February 28, 2023/CSL Research
Supported by strong demand, Lafarge Africa reported a 27.3% y/y increase in Revenue to N373.25bn from N293.086bn in FY 2021. On a q/q basis, Revenue increased by 24.2% to N103.39bn in Q4 2022 from N83.27bn in Q3 2022. The broad-based growth in cement sales (up 27% y/y to N361.96bn), sale of aggregates & concrete (up 43.4% y/y to N10.94bn) and others (up 1.7% y/y to N0.3bn) drove the strong topline growth in FY 2022. While no information has been provided on the Revenue breakdown, we believe that increase in price was key to protecting the profit margins of the company, as production volumes dragged in 2022. As of 9M 2022, prices were up by (+20.5% y/y), while production volumes declined by (-3.4% y/y).
Cost of Sales (adjusted for depreciation) rose slightly faster than Revenue, up 27.5% y/y (vs. Revenue growth of 27.3%) to N153.43bn in FY 2022. This could be attributed to a y/y significant increase in production fixed costs (up 103.7% y/y to N25.25bn), production variable costs (up 25.6% y/y to N111.20bn) and maintenance fixed costs (up 16.1% y/y to N16.97bn). We believe FX devaluation impact on imported raw materials as well as USD priced energy sources contributed to the increase in Cost of Sales. Also, we believe that the persistent inflationary pressures significantly affected the company’s cost. Nevertheless, Gross profit grew 27.3% y/y to N219.82bn in FY 2022 while Gross margin remained stable at 58.9% in FY 2022.
Operating Expenses (adjusted for depreciation) increased by 43.4% y/y to N110.16bn in FY 2022 from N76.84bn in FY 2021. The increase was driven by an upward pressure in both Administrative Expenses adjusted for depreciation (up to N20.59bn from N19.86bn in 2021) and Selling & Distribution Expenses adjusted for depreciation (up to N89.58bn from N56.98bn in 2021). Given the robust Revenue growth, EBITDA increased by 14.1% to N110.21bn in FY 2022 from N96.56bn in FY 2021. EBITDA margin declined marginally by 3.4ppts to 29.5% in FY 2022 from 32.9% in FY 2021. Operating Profit grew strongly, up 29.9% y/y to N84.63bn.
Net Finance Cost rose by 308.6% y/y to N14.45bn in 2022 from N3.54bn in 2021. This was as a result of an increase in Interest Expense (up 202.9% y/y to 15.98bn in 2022) amidst a decline in Interest Income, which was down by 11.9% y/y to 1.5bn in FY 2022. Pre-Tax profit increased, up 13.9% y/y to N70.18bn in FY 2022. Tax Expenses increased to N16.10bn in FY 2022 from N11.25bn in FY 2021. Still, Net Income grew moderately, up 7.4% y/y to N54.10bn in FY 2022 from N50.35bn in FY 2021. Earnings per share was also up 5.1% y/y to N3.33/s in 2022 from N3.17/s in 2021. The company’s management has declared a dividend of N2/s for 2022, implying a dividend yield of 7.70% based on current price, with the qualification date slated for 10 April 2023.
Our estimates are under review. Current Price; N26/s.
| Wapco FY 2022 | ||||||
| Nm, except mentioned otherwise | FY’22 | FY’21 | y/y | Q4’22 | Q3’22 | q/q |
| Sales | 373,245 | 293,086 | 27.3% | 103,392 | 83,266 | 24.2% |
| Cost of Sales (Ex-Dep) | (153,429) | (120,369) | 27.5% | (35,880) | (38,839) | -7.6% |
| Gross Profit | 219,816 | 172,717 | 27.3% | 67,512 | 44,427 | 52.0% |
| Other Income | 557 | 687 | -18.9% | 276 | 82 | 238.6% |
| Selling and Distribution Expenses (ex-dep) | (89,576) | (56,976) | 57.2% | (26,922) | (25,001) | 7.7% |
| Administrative Expenses (ex-dep) | (20,587) | (19,863) | 3.6% | (5,725) | (5,533) | 3.5% |
| EBITDA | 110,209 | 96,564 | 14.1% | 35,141 | 13,974 | 151.5% |
| Depreciation and Amortization | 25,584 | 31,431 | -18.6% | 7,028 | 5,967 | 17.8% |
| EBIT | 84,625 | 65,133 | 29.9% | 28,113 | 8,007 | 251.1% |
| Net Finance Income/ (Cost) | (14,449) | (3,536) | 308.6% | (11,842) | (939) | 1160.6% |
| Profit before tax | 70,176 | 61,597 | 13.9% | 16,272 | 7,068 | 130.2% |
| Tax expense | (16,097) | (11,251) | 43.1% | (7,049) | 420 | -1778.7% |
| Net Profit | 54,079 | 50,346 | 7.4% | 9,223 | 7,488 | 23.2% |
| Net income attributable to equity holders | 53,647 | 51,034 | 5.1% | 8,835 | 7,489 | 18.0% |
| Diluted EPS | 3.33 | 3.17 | 5.1% | 0.55 | 0.46 | 18.0% |
| Margins: | FY’22 | FY’21 | y/y | Q4’22 | Q3’22 | q/q |
| Gross margin | 58.9% | 58.9% | 0.0ppts | 65.3% | 53.4% | 11.9ppts |
| EBITDA Margin | 29.5% | 32.9% | -3.4ppts | 34.0% | 16.8% | 17.2ppts |
| PBT Margin | 18.8% | 21.0% | -2.2ppts | 15.7% | 8.5% | 7.2ppts |
| Net margin | 14.5% | 17.2% | -2.7ppts | 8.9% | 9.0% | -0.1ppts |
Source: Company data, CSL Research
