Lafarge Africa blames 20% profit fall on exchange revaluation

Listed cement giant, Lafarge Africa says the 20 per cent decline in its 2015 net profit was due to the stripping of one-off items and exchange revaluation impacts.

In a statement released at the weekend, the company noted its consolidated revenue was up to 267 billion Naira in 2015 in a challenging market, while cash flow was seen at N57.9 billion.

Peter Hoddinott, Lafarge Africa’s CEO, believes 2016 will deliver significant upsides, as new cement and power generation capacities come on stream with benefits from the 2015 merger flowing into its Nigeria unit.

Lafarge is forecasting that the Nigerian market will record significant growth this year on strong individual home building segment.

The company had earlier announced a disappointing profit decline of about seven billion Naira, for the 2015 financial year.

In a statement released to the stock exchange on Thursday, the cement giant reported a net profit of 26.9 billion Naira down from 33.5 billion reported in the 2014 full year period.

THE FULL STATEMENT

1. LAFARGE AFRICA PLC DECLARES DIVIDEND OF 300 KOBO PER SHARE AND 1 FOR 10 BONUS SHARE.

…NIGERIA INTEGRATION TO GENERATE SYNERGY SAVINGS OF N9 BILLION BY MID-2018.

2. LAFARGE AFRICA PLC DECLARES DIVIDEND OF 300 KOBO PER SHARE AND 1 FOR 10 BONUS SHARE

…OPERATIONAL IMPROVEMENTS BOOSTS REVENUE BY 2% TO N267 BILLION

3. LAFARGE AFRICA PLC REVENUE HIT N267 BILLION, UP 2%

…SOUTH AFRICA REVENUES UP BY 7% IN Q4

Lafarge Africa Plc, a leading cement and building solutions provider, has now reported its 12 months 2015 results, with revenue up 2%  against  last year’s reaching N267 billion, in a challenging transitional market. South West operations grew by 8% behind a number of initiatives such as the Key Distribution Scheme, a strong route to market and solid capacity utilization. ReadyMix Nigeria continued its strong growth with a 29% increase over prior year. South African revenues grew by 7% in the last quarter. Ashaka operations are normalized, following the security challenges in the region which affected demand for cement in the North. Management remains very optimistic about the long term outlook for Ashaka, which is foreseen to return to strong growth in 2016.

Plant operations were mostly stable with gas utilization in the 90s in South West and Mfamosing operations. The South African cement operations returned to growth in Q4 with production up by 28% vs. last year, following the kiln overhauls in Q1 2015.

Group after tax profit declined by 20% versus last year, when taking into account the one-off restructuring costs and the unrealized exchange impact on the Mfamosing operations foreign currency borrowings from the parent group, LafargeHolcim, the world’s largest building materials company. The one-off impact of the adjustment to the naira value of the foreign currency borrowing, due to the deterioration in the naira exchange rate, is to a large extent an accounting exercise as Lafarge Africa PLC is not foreseen to repay the shareholder loans in the foreseeable future, which makes up the majority of the foreign currency borrowing. Excluding these one-off/none operational impacts, profit improved by 6% versus last year behind the strong underlying fundamentals of Lafarge Africa Plc’s operations. Cash flow from operations was robust at N57.9 billion.

The Nigerian operations of Lafarge Africa have been successfully unified and rationalized under one management team while being cognizant of the different stakeholders. Lafarge Africa has strengthened its foundation further by increasing its shareholding in Mfamosing operations from 35% to 50%, with full management control and consolidation. Similarly, the shareholding in Ashakacem Plc. also increased from 58.61% to 82.46% in the year. The unified management team promises to drive efficiencies and ultimately generate synergy savings of N9 billion for the group by mid-2018.

Commenting on the results, the CEO, Lafarge Africa Plc., Mr. Peter Hoddinott said “our company continues to deliver good performance with significant upsides to come as new cement and power generation capacities come on stream and synergy benefits from the merger in Nigeria flow through. Our business integration process has been successful and as a Company we are optimistic to deliver improving performances in 2016 and beyond, improving value to our shareholders”.

FUTURE OUTLOOK

The overall Nigerian cement market is foreseen to grow robustly in 2016 behind a strong Individual Home Building Segment. The Federal Government of Nigeria has also shown strong indications to support Infrastructure growth in the coming year. Lafarge Africa will be able to leverage its unique footprint in 2016 with Ashaka returning to growth, ReadyMix securing high volume contracts to support its 8 existing, and new plants to be commissioned as well as the new 2.5 million tons cement line due to be commissioned in Mfamosing in H2.

The South African market will remain challenging, but Lafarge Africa will leverage the 2015 investments within the cement operations with a revamped sales team and route to market. In aggregates, the company will continue to benefit from its strong network delivering results with two new quarries, being opened in the Gauteng market and Ready-Mix growth. Overall, new strategies in penetrating retail, new geographies and the technical segment are expected to allow Lafarge Africa volumes to grow above a flat market in all three product lines.

Overall, the Lafarge Africa group will continue to seek innovative ways of improving product offerings in the Nigerian cement, concrete and aggregate market in 2016.