time being, there is nothing like this envisaged.

The next question is from -- it's a follow-up question from Kayode E, CardinalStone Partners. He says, it's Kayode E, again. I have some follow-up questions. Also, what are your FX exposures? And how do you intend to manage the volatility in currency this year? What are the updates on the energy mix, especially for distribution? There was a mention of investing in CNG-powered trucks. Can more light be shed on that? Are there any other expansion plans other than the 6 million metric plus to be commissioned and what are your CapEx and your plans to fund such CapEx? Regarding interest rate surge and potential maturities of your debt instrument, what are the plans to deal with this? Are there any possibilities for deleveraging or raising capital through equity in the near future?

Okay. Thank you very much. Let me just attempt to answer some of these questions, and then Mr. Jacques will comment on the ForEx exposure and the volatility. The energy mix on distribution, we have two modes of distributing our products to our customers. One is sell collection in which customers appears and collects his product ex factory. The other is door to door service in which we use our own trucks to deliver. And certainly, our trucks consume fuel, all diesel and the price has been on the rise. So we solely transport via trucks to various destinations using diesel. Regarding the expansion, certainly, this year, we didn't have any plans for putting up additional lines at existing locations. But don't forget, we already have one line that is hanging somewhere, and that is definitely -- construction is going to start. We do not require any funding for it because it has already been paid for. If you remember and if you have been watching events, you know we mentioned a plant in Adamawa about 3 years back. This plant is ready. It has been paid for. And certainly, we are going to put it at a location various -- and that will happen this year. So I think probably that is the expansion that we will do. But this will not require any funding. And with our two new lines in operation, now we should be in a position to generate sufficient cash flow to fund any CapEx in the near future. Jacques, can you talk on the ForEx exposure?

Yes. The FX exposure we have currently in terms of import finance is about $100 million and then we have the IFC loan which is partly offset by some deposits that we still have. So as you know, the IFC loan is $300 million and at the time of -- at year-end, we had $165 million of deposits still unutilized. In terms of the how we're going to manage or how we are managing it, actually, as you know, you cannot hedge hard currencies in Nigeria with this, what just happened since last year, no bank anyway will be willing to do any hedging because they will not know at what price and if there was any price, it will be very, very expensive. So that does not exist. So the only thing you can do to hedge actually is one payout as quickly as possible your dollar bills. That's number one. Number two, purchase dollars. So purchase dollar today, yes, it's possible. But until a few days ago, everyone knows the rates that at which they were offered. So that was not very beneficial also when everybody was saying that the Naira would appreciate. And prior to that, even if the dollars' reliability was [ cursed ], the -- it was very difficult to get any dollars. You remember the [ CBN ] stopped the allocations and then on the market, yes, you could buy some dollars, but not what is required for a manufacturing company outside. So we are doing our best, of course. We -- like other companies were also affected, as you could have seen about this Naira depreciation. And our goal, of course, is to minimize that to the maximum possible. Now in terms of interest rate surge, yes, interest rates, you can hedge. But what we see now, the trend, in Naira, yes, the rate has increased. So this was really very recent. So what we are going to do is our plan is to reimburse or as much as possible with our internal cash flows, the Naira, in addition, it is -- in general, it is a short-term debt. So we are going to reduce that to the maximum possible. And then on the dollar borrowing, we hope it will be -- the rates will go the other direction. That means that the rates are going to decrease because that's the trend we start to see now except maybe in the U.S., the Central Bank governor there still mentioned the other day that the inflation is still on the high side but we hope that the interest rate are going to reduce to lower. And that's what most of the financial analysts are saying. So this will also reduce debt servicing. And there was another question, sorry, about raising capital. So there is no such intention yet. Actually with the existing borrowing that we have to, as I mentioned before, for -- that we give for the expansion primarily. Now that we are going to have all this additional capacity over 6 million tonnes. We hope that we will be able to sell everything and generate sufficient cash flows and profit so that we don't need to recapitalize the company. So for the time being, it is as I just mentioned. Thank you.

We have a final question. Olayinka Adesanya from SBG Securities. Please, I have some follow-up questions. Number one, is there a policy used in the declaration of dividend; Two, can we expect the capitalization of interest expense to end after the completion of new lines?

Yes, the answer to both is yes. We are working a dividend policy for the payment of dividends. And also, yes, definitely by the time the new lines we signed the takeover certificate, yes, we have to stop the capitalization of interests.

I have no more questions. Chris, I hand it over to you.

Thank you very much. So we have no questions on the conference call. So if you would like to make some closing remarks. Mr. Binji, we have no further questions on the conference call, which you'd like to make some closing remarks?

Thank you very much, ladies and gentlemen. Thank you for spending a greater part of your day listening to our full year 2023 presentation of results and answering your questions. It has been a great delight to us. We look forward to you joining us towards the end of April or early May when we will hold the next session for the Q1 audited financials for 2024. So thank you. Have a very good evening.

Thank you very much. Ladies and gentlemen, that then concludes today's event, and you may now disconnect your lines.