Cement Stocks Close Lower as Investors React to Profit warning


Shares on the Nigerian bourse closed lower friday as the bearish trend at the stock market continued. The market had declined by 1.54 per cent last week. And when trading resumed for the week yesterday, the Nigerian Stock Exchange (NSE) All-Share Index fell by 0.14 per cent to be at 28,815.32. Similarly, the NSE market capitalisation shed N14.2 billion to close at N9.8 trillion.

In all, 30 stocks declined compared with 16 stocks that appreciated. An analysis of the performance showed that the fall in the index mostly resulted from major sell-offs in cement companies, Lafarge Africa Plc and Dangote Cement Plc. Lafarge Africa went down by 5.0 per cent, while Dangote Cement shed 0.2 per cent.

Market analysts said the profit warning sent by Lafarge Africa Plc last week jolted many investors who have reacted negatively.

Lafarge Africa Plc last Friday said its second quarter(Q2) financial results to June 30, 2016, would be affected by an unrealised foreign exchange loss of about N28 billion.
According to the cement firm, the Q2 results would be affected by the impact of the Naira devaluation against the United States dollar (USD), resulting in an unrealised exchange loss.
“The impact of the naira devaluation is expected to be a N28 billion unrealised exchange loss arising from the USD borrowings, which at the time of the devaluation, consisted of $310 million shareholders loans and $85 million external loans. These loans relate to the United Cement Company of Nigeria Limited (Unicem) and were mainly set up prior to the acquisition by Lafarge Africa of its original 35 per cent stake in Unicem. Lafarge Africa has since then increased its stake in Unicem and held at the time of the devaluation, 50 per cent of Unicem which was fully consolidated. Lafarge Africa now holds 100 per cent of Unicem. The N28 billion unrealized exchange loss will not have immediate impact on our cash flow,” the company said.

The decline in the share prices of Lafarge and Dangote Cement made the NSE Industrial Goods Index close with a 2.1 per cent fall to lead other sectoral indices. The NSE Insurance and Oil & Gas Indices followed with decline down 1.2 per cent, while the NSE Consumer Goods Index ended with a 0.07 per cent decline.