Background
Lafarge WAPCO Cement plc (WAPCO) is a 60 percent-held subsidiary of Lafarge SA, located in Ogun State, in the South-western region bordering Lagos State.
WAPCO is the second-largest cement manufacturer in the country, with a c. 15 percent share of total industry production capacity. The business became a part of the Lafarge Group following the acquisition of the Blue Circle Group by Lafarge in 2001. The company has 2.23 billion shares outstanding with shareholders funds of N49.97 billion as of March 31, 2014.
Financial results for Q1’2014
Ashaka Cement Nigeria plc, a unit of Lafarge South Africa, for the three months period through March 2014, recorded tremendous growth both in top- and bottom-line level buoyed by cost cuts and focused strategy. The performance is impressive considering slow growth of companies in the North-east region of the country caused by the Boko Haram insurgents, disrupting commercial activities.
For the Q1 2014, Ashaka Cement revenue rose by 7.74 percent to N6.50 billion from N6 billion recorded same period in the prior year (FY12). Profit before tax surged by 74.04 percent year-on-year to N2.81 billion in Q1’2014, compared with N1.61 billion as of Q1’2013, while profit after tax also spiked by 69.45 percent to N1.91 billion in Q1’2014, as against N1.13 billion as of Q1 2013.
Based on BusinessDay’s investigation, this is the most impressive Q1 operational performance among the cement makers.
The sector has been experiencing copious growth as the cumulative full-year 2013 revenue of the four major dominant players hits N500.2 billion. Net margin, a gauge of profitability and efficiency, jumped to 29 percent in Q1’ 2014, from 18 percent as of Q1’ 2013.
One of the fulcrums of good financial management is cost minimisation and maximisation of profits that Ashaka has been able to achieve as the analyses below reveals.
Cost-of-sales margins reduced to 50 percent in 2014, as against 63.1 percent as of Q1’13, hence gross margin spiked to 48.92 percent in 2014 from 36.67 percent in 2013. Operating expenses were down by 13.23 percent to N729.19 million in Q1’14, compared with N840.11 million as of Q1’13, while operating margin slid to 11.21 percent in Q1’14 as against 14 percent in Q1’13.
Cost of sales in the review period declined by 13.44 percent to N3.32 billion in Q1’2014, compared with N3.83 billion as of Q1’ 2013. Return on average equity and return on assets in the review period
were 3.97 percent and 2.76 percent, respectively.
Ashaka cement’s total assets for the first three month through March increased by 4.82 percent to N70.67 billion compared with N67.42 billion as of Q1’13.
In 2009, Ashaka launched the Maiganga coal project to improve its operational costs, and has sufficient coal reserves to provide at least 25 years of energy for cement production.
Share performance and outlook
The company’s share price closed at N20.01 on May12, 2014, on the floor of the Nigerian Stock Exchange, and market capitalisation was N44.81 billion on the same day. Price-to-book ratio and price-to-sales ratio were 0.90x and 2.05x, respectively.
BALA AUGIE
