FSDH Initial Reaction: Lafarge Africa FY23 results 
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March 1, 2024/FSDH Report

Key Performance Highlights:

• Lafarge Africa reported decent sales growth despite challenging macroeconomic headwinds in FY23. Looking at the top line, the revenue grew 8.6% YoY to N405.5 billion, while the cost of sales increased by 12.3% YoY to N198.8 billion, resulting in a 5.3% YoY rise in gross profit to N206.7 billion. However, the gross margin declined 159 bps YoY to 51.0% in FY23 (FY22: 52.6%), as the cost of sales grew more than proportionately, mainly due to higher Fuel and power costs, which vaulted 21.6% YoY to N75.7 billion in FY23.
   
• The selling and marketing expenses fell 12.9% YoY to N78.1 billion in FY23, with a major decline coming from a drop in distribution variable costs to N66.9 billion (FY22: N75.9 billion). Administrative expenses soared 22.1% YoY to N27.6 billion, driven by a 140.1% YoY surge in office and general expenses to N5.4 billion in FY23. On the other hand, other income increased 60.0% YoY to N982 million in FY23 due to gain on disposal of property, plant and equipment. Consequently, the operating profit expanded 21.2% YoY to N102.0 billion in FY23, with an operating margin improvement of 260 bps YoY to 25.2% (FY22: 22.6%).
   
• The finance income rose 3x YoY to N4.7 billion in FY23, resulting from higher interest income. In contrast, finance costs spiralled to N26.0 billion in FY23 (FY22: N16.0 billion), largely due to a net foreign exchange loss of N21.0 billion in FY23 compared to N16.0 billion in FY22. This resulted in profit before tax growing by 15.7% YoY to N80.7 billion FY23. The company reported an effective income tax rate of 36.6% this year against 23.1% in FY22 (due to the expiry of Pioneer Status Incentive in 2022), resulting in tax expenses of N29.6 billion, a massive 83.6% YoY rise. Consequently, Lafarge Africa reported a 4.7% YoY decline in the net profit to N51.1 billion in FY23. The earnings per share came in at N3.17 in FY23 compared to N3.33 in the prior year. The Board proposed a final dividend of N1.90 per share (FY22: N2.00 per share) to all shareholders registered in the company’s books at the close of business on Thursday, 28 March 2024.
   
• It is worth noting that the company reported robust Q4 results, with revenue jumping 12.6% and net profit surging 35.8% YoY. Furthermore, on a sequential basis (QoQ), revenue and net profit rose 27.4% and 210.6%, respectively. Lafarge Africa recorded a 12.6% YoY revenue growth to N116.4 billion in 4Q23, while the cost of sales soared 37.6% YoY to N57.8 billion, leading to a 902 bps YoY fall in the gross margin to 50.4%. Moreover, selling and marketing expenses declined 36.0% YoY to N17.2 billion, and foreign exchange loss was marginally lower at N12.5 billion in 4Q23 compared to N12.9 billion in 4Q22. Consequently, Lafarge reported a 35.8% YoY rise in the net profit to N11.9 billion and a 175 bps YoY expansion in the net profit margin to 10.2% in 4Q23.
   
• On 29 February 2023, Lafarge Africa announced the resignation of Mr. Rajesh Surana as a Non-Executive Director of Lafarge Africa Plc, effective 26 February 2023. The Board has approved the appointment of Mr. Grant Earnshaw as a Non-Executive Director of the Company with effect from 27 February 2023. 

Market Reaction: The investor reaction to the FY23 results was muted as the Lafarge Africa stock remained unchanged at N31.95, versus a 0.72% gain for the All-Share Index (29/2).

Lafarge Africa Earnings Highlights FY23

Source: Company Financials, FSDH