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April 25, 2022/FSDH Research

Key Performance Highlights:

• Lafarge Africa continues to report solid results, with revenue jumping 26.8% YoY and the profit after tax surging 92.2% YoY in 1Q22. Lafarge Africa’s revenues grew 26.8% YoY to N90.6 billion in 1Q22, and the Cost of Sales rose 20.3% YoY to N48.4 billion, resulting in a 35.2% increase YoY increase in gross profit and a 289 bps YoY jump in the gross margin to 46.5% in 1Q22. The increase in the cost of sales was primarily due to higher production variable costs. Variable costs increased to N31.4 billion from N24.4 billion in 1Q22, primarily due to higher inflationary and FX pressures.
   
• The selling and marketing expenses increased 16.9% YoY to N15.0 billion, primarily due to an increase in distribution variable costs. Administrative expenses increased 21.3% YoY in 1Q22. Other income was reported at N166 million, a 12.0% YoY increase caused by a massive 98.65% jump in the Government grants to N140 million in 1Q22.
   
• A respectable top-line growth, coupled with tighter cost control and no write-back of receivables, resulted in a 50.4% YoY growth in operating profit to N22.1 million in 1Q22. The company’s operating margin soared 384 bps YoY to 24.4% in 1Q22. The finance income dropped by 84.7% YoY to N26 million in 1Q22. The finance cost also declined by 67.9% YoY to N676 million in 1Q22, primarily due to reduced Interest on borrowings to N388 million in 1Q22 from N1.7 billion in 1Q21. This resulted in a profit before tax growth of 68.1% YoY to N21.5 billion in 1Q22.
   
• The company recorded an effective tax rate of 18.2% in 1Q22 against 28.5% in 1Q21 due to deferred income tax expenses. The Group also benefited from a tax relief arising from the pioneer tax relief granted on one of the Company’s production lines in the Mfamosing Plant. Thus, the company’s net profit after tax climbed 92.2% YoY to N17.6 billion in 1Q22, with a 660 bps YoY increase in the net profit margin. Lafarge Africa’s earnings per share came in at N1.09/share in 1Q22 versus N0.57/share in 1Q21.
   
• On a sequential basis, Lafarge Africa recorded a robust 22.6% QoQ rise in revenues to N90.6 billion in 1Q22. The impressive top-line performance aided by solid cost control measures resulted in a 30.3% QoQ jump in the company’s operating profits in 1Q22. Moreover, a drop in the effective tax rate from 45.6% in 4Q21 to 18.2% in 1Q22 resulted in a massive 90.3% QoQ jump in the net profit and a 689 bps QoQ expansion of the net profit margin to 19.4% in 1Q22. 

Market Reaction: The investor reaction to the solid quarterly result was overwhelmingly positive as the stock rose 9.89% (22/4) versus a 0.49% gain for the All-Share Index (22/4).

Lafarge Africa Earnings Highlights 1Q22

Source: Company Financials, FSDH