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REVIEW OF THE BUSINESS IN 2016 Nigerian operations After more than a decade of strong GDP growth, Nigeria’s economy fell into recession in 2016, with the World Bank estimating that GDP contracted by 1.7%. Falling oil prices reduced government revenues at national and state levels, resulting in delays to salary payments, delays to contractor payments and a reduction in infrastructure investment. The associated devaluation of the Naira and the limited liquidity of currency markets created additional pressures for consumers who experienced falling disposable income and inflation higher than 18% in the final months of the year, reaching 18.55% in December. In addition, a resurgence of militancy in the south of Nigeria led to oil and gas shortages as pipelines were attacked, resulting in shortages of power and fuel. Against these significant challenges, Nigeria’s market for cement proved itself to be remarkably robust in 2016 and we estimate that total market sales rose by 5.7% to 22.7Mt in 2016, from 21.5Mt the year before. Market growth was very strong in the first four months of 2016 following the price reduction we introduced in September 2015. In fact, we achieved 11 months of growth after that reduction, with the majority of cement being sold through retail outlets and distributors for small-scale building. Dangote Cement was the leading supplier in Nigeria, with volumes rising by 11.1% from 13.3Mt in 2015 to nearly 14.8Mt in 2016, almost double the market growth rate. Including exports, total sales from Nigerian plants were 15.1Mt, or a 13.8% increase. Backed by strong marketing efforts, better logistics and increasing brand recognition through retail and distributor promotions, we increased our market share from 62% in 2015 to 65% in 2016, despite the recent entry of a new competitor in Edo State. We estimate that our nextlargest competitor has a 24% share. Across Nigeria, we sold 22% of our cement into Lagos and Ogun, with a further 15% being sold elsewhere in the South West. The South South region accounted for 17% of sales volumes and the South East took 14%. The North regions, including Abuja, took 29% of sales. 56 Annual Report 2016 Our large plants at Obajana and Ibese accounted for almost all of our Nigerian sales, with Obajana selling 7.6Mt, slightly less than in 2015 because of the poor fuel supply, and Ibese increasing sales by 37.3% to 6.9Mt. Our 4.0Mta plant in Gboko, which remained mothballed for much of the year, sold 0.6Mt. The plant, which has no gas supply, has now been equipped with coal milling facilities enabling its kilns to run on coal instead of the more expensive LPFO. This will increase profitability at the plant when operations restart and the plant’s reopening will enable us to improve distribution in the North East and South East regions of Nigeria. All our plants are supported by their own fleets of trucks, controlled by a modern fleet management system. We have nearly 2,000 cement delivery trucks at Obajana and 1,500 at Ibese. Although we achieved volume growth in each of the first three quarters of 2016, fourth-quarter sales were lower than in 2015, following the N600/bag price increase we took in early September, as well as the fact that some competitors delayed price increases to make temporary gains in market share. The price increase and an improved fuel mix doubled fourthquarter EBITDA per tonne in Nigeria, compared to the third quarter of 2016. We improved our marketing across Nigeria in 2016 with strong promotional activities such as the Mega Millions Dash helping to build very strong brand awareness and a preference for Total Nigeria cement market sales 2015/6 2,500 2,000 1,500 1,000 500 0 Jan Feb Mar Apr May 2016 Jun Jul Aug Sep Oct Nov Dec 2015

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