Lafarge Africa posts muted top line growth as revenue grew 8.3% y/y to N230.6bn amid increased construction activities in Nigeria

Charles Abuede

Lafarge Africa, a leading cement manufacturer in Africa has reported relatively weak revenue numbers for the full year 2020. The company grew its revenue by 8.3 per cent year on year to N230.6 billion. Also, it reported that its net profit after tax climbed 98.8 per cent year on year to N30.8 billion in FY20 while its profit before tax doubled to N37.6 billion as a result of the 51.9 per cent decline in finance cost to N9.7 billion.

The cement manufacturer, in its audited full-year 2020 financial statement filed to the NSE revealed that a respectable top-line growth, coupled with tighter cost control resulted in a 30.8 per cent year on year growth in operating profit to N45.7 billion in 2020. The company’s operating margin expanded 3.4 percentage points year on year to 19.8 per cent in the period under review. Although below the operating line, the interest income declined 62.8 per cent year on year to N1.2 billion as the company’s selling and marketing expenses were tightly under control, with a significant cut in the advertising expenses in 2020. However, administrative expenses rose slightly by 4.2 per cent year on year in the period under review.

Looking at the quarterly performance, Lafarge recorded a 1.5 per cent year on year rise in revenues to N50.7 billion in the fourth quarter of 2020. Moreover, the company’s gross margins expanded 10.7 percentage points year on year to 21.9 per cent in FY20. The decent top-line performance aided by solid cost control measures resulted in an operating profit of N4.6 billion in 4Q20 versus a loss of 628 million in the same period of 2019.

Elsewhere during the year, Lafarge generated a robust free cash flow of N47.4 billion from N46.2 billion in 2019 to end the year at a net cash position of N3.6 billion as against a net debt of N37.1 billion in FY19 while the Cost of Sales rose 4.0 per cent, resulting in a gross profit of N67.2 billion. The relatively lower growth in the cost of sales was due to a marked decline in distribution cost and production cost. The company recorded a gross margin expansion of 2.9 percentage points to 29.2 per cent in the review year.

However, it is worthy of note that the previous year’s results benefitted due to one-off profit from discontinued operations. Thus, on July 31, 2019, the company completed the sale of its investment in Lafarge South Africa Holdings to Caricement B.V, a related party within the Lafarge Holcim Group, for $317 million recordings a profit from discontinued operations of N99.6 billion in 2019 while there was no such income in FY20. Therefore, the net profit after tax for the year retreated 73.2 per cent year on year to N30.8 billion with earnings per share from continuing operations at N1.91 per share in the current year versus N0.96 per share in 2019.

Also, on January 20, 2021, the board of Lafarge Africa approved the disposal of the company’s investment in Continental Blue Investment (CBI) Ghana Ltd to a third party F. Scott AG. The proceeds from the transaction will amount to $ 8.2 million after repayment of a loan granted by Lafarge Africa Plc to CBI Ghana in the sum of $ 5.8 million, settlement of earn-out obligation by Lafarge Africa Plc will be in tune of $ 3.6 million and Payment for Lafarge Africa Plc’s shares by F. Scott AG will be $ 6 million. The parties have agreed to close the transaction no later than June 30 2021.

Commenting on the results, Khaled El Dokani, CEO of Lafarge Africa while revealing the company’s strategy implementation outlook said: “Our “health, cost and cash” action plan delivered results in 2020 amidst the COVID-19 pandemic, which triggered inflationary and Naira devaluation pressures and production challenges. Full year 2020 results remained resilient, with net sales of +8.3 per cent, recurring EBIT of +30.8 per cent and net income of +98.8 per cent. We are proud of our people, who stand with our communities, and of our sustainability commitments to accelerate the net-zero pledge through affordable clean energy and our agri-ecology footprint”.