" />
Published On: Mon, Oct 9th, 2017

Lafarge poised to increase market share

 

Okey Onyenweaku

Lafarge Africa has annouced plans to raise fresh funds through a Rights Issue. The Cement Company plans to raise a whooping N131.65billion at N42.50 per share by issuing 5 new shares for every 9 shares held by shareholders at the

Michel Puchercos, MD, Lafarge Nigeria

qualification date. While the opening date of the Rights Issue is yet to be made public, the Rights offering’s price represents a 26 per cent discount on Lafarge Africa’s traded closing price as at Friday October 6, 2017.

Lafarge also notified the Nigerian Stock Exchange (NSE) of plans to merge its subsidiaries United Cement of Nigeria limited (Unicem) and Atlas Cement Company limited (Atlas) with Lafarge Africa.

The company said, the merger would enable the enlarged cement maker take advantage of benefits arising from various synergies as well as benefit from efficiencies arising from streamlining the operations of Unicem and Atlas.

The company has brandished an impressive second quarter Result to woo existing shareholders to take up their Rights.

Lafarge Africa Plc reported a profit after tax of N19.73 billion for the half year ended June 30, 2017 in contrast to a loss of N30.2 billion in the corresponding period of 2016.  Revenue grew 44 per cent from N107.3billion in 2016  to  N154.8 billion in H1 2017. The company was burdened by cost of sale which grew by 19 per cent from N92.2 billion to N110 billion. Similarly, sales and marketing expenses also rose to hit N2.12 billion, from N1.98 billion.

Lafarge’s administrative expenses ferried up from N10.23 billion to N16.3 billion.

Fortunately, lafarge has dug itself out of a deep hole having achieved profit before tax (PBT) of N18.16 billion and (PAT) N19.73 billion at the end of H1 from a huge loss of N30.24 billion.

Analysts at FBN Quest said the company’s second quarter results achieved a PBT growth to N8.7 billion compared with a pre-tax loss of N28 billion in Q2 2016. According to FBN Quest

“The key drivers of the PBT growth were sales growth of 34 per cent and a 18.64 per cent expansion in gross margin to 32 per cent. These positives completely offset a 78 per cent rise in opex and a 138 per cent spike in net interest expense. Thanks to a tax credit of N5.9 billion and a positive result of N5.8 billion on the other comprehensive income (OCI) line, PAT accelerated to N20.3 billion.

It added that sale and profit before tax (PBT) was down by 10 per cent quarter/quarter (q/q) and eight per cent q/q respectively. However, PAT expanded by 44 per cent q/q thanks to the positive results on the tax and OCI lines. Compared to our forecasts, sales missed projections by 11 per cent. Although, PBT was in line with our N8.6 billion forecast, PAT beat projected value by 260 per cent mainly due to the tax rebate of N5.9 billion and the positive result of N5.8 billion on the OCI line,”

READ  Kings of Broad Street: GT, ZENITH, UBA, ACCESS

FBN Quest also noted that while a tax rebate of N5.9bn was due to capital allowances on UNICEM, the OCI was boosted by an exchange rate gain of N5.6bn.

With the tempo of the H1 results which proved impressive, Lafarge Cement expects to woo investors to part with money and take up their Rights in a weak economy; a very low time indeed for investors, who are battling with shrunken revenue, caused by a recessionary trend. High inflation at above 16 per cent, unemployment at an unprecedented level, shareholders appear weary. The scenario above seems to pose a threat to Lafarge’s ability realise its pursuit.

In its consolidated financial statements for the year ended December 31, 2016, Lafarge Africa recorded drop in revenue by 17 per cent from N267.2billion in 2015 to N219.714 billion in 2016.

Gross income also dropped by 51 per cent from N82.645billion to N40.662billion in 2016. Its income before tax fell from N29.287billion in 2015 to  N22.819billion negative in 2016. Profit before tax also dropped by 38 per cent from N27.163 billion in 2015 to N16.899billion in 2016. The company paid a dividend of 105 kobo per share to shareholders.

‘’During the year, Cement demand witnessed a progressive decline in growth due to the recession in Nigeria, while market in South Africa remained soft . The combination of the softening of the cement market and operational issues in the first part of the year namely gas shortages, logistics issues and technical stoppages have affected our revenue against corresponding period last year. However, revenue for Q4 increased by 12 per cent on the basis of the operational turnaround plan’’, said the company.

It added, ‘’Profit for the Group was affected by lower sales and the operational challenges the company faced during the first 9 months. However, the turnaround plan delivered strong performance during the last Quarter to restore profitability. The debt restructuring has been fully completed at year end with the conversion of the debts as equity instrument and the pre-payment of the syndicated loan. A deferred tax asset of N40bn has been recognised in Unicem’’.

Interestingly, Lafarge Holcim was in 2015 formed from the successful global merger of Lafarge and Holcim. Lafarge Holcim, the majority shareholder is the world leader in building materials industry with a local presence in 90 Countries, over 100,000 employees and 374,000 million metric tons of installed capacity worldwide.

Looking critically at the Cement market in Nigeria, it is an attractive sector given that the country is still a developing nation with very poor infrastructure. This presupposes that there is market for the producers cement will continue to increase for the small number of large players. Research shows that Dangote Cement accounts for 60%, Lafarge 30%, others account for 10%. However, many analysts believe that Dangote Cement which has more than 14 plants controls about 80% of cement production in Nigeria. Interestingly, Nigerian cement volumes grew by c. 11% YoY in 2016.

READ  Stop paying dividends, CBN orders banks with huge bad loans

It is this dominance of Dangote that Lafarge Africa wants to break and probably increase market share.

Chairman of BUA Group, Alhaji Abdulsamad Rabiu, noted that, “the cement sub-sector today represents over 90 per cent of the Nigerian mining sector and employs some 30,000 people directly and over two million people indirectly. It also saves the Nigerian economy some $2 billion in foreign exchange.

The output capacity of Nigeria’s cement industry is set to hit 45 million tonnes per annum by 2018, 1400 per cent up from about 3.0 million a decade ago, with the target completion date for the second line (Line-2) of BUA Group’s Okpella plant in the first quarter next year’’, he added.

While Lafarge Africa has articulated plans to expand its market share in Cement production in Nigeria, Dangote Cement has also structured its plans to continue to dominate the industry.

‘’Against these challenges, we performed very well across the continent, with all our operations increasing sales and gaining market share to strengthen our position as the leading cement manufacturer in Sub-Saharan Africa.

As a result, Pan-African operations contributed ₦195.0B to Group revenues, or 31.4%, (excl. eliminations) up 88.5% on 2015. EBITDA was ₦26.5B, making up 9.9% of Group EBITDA (excluding central costs)’’, said Chairman of Dangote Cement, Alhaji Aliko Dangote’

‘’Against such cost pressures, we took action to protect our margins and in early September we increased our ex-factory prices, as we had previously indicated we would. Accounting for inflation, that increase returned pricing to just a little higher than where it was in August 2015, before the price cut that stimulated so much of our volume growth in late 2015 and much of 2016.’’ He also said. While Lafarge expects 18million MT in 2020 Dangote targets more than 46 million mt.

Managing Director/Chief Executive of HighCap Securities Limited, Mr. David Adonri, told Business Hallmark that the emergence of Dangote Cement brought in competition in the Cement Industry which was dominated by Lafarge Africa. He added that the circumstances have changed with Dangote Cement now out competing Lafarge in Nigeria.

‘’By sheer size Dangote Cement has out competed and dominated others in the industry. This is why Lafarge is doing a unilateral expansion to enable it become more competitive again. The exercise will make the company bigger and competitive and would give it the advantage of scale.

The company’s Rights Issue will be successful’’, he said.

A Lagos based shareholder, Mr Boniface  Okezie, told Business Hallmark that the merger and the additional capital would help to increase the productive capacity and make  the company more competitive.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • Stop paying dividends, CBN orders banks with huge bad loans

    Banks and discount houses with non-performing loans above 10 per cent will no longer be allowed to pay dividends to their shareholders. The Central Bank of Nigeria gave the directive as part of measures to curb the increase in non-performing loans and to stop further erosion of the capital base of the banks. The directive […]

  • All recovered assets will be sold, says Buhari

    President Muhammadu Buhari has assured Nigerians that all mismanaged and misappropriated national assets recovered will be sold off. In a statement issued on Monday by his Senior Special Assistant on Media and Publicity Mr Garba Shehu, he also vowed to ensure that the proceeds of the sales are paid to the treasury for the benefit […]

  • Ortom explodes! Says attacks by herdsmen, a continuation of Uthman Danfodio’s 1804 jihad

    Governor Samuel Ortom of Benue State has described the ongoing killings by Fulani herdsmen in the state as a continuation of 1804 jihad by Uthman Danfodio, alleging that the Fulani are angry because the initial jihad led by Danfodio was halted in Benue and prevented from proceeding to the sea. The governor who bared his […]

  • Drug abuse is on increase among youths

     Frustrated and humbled by increasing difficult economic conditions, pervasive social anomie, breakdown of age-old value system and discipline, most youths now find solace in drug abuse, writes Adebayo Obajemu  Fadairo [not real name] is 24, at that age, his physical appearance is that of a man in his thirties, slurred and incoherent speech, hanging jaw, […]

  • 2019: Can the Jagaban save Buhari?

    Challenges for Tinubu over the re-election bid By Obinna Ezugwu On Tuesday last week, pictures of President Muhammadu Buhari posing with Asiwaju Bola Ahmed Tinubu, National leader of the All Progressives Congress (APC) and Chief Bisi Akande, interim national chairman of the party filled the country’s media space. Both Tinubu and Akande had gone to […]

  • Kings of Broad Street: GT, ZENITH, UBA, ACCESS

    BY OKEY ONYENWEAKU As the banking industry gets tighter with narrowing operating margins and tougher competition for retail customers, the big four financial institutions are revising their strategies and setting up camp to fight an unconventional warfare. The new terms of engagement are moving from terrestrial combat to digital battlegrounds. ‘Banks will increasingly need to […]

  • Massive sell-off hits insurance sector

        FELIX OLOYEDE As the Nigerian Stock Exchange (NSE) changes its rules about the maximum price that stocks could dip below their nominal book values of 50 kobo per share, Insurance sector stocks since last week have taken a free fall. David Adonrin, managing director, Highcap Securities Ltd has been holding Royal Exchange Insurance […]

  • War has been provoked between Yoruba and Fulani- OODUA Redemption Alliance declares

    War has been provoked between Yoruba and Fulani- OODUA Redemption Alliance declares OBINNA EZUGWU At the end of its security summit held in Ibadan on Thursday, the OODUA Redemption Alliance resolved to end what it called gradual incursion into Yoruba land by herdsmen who they accused of continuing the Jihad of Usman Danfodio. The group […]

  • It would be utterly irrational for Nigerians to vote for Buhari again- Junaid Mohammed

    Second Republic lawmaker, Dr Junaid Mohammed has noted that President Muhammadu Buhari has performed poorly in office and it would be irrational for Nigerians to vote for him in 2019. Dr Mohammed who made the assertion in an interview with Vanguard on Saturday, also criticized Buhari for being a poor reader who according to him, […]

  • Bayelsa tour: Obasanjo lays foundation for refinery

    Former President Olusegun Obasanjo continued his visit to Bayelsa State after inaugurating some projects of the state government on Friday. The former president continued his tour of the state on Saturday with the laying of the foundation for the establishment of Azikel Refinery. The refinery is owned by Dr Eruani Godbless, a prominent businessman and […]

  • Quite notice, hate speeches and President Buhari’s Northenisation/Islamisation agenda by Professor Ben Nwabueze

    Quite notice, hate speeches and President Buhari’s Northenisation/Islamisation agenda by Professor Ben Nwabueze NATURE OF HATE SPEECHES In the aftermath of the divisions in the country caused by President Buhari’s Northernisation/Islamisation Agenda, as manifested in his lopsided strategic appointments that unfairly favour the North as against the South, and the complete exclusion of the South-East […]

  • Chief Adeniyi to Tinubu: Withdraw your support for Buhari or risk losing influence in Yoruba land

    OBINNA EZUGWU Veteran columnist and elder statesman, Chief Adetola Adeniyi has warned former Lagos governor, Senator Bola Ahmed Tinubu against supporting President Muhammadu Buhari’s second term bid, as according to him, such could mark the beginning of the end of his influence in Yoruba land. Chief Adeniyi who led the Global Intelligentsia for Buhari, a […]

  • Killings: Buhari condemns action, sends Defence Minister to Zamfara

    President Muhammadu Buhari has strongly condemned Thursday’s massacre of innocent persons in Birane village, Zurmi Local Government Area of Zamfara State. The President stated this in a statement issued on Friday by his Senior Special Assistant on Media and Publicity, Mr Garba Shehu, following the death of at least 18 persons as a result of […]

  • Obasanjo visits Jonathan at Bayelsa residence

    Former President Olusegun Obasanjo on Friday visited former President Goodluck Jonathan at his home in Bayelsa State. Dr Jonathan welcomed the elder statesman who was in his home for a private dinner, in company with his wife, Patience. Earlier before the visit, former President Obasanjo inaugurated a government specialist hospital in the state and unveiled […]

  • NNPC dispatches 29.058m litres of PMS to 13 states

    The Nigerian National Petroleum Corporation (NNPC) said it supplied a total of 29.058 million litres of Premium Motor Spirit (PMS) popularly known as petrol to thirteen Northern states in three days. In its report on daily dispatch to filling stations made available to the News Agency of Nigeria (NAN) in Abuja on Friday, it named […]

  • Lagos will bring about world class childhood disability intervention-Joyce Onofowokan

    An area in which different levels of governments in Nigeria have remained loudly silent and painfully indifferent is childhood disability. Children with disabilities and their parents have over the years ridden on waves of disillusion, despair, and decay. They constitute a tribe of the silent minority that the society has conveniently allowed to disappear into […]