Lafarge Africa: Sustaining Shareholder Return on Investment
Since reporting a loss in 2017 full financial year, Lafarge Africa Plc has maintained stronger top-bottom line performance and sustained dividend payout to shareholders.
The company in the last five years has maintained impressive growth in revenue that has translated into robust profit and proposed dividend on shareholders return on their investment.
Lafarge Africa between 2019 and 2021 declared a sum of N104 billion profit of which N64.4 billion paid to shareholders as dividend.
This represents 61.43 per cent return to shareholders as dividend on investing in Lafarge Africa stocks on the Nigerian Exchange Limited (NGX).
Lafarge Africa in its 2021 financial year recorded a 27.1 per cent increase in net sales driven primarily by strong volume and price improvement. The audited financial result for 2021 is an indication of the strength of the company’s execution of its strategy, which has led to impressive results.
However, in its unaudited financial statement for first quarter (Q1) period ended March 31, 2022, Lafarge Africa has shown sustained results, driven majorly by impressive increase in revenue and effective management of costs.
The cement maker showed impressive performance in revenue that impacted on profit before tax and profit after tax that rose by 68.09 per cent and 92.2 per cent respectively.
The unaudited financial statement showed sustainable performance in Basic Earing Per Share has the company maintained the third most profitable cement manufacturing company on the Nigerian Exchange Limited (NGX).
With the growth in profit, Lafarge Africa closed Q1 2022 with earnings per share (EPS) of N1.09 kobo from N0.59 kobo reported in Q1 2021.
Double-digit increase in revenue
Lafarge Africa reported 27per cent increase in revenue to N90.61 billion in Q1 2022 from N71.47 billion reported in Q1 2021, driven by revenue from cement.
Cement’s revenue grew by nearly 26 per cent to N87.99 billion in Q1 2022 from N69.86 billion reported in 2021.
Also from revenue, aggregates and concrete rose by 62.3 per cent to N2.52 billion in 2022 from N1.55 billion in 2021, while revenue from ‘Other product’ rose by 60.4 per cent to N98.94million in Q1 2022 from N61.68 million in Q11 2021.
Lafarge Africa’s cost of sales gained rose by 20.26 per cent in 2022 to N48.43 billion in Q1 2022 from N40.27 billion reported in Q1 2021.
The growth in cost of sales primarily driven by production variable costs that moved from N24.44 billion in Q1 2021 to N31.38 billion reported in Q1 2022, while production fixed cost inched up by 3.18 per cent to N6.499 billion in Q1 2022 from N6.29 billion in Q1 2021.
In December 2021, the group and company modified the classification of distribution costs on its products to reflect more appropriately the nature of the expense, which is consistent with the accounting policy of the group and company.
Comparative amounts in the statement of profit or loss were reclassified for consistency. As a result, N14.1 billion (2021: N12.1 billion) for the Group and N13.2 billion (2021:N10.8 billion) for the Company relating to distribution costs were reclassified from cost of sales to selling and distribution costs.
Consequently, CoS/Revenue dropped to 53.5 per cent in Q1 2022 from 56.35 per cent in Q1 2021.
Lafarge Africa’s reported gross profit of N42.17 billion in Q1 2022, an increase of 35.18 per cent from N31.2billion in Q1 2021 to positioned gross profit margin at 46.5per cent in Q1 2022 from 43.65 per cent reported in Q1 2021.
With the double-digit inflation rate, total operating expenses rose by nearly 18 per cent to N20.26 billion in Q1 2022 from N17.17billion in Q1 2021.
The breakdown of operating expenses showed 16.9 per cent increase in selling and distribution cost to N15.02 billion in Q1 2022 from N12.86 billion in Q1 2021, while administrative expenses rose by 21.3 per cent to N5.23 billion in Q1 2022 from N4.32 billion in Q1 2021.
The cement maker, thus, reported ‘other income’ of about N165.66 million in Q1 2022 from N147.97 million in Q1 2021 to drive 50.4per cent increase in operating income to N22.12 billion in Q1 2022 from N14.7 billion reported in Q1 2021.
As finance income dropped to N26.19 million in Q1 2022 from N171.7 million in Q1 2021, finance cost dropped by 67.9 per cent to N675.7million in Q1 2022 from N2.1 billion reported in Q1 2021.
In all, profit before tax rose by 68.09 per cent to N21.5 billion in Q1 2022 from N12.77 billion reported in Q1 2021. The company reported 7.5 per cent increase in tax expenses to N3.91 billion in Q1 2022 to position 92.2 per cent to N19.56 billion in Q1 2022 from N9.14 billion reported in Q1 2021.
With the increase in profit, Lafarge Africa closed Q1 2022 with 23.7 per cent profit margin as against 17.9 per cent reported in Q1 2021.
Lafarge Africa’s Basic earnings per share moved to N1.09 in Q1 2022 from N0.57 per share reported in Q1 2021.
Balance sheet on stronger position
Lafarge Africa improved on its balance sheet positioned that has contributed to profitability. The company reported N535.6 billion total assets as of March 31, 2022 from N526.84 billion in December 31, 2021 full financial year result and accounts.
Its non-current liabilities rose by six per cent to N413.7billion as of March 31, 2022 from N390.26 billion reported in 2021 FY, while current assets dropped by 10.7 per cent to N121.95 billion as of March 31, 2022 from N136.57 billion reported in 2021FY.
Total equity increased marginally by 4.6 per cent to N396.12 billion as of March 31, 2022 from N378.56 billion in 2021 FY.
Also from the balance sheet position, total liabilities dropped by nearly six per cent to N139.52 billion as of March 31, 2022 from N148.3 billion reported in 2021 FY.
The company reported N123 billion current liabilities as of March 31, 2022 from N131.05 billion in 2021FY, while non-current liabilities also dropped by 4.1 per cent to N16.5 billion as of March 31, 2022 from N17.22 billion reported in 2021FY.
The company’s in its 2022 outlook stated that good demand momentum is expected to continue in the second quarter (Q2) of 2022 stressing that it will continue to maximize volume opportunities across our markets and actively manage our costs.
The company added that it remained focused in its drive towards sustainability.
The Chief executive officer, Lafarge Africa, Khaled El Dokani in a statement said, “Our Q1 2022 performance shows significant improvement over Q1 2021, with net sales of +26.8per cent, recurring EBIT of +50.4per cent and net income of +92.2per cent.
“Coming after our very strong FY 2021 results, our Q1 2022 performance confirms the continued growth trajectory of our business.
“We are equally pleased with the progress we are making on sustainability; our use of affordable clean energy and agro-ecology footprint are in accordance with our net zero pledge journey.”
Speaking to shareholders during the company 2021 Annual General Meeting, Chairman of the company’s board, Prince Adebode Adefioye hinged the company’s success on the rising demand for cement as building and construction activities picked up nationwide. ‘The cement industry experienced another year of strong growth, mainly attributable to increased government expenditure on infrastructure and improved real-estate investments by private and commercial home builders.”
According to Adefioye, the company benefited from these improved market conditions with volume and price growth; with net sales increasing by 27.1 per cent compared with the previous year, to close at N293.1 billion. “The positive impact of increased net sales, moderated cost of sales, selling, distribution and administrative expenses amidst inflation and devaluation pressures resulted in improved margins recorded for the year.”
“Through effective governance frameworks, assessments, as well as monitoring and evaluation, we are entrenching a culture of ownership, ethics and corporate responsibility in our activities. We also continue to pursue and leverage strategic partnerships that help sustain value and with a positive impact on our stakeholder groups. We are providing thought leadership initiatives to strengthen our voice and position as a foremost company in Nigeria committed to Environmental, Social and Governance (ESG),” he remarked.
Lafarge Africa has the widest footprint in Nigeria with cement operations in the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka, in Gombe State), South East (Mfamosing, Cross Rivers State) with Ready-Mix operations in Lagos, Abuja and Port Harcourt. Lafarge Africa has a current installed cement production capacity of 10.5Mtpa.