Swiss cement giant Holcim has announced its planned exit from Nigeria, a decision attributed to unfavorable economic conditions under intense competition with other players in Nigeria.
The company, which held an 84% stake in Lafarge Africa, disclosed on Sunday that it has sold its stake to China’s Huaxin Cement for $1 billion. According to a Reuters report, the deal, slated for completion by 2025, remains subject to regulatory approvals.
Holcim described the move as part of its broader strategy to streamline operations and refocus on high-growth regions, particularly North America, where it plans a U.S. listing in 2025.
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Holcim, a global leader in cement manufacturing, emphasized that its decision aligns with a renewed focus on sustainable growth in core markets, higher-margin products, and strategic infrastructure investments. This development comes shortly after the company’s September acquisition of a stake in Sublime Systems, a U.S.-based startup pioneering low-carbon cement technology, underscoring its commitment to improving environmental credentials.
Challenges That Pushed Holcim Out
Holcim’s subsidiary, Lafarge Africa, had been struggling to maintain profitability amid Nigeria’s economic challenges. Although the company reported an 8.6% revenue growth in 2023, rising from N373.25 billion to N405.50 billion, its profit after tax (PAT) declined by 4.7% to N51.14 billion. This decline was attributed to a higher effective tax rate and N21 billion in foreign exchange (FX) losses, a consequence of the naira’s dramatic depreciation from N700 per dollar in 2023 to its current rate of N1,700 per dollar under Tinubu’s administration.
The removal of the fuel subsidy by Tinubu, a move aimed at stabilizing Nigeria’s fiscal position, further compounded the cost pressures on businesses like Lafarge. Raw material prices soared, making production more expensive and complicating efforts to maintain profit margins. While Lafarge Africa reported a 53% rise in PAT for the first nine months of 2024, increasing to N60.08 billion from N39.31 billion in the same period the previous year, this improvement was insufficient to offset the broader challenges in the operating environment.
Yet Another Multinational
Holcim’s departure is part of a worrying trend of multinational companies exiting Nigeria. In 2024 alone, major firms such as Pick n Pay, Microsoft Nigeria, Total Energies Nigeria, PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo PLC have pulled out of the market. Pharmaceutical giants Sanofi and GlaxoSmithKline left in 2023, shortly after President Tinubu assumed office.
The exits underscore the struggles foreign companies face in a country grappling with macroeconomic instability, high operating costs, and unpredictable regulatory frameworks.
While Holcim’s exit reflects mounting difficulties in Nigeria’s economic environment, many industry observers believe the divestment to China’s Huaxin Cement could herald a competitive shift in the local cement manufacturing industry.
The sector has long been dominated by two players: Dangote Cement, owned by Africa’s richest man, Aliko Dangote, and BUA Cement, led by billionaire industrialist Abdulsamad Rabiu. Both companies control significant market share, and Huaxin Cement’s entry could disrupt the balance, introducing new competition and potentially reshaping pricing and supply dynamics.
Analysts suggest that Huaxin’s acquisition of Lafarge Africa’s assets could lead to increased innovation, expanded production capacity, and a more competitive pricing structure, offering potential benefits for consumers.
However, the sale of Lafarge Africa to Huaxin Cement also raises questions about the broader economic situation in Nigeria and the country’s ability to retain foreign direct investment (FDI). While Chinese companies like Huaxin have been expanding their global footprint, their growing presence in Nigeria could signal a shift in investment trends as Western multinationals retreat.
However, concerns remain about whether the Chinese company will overcome the challenges of navigating Nigeria’s harsh economic climate. The company will need to contend with the same issues that drove Holcim out, including rising production costs, an unpredictable foreign exchange market, and an often opaque regulatory environment.