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Lafarge shines in H1 2020 result



By Okey Onyenweaku

After its return to profitability from its erstwhile huge loss position, Lafarge Africa has seemingly focused on not only being great again but working to regain its past glory. And the fruits are showing.

This time around the company grew its profit by a whopping 86.1per cent to N28.757billion while profit after tax also grew by 89.2 per cent from N9.0billion to N23.329billion in the half-year (H1) ended June 2020.

This performance is perceived as consolidation on the performance recorded in its Final year results of 2019 and first quarter posting in March 2020.

Broken down, analysts believe that the adoption of a renewed cost-efficiency strategy may have been the critical buoy in lifting the profitability of Lafarge Africa Plc for the half-year ended June 30, 2020. This is as the unaudited results showed revenue of N120.54 billion in 2020, up 2.3 per cent from N117.885 billion in the corresponding period of 2019.

At the same time, selling and marketing expenses were reduced by 9.9 per cent from N1.720 billion to N1.550 billion, while administrative expenses declined by 30.6 per cent to close at N7.830 billion, compared with N11.289 billion in 2019.

Net financing cost dipped by 67.3 per cent to N4.052 billion, from N12.395 billion in 2019. Given the significant reduction in financing cost, Lafarge Africa Plc ended the half-year with a profit before tax of N28.757 billion.

To be sure the impressive result was not unexpected given the efforts made by Lafarge Africa Plc to restructure its balance sheet since last year. Along this line, the company had sold its subsidiary in South Africa and injected fresh equity funding through a rights issue, actions that led to a return to profitability and a payment of 100 kobo dividend for 2019 financial year.

At the facts behind the figures event held virtually at the Nigerian Stock Exchange on September 17, 2020, Khaled El Dokani, the Managing Director/Country CEO of Lafarge extolled the company’s management for the impressive half-year performance and expressed hope that the future was going to be better for shareholders of the firm. He assured that the company’s fortunes would soar since there are not many encumbrances.

Speaking to the overhanging burden that his team had been working on for a while, he affirmed that, so far so good, ‘the current debt position is not a problem for us.”

“The implementation of our healthy, cash and cost initiatives has and would continue to deliver improvement in our performance”, Dokani said.

Dokani was also upbeat on the firm’s COVID-19 containment strategy:

“Despite the impact of Covid-19 pandemic in H1 2020, our medium to long term outlook remains positive.”

“With the gradual easing of the lockdown by the Federal Government, we will continue to focus on business resilience to maintain a healthy balance sheet while prioritising the health of our people, communities and other stakeholders”, the CEO said.

Overall, the company achieved impressive results despite fears that the Nigerian economy may hit the rocks sooner or later given the double-edged challenges of Coronavirus and the crashing price of crude plaguing the world now.

Lafarge Africa had in the first quarter of 2020 posted a net profit of N8. 1 billion compared with the N3. 2 billion achieved in the corresponding period of 2019, representing 153.1 per cent growth in profit after tax.


Business Hallmark had reported in the period ended December 31, 2019, that Lafarge Africa posted a profit before minimum tax of N17.2 billion in 2019, compared to a loss before minimum tax of -N1.5 billion in 2018.

Its profit from continuing operations closed at N15.5 billion in 2019 as against a loss of -N8.1 billion during the comparable period in 2018.

It was however not an all-favourable result as despite this showing, the operating Profit for 2019, however, declined to N34.9billion, down from N38.5 billion in 2018.

At the close of the business year 2019, Lafarge’s revenue also declined by 1.8 per cent to N213billion from the N217 billion it had recorded in 2018.

Market observers equally noted that this year’s revenues were the least the company has recorded in the last five years even as it paradoxically posted a profit before tax of N17.892billion which has been the best year’s performance in this regard for the cement manufacturing company.

The company had plunged into the red in 2016, posting a huge loss of (-N22.8billion). The losses increased to (-N34.032billion) in 2017, before dropping to (-N19.508billion) in 2018; and now turning the bend and returning to profitability this year.

While it paid dividends of N1.00 to its shareholders, earnings per share stood at 96 kobo in 2019. Its earnings per share had stood at 574 kobo in 2015, 315 kobo in 2016, and then it was negative at (-637 kobo) in 2017, before becoming positive again in 2018 at 93 kobo.

The company’s borrowings had been very high at 144billion in 2018 and dropped to N45.8billion in 2019. The company, in a statement made available to the Nigerian Stock Exchange on April 6, 2019, revealed that its net debt reduced by -87.2 per cent from N288.9billion to N37.1billion.

Industry observers appear impressed by the performance of Lafarge which has been in the red zone in the last three years. They believe the rebounding is good for the company’s future.

According to the Managing Director of High Cap Securities Limited, Mr David Adonri, Lafarge appears to have surprised shareholders, having emerged from a loss position in the previous year to become a strong profit-making firm that is paying a dividend of N1.00 per share.

‘The company’s dividend payment is not only impressive but also surprising. With the profit it achieved, the prospect for the future is bright,’ he said.

Also, a Lagos based shareholder-activist, Mr Boniface Okezie who own shares in Lafarge Africa believes that a combination of the successful rights issue that the company undertook earlier and the spinning of its South African subsidiary which has been a drag on the company helped it to return to profitability.

Okezie who affirmed that it was evident that the company had reduced its debt substantially and was now regaining its bearing, added that the company must, however, take even more far-reaching measures to remain competitive and regain market share.

Unfortunately, however, the company is competing against two giant cement firms which may have better financial muscles in the African region.

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 the market for the producer’s cement will continue to increase for the small number of large players. Research shows that Dangote Cement accounts for 60%, Lafarge 30%, while other firms account for 10%. But this, analysts say will change now with the recent acquisitions made by the nimble and assertive competitor, BUA which has just listed on the exchange.

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. With the bearish trend in the equities market which has declined by over 14 per cent year to date, Lafarge stock price dropped a notch from N13.80 on January 2, 2020, to N12.00 per share on April 16, 2020.


Market analysts have attributed the weak performance of manufacturing companies to the prevalent macroeconomic challenges in Nigeria. While some of them fingered lack of economic direction of the President Buhari administration as one of the strong reasons, others have hinged it on tight regulation of both the fiscal and monetary authorities. Yet a third group has sadly pointed at the shrinking revenues of the nation, caused by the volatility in crude price, lack of productivity and increased funding for security, in addition to low disposable income in the hands of consumers. These, market observers believe have also been responsible for the near weak performance of other sectors of the economy. Nigerian economic growth sadly closed in the -6.1 per cent negative at the end of June 2020.

These have dealt a heavy blow on business operations as many firms seem to be struggling to survive.

Lafarge is a publicly quoted company on the Nigerian Stock Exchange (NSE) and serves Nigeria and South Africa with a wide range of building and construction solutions designed to meet housing and construction needs from small projects like individual home buildings to major construction and infrastructure projects.

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 ahead

Given that the firm’s net debt reduced from N288.9bn to N37.1bn (-87.2% vs LY) further to the divestment from South Africa and its successful rights issue in 2019, Lafarge must continue to put the lid on its exposures going forward.

It may indeed be in line with this, that Khaled El Dokani, CEO of Lafarge Africa had stated: “Our turnaround and cost-reduction strategy in FY 2019 and the divestment of the South African business, have delivered strong results. The decrease in net debt has significantly strengthened our balance sheet and has placed us in a vantage position to face the future.” But even more, would need to be done in related respects.

This is more so as the Coronavirus (COVID-19) pandemic in which the company was reportedly linked with the index case, now impacts Nigeria more than ever before.

Instructively, Lafarge Africa has since that incident, taken even more robust and necessary measures to protect the health of its employees, customers, suppliers and other stakeholders.

The final word here would then be given to Lafarge:

‘The construction sector and construction sites are generally more resilient than other sectors and Lafarge Africa has a strengthened balance sheet and is well equipped to weather the storm. However, we are closely monitoring the evolving situation and the impact of the COVID-19 pandemic on the Nigerian market. The Nigerian cement industry growth momentum is expected to slow down in FY 2020 compared to 2019 on the back of the COVID-19 pandemic and the challenging global macro-economic environment.

We have launched an action plan “HEALTH, COST & CASH” and will continue to focus on the implementation of our cost optimisation initiatives during this period to minimise the impact on the business,” a company document outlined.

And the evidence from the market: investors seem to be impressed with its shares as they are already taking a quite hopeful position in the company’s stock at the price of N14.10 per share as recorded on September 24, 2020, to reap the expected yield at the end of the year.

BH wishes them every success.

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