Higher operational cost drags Lafarge to N10.4bn loss in Q3 2018

Lafarge Africa

Rising sales cost and total operating expenses forced  Lafarge Africa Plc to N10.37 billion loss  in the third quarter of 2018, compared  N937.9 million post-tax profit it declared during the same period, its just released unaudited financial statements has shown. 

Despite reporting 4.7 per cent increase in revenue to N234.3 billion in nine months ended September 30,208, the 7.5 per cent and 26 per cent increase in cost of sales and total operating expenses erode the company’s overall performance in the period under review.

As cost of sales closed the period under review at N178 billion from N165.7 billion in nine months ended September 30,2017, total operating expenses moved from N29 billion in nine months of 2017 to N36.96 billion in nine months ended September 30,2018.

InvestmentOne Research, said the company’s  poor showing in Q3 2018 was not a surprise, as consequent of its surging net finance cost.

According to the Lagos based company report, Lafarge Africa top line performance may have been waned as a result of seasonality in Nigeria on a quarter-on-quarter basis.

“Looking at the nine months 2018 performance, the company reported a revenue of N234 billion, showing a 4.75 per cent increase.

“The positive performance was mainly driven by strong volume growth in Nigeria and favourable pricing trends in South Africa. However, the 195basis points y/y decline in gross profit margin performance to 23.94 per cent was driven by a 64 per cent y/y rise in raw materials to N36.9 billion.

“In terms of bottom-line performance, the company recorded a negative profit before tax margin of 6.13per cent owing to the disturbing level of net finance expense (N33.48 billion, nine months of 2018) which completely eroded the company’s EBIT of N19.13billion in nine months of 2018.

 “Overall, the results were headlined by increased in finance cost, revival in South Africa operations as well as effective cost management. Going forward we expect that prices to be stable in the Nigeria market while the potential increase in government capital expenditure may be supportive of top line. We expect to see a better revenue performance in Q4 2018 vs Q3 2018 as the federal government has recently released about N460 billion for CAPEX. We also point that, the cement company has commissioned a new grinding station in Ghana with a capacity of 600KT, we believe this may bode for top line performance in the long run.