Recently at the Nigerian Stock Exchange (NSE), Lafarge Africa plc published its full-year 2014 consolidated results.
While Lafarge operations in Nigeria show positives across major financial lines like sales, EBITDA, and after tax profits, its South African Holdings operations show decline across the indicators, contributing to a not too impressive outing across the group’s key line items year-on-year (y-o-y).
In September 2014, Lafarge Africa plc, formerly known as Lafarge Cement Wapco Nigeria plc, emerged from a combination of all Lafarge’s Nigerian operations – (AshakaCem plc, UNICEM, Atlas Cement Company Limited) and Lafarge South African Holdings Limited assets – in a transaction aimed at creating a stronger platform for growth in sub-Saharan Africa, with value creating opportunities.
In Nigeria for instance, the company’s operations show strong topline performance in a softer than expected market. Devalued naira during Q4 had limited business impact on the company; among others.
Lafarge Africa consolidated financial statements for the year ended December 31, 2014, show revenue dropped by 0.11 percent to N205.844 billion from N206.072 billion in 2013 financial year. Profit before tax (PBT) – consolidated operations rose by 2 percent to N43.6 billion from N42.6 billion in 2013. Profit after tax (PAT) – consolidated operations also increase by 8 percent to N36.8 billion from N34.1 billion in 2013.
The group’s Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) declined by 1 percent to N55.3 billion from N55.7 billion in 2013.
EBITDA evaluates a company’s performance without having to factor in financing decisions, accounting decisions or tax environments. Lafarge Africa’s EBITDA margin dropped by 0.2 basis points to 26.8 percent, from 27 percent in 2013.
Looking at Lafarge Africa’s recent presentation to analysts, one could see the impact of its South Africa’s operations to the group’s overall financial performance.
For instance, Nigeria’s operations of Lafarge Africa recorded 4 percent increase in cement volume while South Africa operations declined by 10 percent. The ‘Ready-Mix’ volume for Nigeria operation rose by 172 percent while South Africa operations declined by 2 percent.
Sales of N131 billion, which shows 8 percent increase against 2013, was recorded in its Nigerian operations while N75 billion worth of sale, a decline of 2 percent resulted from its South Africa operations.
In South Africa, Lafarge faced challenging environment with new cement entrant and lower overall growth – though its Ready Mix and Aggregates are gaining momentum.
Also, the South Africa Holding FY 2014 revenues were marginally down following cement pricing, which was offset to a large extent by Ready Mix and Aggregates.
Nigerian operations of Lafarge Group reported EBITDA increase of 16 percent to N46.2 billion while EBITDA from South Africa operations stood low at 37 percent to N9.1 billion. The company linked EBITDA growth in its Nigeria operations to cost savings initiatives, improved industrial performance and innovation.
The after tax profit – consolidated units that accrued from Nigeria operations rose by 27 percent to N32.8 billion, while that of South Africa declined by 51 percent to N4.1 billion.
In a recent statement from Lafarge Africa preceding the full-year financials, Olusegun Osunkeye, its chairman, board of directors, said: “It is with pleasure that we publish the first audited results of our newly transformed company. The good performance even in a volatile market affirms the strength of our new company and our commitment to achieving excellence.”
Also, commenting on the results, Guillaume Roux, GMD/CEO, Lafarge Africa plc, said “our company has shown impressive performance; our business combination plans have been well executed within set timelines. We are committed to improving operational performance by leveraging on opportunities this presents to us to deliver sustainable returns to our shareholders.”
“The visible slowdown in the macro-economic environment following the sharp fall in oil prices by around 36 percent (between Q3 and Q4 2014) led to a reduction in revenues to the Federal Government and state governments and by extension a slowdown in capital expenditure. On the private side, the uncertain macro-environment also led to weaker demand for cement. Notwithstanding the impact of the slowdown, the opex line contributed the most to the negative surprise in the results relative to our forecasts,” according to Tunde Abidoye team of financial analysts at FBN Capital Limited.
The analysts said they expect a visible slowdown in sales growth for Lafarge operations in Nigerian this year.
“In terms of outlook, we continue to expect that the weak macro fundamentals, particularly the slide in oil prices and potential reduction in FGN revenue in 2015, will constitute a drag on the sector’s sales growth. We note that the Federal Government in its 2015 budget proposal reduced the allocation to capital items to N630 billion compared with N1.55 trillion in the 2014 budget. More recently, the Federal Ministry of Works had its annual budget slashed from N100 billion to N11 billion,” the analysts said.
“Given the weak set results, we expect marked reductions in consensus PBT forecast. WAPCO shares have outperformed the index and the sector this year. They have gained 10.6 percent ytd compared with -10.6 percent and -18.3 percent for the ASI and the sector, respectively. Our estimates are under review,” the analysts said.
Lafarge Africa reported earning per share decrease of 1 percent to 738 kobo from 747 kobo in 2103. Ahead of its annual general meeting scheduled on May 22, 2015, the board proposed a dividend of N3.60 per share, which is about 9 percent higher than the 2013 dividend per share of N3.30.
“The company expects cement demand to increase both in Nigeria and South Africa in 2015. In Nigeria, the demand growth should be supported by increasing needs for housing and infrastructure, but could be lower than normal growth levels given the exchange rate development. This should be partly cushioned through the South African cash flow. We remain very optimistic and highly committed to delivering innovative building materials while leveraging on the operational strength and pedigree of the Lafarge Group,” Lafarge said in a recent release.
Iheanyi Nwachukwu
