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Operational Review INTERVIEW WITH THE GROUP CHIEF EXECUTIVE OFFICER Why was Dangote Cement able to turn in such a robust performance while others were struggling? I think it’s because those strong foundations are the result of decisions we have taken about how we manage the business for the future. A good company needs to be run with a mixture of decisions about the long-term, strategic direction it needs to be moving in, along with more tactical decisions about how it responds to market conditions. In our case, the overarching strategy has been to expand very rapidly across Africa and in doing so, diversify the business in terms of markets, risks and sources of revenue and profitability. Now, in 2016, we can see how that strategy has helped us in a time that our main market of Nigeria is facing a recession, high inflation, lower consumer spending and a shortage of foreign currency to fund essential imports. But outside of Nigeria we’ve had operations that have now been running for more than a year and they are experiencing good growth and improving profitability, so we have managed to offset some of those topline pressures in Nigeria with revenue streams from countries in very different parts of the continent. Furthermore, those Pan-African operations are helping to generate foreign currency for the Group, so this shows how a long-term decision to diversify can help with a short-term pressure like an illiquid currency market in Nigeria. Obviously, this will be helped by increasing the amount of cement we export from Nigeria to places like Ghana and Cameroon and that’s a focus for the coming years. Another long-term strategic decision we made was to install coal-milling facilities at all our plants in Nigeria, a project we completed in the final quarter of the year. That was a decision taken a couple of years ago in response to maintenance disruption on the nation’s gas infrastructure, when militant attacks were not part of the problem. But in 2016 we saw a very strong resurgence of militancy and its associated attacks on gas pipelines and although we didn’t have coal facilities ready on every line, we had enough to negate the need to switch entirely to LPFO, which is a very expensive way to fuel the kilns we use to make cement. So this was a very smart decision because it helped us to protect margins by using a cheaper alternative to LPFO, even if the coal we were using was imported. The second part of that coal strategy is that we will soon be able to use coal mined in Nigeria by our parent company Dangote Industries. Again, this came from thinking some years back about what we needed for the future and the benefits will come at a very good time for us. We will be able to control our own supply chain, the coal we mine will be priced and paid for in Naira, not Dollars, and it will be cheaper compared to gas, which is priced in Dollars and paid in Naira. Then if we look at shorter-term, more tactical decisions, we can see the incredible impact our price cut of September 2015 had on sales of cement in Nigeria. We then had 11 months of very good growth at a time when the country was in recession, and although we obviously gave up some margin, we increased volumes very significantly to compensate. This, in turn, meant we had to achieve substantial development of the supporting areas of the business, like marketing and transport and those improvements were great achievements for us in 2016. How did improvements in these supporting functions make a difference? Looking back, it’s clear that we were able to take that pricing decision because, unlike some other manufacturers in Nigeria, we had lots of capacity to supply that increased demand, so we had a lot of operating leverage. But the growth we achieved wasn’t just a factor of the pricing actions we took. We had thought about how we sell into the market and again, this has been a strategic shift for us. A few years ago, we were selling in a deficit market and of course that was relatively easy. When the deficit cleared we knew we had to begin marketing the product very strongly to consumers, so we hired a marketing expert who knew about fast-moving consumer goods. The approach we took in 2016 was to hire more sales and marketing staff, focusing on retail presence, Annual Report 2016 53

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