April 30, 2024/Cordros Report
Lafarge Africa Plc (LAFARGE) released its Q1-24 unaudited financials yesterday (29 April), reporting a marked 65.2% y/y decline in EPS to NGN0.32 (Q1-23: NGN0.93). The notable drop in earnings was driven mostly by the net FX losses (NGN21.80 billion) in the review period amid a spike in COGS ex depreciation (+70.3% y/y) and OPEX ex depreciation (+45.4% y/y).
In Q1-24, LAFARGE’s revenue grew by 50.0% y/y, supported by increases across its cement (+49.1% y/y | 96.8% of revenue), aggregates and concrete (+84.4% y/y | 3.0% of revenue) and mortar and power (+76.8% y/y | 0.1% of revenue) revenue lines. While we await clarity from management, we believe the outturn was majorly supported by higher volumes following a pickup in cement demand coupled with likely price increases in the review period.
Gross margin slumped by 565bps y/y to 52.5%, as cost of sales ex-depreciation advanced by 70.3% y/y driven by increases across its entire cost line. Notably, raw materials and energy (+61.6% y/y), salaries and electricity (+86.8% y/y) and maintenance (+104.8% y/y) costs surged aggressively due to inflationary pressures and higher energy prices.
Sequentially, operating expenses ex-depreciation (+45.4% y/y) also settled higher majorly attributable to expenses arising from fuel, outbound freight, outsourced mining activities and salaries. Consequently, EBIT and EBITDA margins moderated by 227bps y/y and 495bps y/y to 21.9% and 27.0%, respectively in Q1-24.
Further down, the group recorded net finance cost of NGN21.53 billion in Q1-24 compared to the net finance income of NGN24.23 million in Q1-23. Just like its local peers, the company recorded net FX losses amounting to NGN21.80 billion in Q1-24, due to the naira depreciation in the first three months of the year (-30.5% to NGN1,309.39/USD).
As a result, PBT declined by 61.3% y/y to NGN8.71 billion in Q1-24 (Q1-23: NGN22.48 billion). Following a lower tax expense of NGN3.52 billion (-53.4% y/y), profit after tax settled 65.2% y/y lower at NGN5.19 billion in Q1-24.
Comment: We note that the significant margins contraction suffered by LAFARGE in Q1-24 was below our expectations. We acknowledge the naira depreciation and resultant pressure on the company’s bottomline is a broader economic challenge whose risk remains in the near term. Our estimates are under review.
