9

Introduction CHAIRMAN’S STATEMENT A year later, as you read our 2016 Annual Report, I hope you will come to understand how prescient those decisions and those actions were. Nigeria has fallen into recession for the first time many people can remember. Inflation stood at 18.6% in December; the Naira was allowed to float against the Dollar and quickly fell from just under $1/₦200 in June to $1/₦320 in late August. At the end of the year it stood at $1/₦304. Not only was our currency worth less in the money markets but the shortage of foreign currency in Nigeria made it difficult to convert our Naira into the Dollars we needed to pay for imports and capital expenditure. Even more disruptive for our business, and Nigeria as a whole, was the resurgence in attacks on oil and gas pipelines in the south of Nigeria that have left homes and factories such as Ibese and Obajana short of fuel, crippled exports and slashed government revenues. Nevertheless, the results of those strategic decisions, taken years ago, enabled us to strengthen our business and consolidate our position in a year when many others in Nigeria and across the rest of Africa have struggled against economic downturn. Our Pan-African diversification has provided cash streams, from countries such as Senegal, Cameroon and Zambia have provided us with essential foreign currency as foreign exchange controls made it difficult for us to obtain Dollars for operations. Furthermore, we were able to borrow money in these countries’ local currencies, thus reducing our exposure to foreign currency shortages in Nigeria. In addition, we began to generate foreign currency sales from exports of cement from Nigeria to Ghana. In 2017 we will begin to benefit from using coal mined in Kogi State by our parent company Dangote Industries. The benefits of this switch are numerous: the coal we buy will be cheaper than alternatives such as gas and imported coal; it will be priced and paid for in Naira, reducing our need for foreign exchange to fund our biggest variable cost; and it allows us to control our own fuel supply chain without dependence on gas pipeline security or importers of coal and LPFO. Looking back at the 2016 financial year, I am pleased to report that our cement sales volumes increased by 25.0% to nearly 23.6Mt. Of this, almost 14.8Mt was sold in the Nigerian market. Revenues increased by 25.1% to ₦615.1B, of which 68.3% was generated in Nigeria (excluding eliminations)and 31.7% from Pan-African operations. Our earnings before interest, depreciation and amortisation (EBITDA) decreased only slightly, to ₦257.2B, with Pan-African operations contributing ₦26.5B, excluding central costs. Earnings per share increased by 4.5% to ₦11.34. We invested ₦136.2B across Africa, including ₦62.9B in Nigeria, and created nearly 2,000 jobs. As I have already stated, the Board proposes a dividend of ₦8.5 per 50 kobo share, subject to your approval, to be paid on 26th May 2017 to shareholders whose names are on the Company’s Register at the close of business on 12th May 2017. The Board believes the recommended dividend is consistent with our aim to deliver excellent returns to shareholders, taking into account the company’s need to invest for growth. Looking at our performance by region, in Nigeria, we increased sales volumes by 11.1% to nearly 14.8Mt in 2016. The year began with strong sales momentum following the price reduction we introduced in September 2015 and this clearly helped to stimulate the market, driving 11 months of strong growth in our home market, through to the end of August 2016. Such strong growth in cement demand bucked the national trend, with Nigeria’s economy falling into recession in the first half of the year. By contrast, in the same six months, our sales volumes rose by 38.8%, an unprecedented level of growth, driven by small-scale building projects such as home improvements. The contraction of Nigeria’s economy was driven by falling government revenues from oil and gas, due to lower international oil prices and increased gas pipeline Annual Report 2016 9

10 Publizr Home