FSDH Initial Reaction: Lafarge Africa 1Q24 results 
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April 30, 2024/FSDH Research

Key Performance Highlights:

• Lafarge Africa demonstrated a remarkable 50.0% YoY increase in sales to N137.8 billion in 1Q24, driven by a 49.1% YoY rise in Cement sales from N89.4 billion to N133.4 billion and an 84.4% YoY increase in aggregates and concrete sales to N4.2 billion in 1Q24. Lafarge Africa’s quarterly sales growth (50% YoY) marginally lagged behind that of its competitor, BUA Cement, which reported a 51.5% YoY increase in 1Q24. However, the Cost of Sales surged 59.1% YoY to N72.1 billion during the quarter, reflecting higher variable costs like fuel, power, raw materials and consumables, higher fixed costs like personnel expenses, by-products costs and electrical energy expenses, and maintenance of those fixed costs. Consequently, Lafarge’s Gross profit increased 41.2% YoY to N65.6 billion, while its Gross margin narrowed by 297 bps YoY to 47.6%.
   
• During 1Q24, Lafarge Africa’s Selling and marketing costs increased 46.0% YoY to N27.2 billion, majorly due to increased distribution variable costs, including diesel/gasoline, outbound freight and outsourced mining activities. Further, Administrative expenses surged 43.7% YoY to N8.3 billion, compared to N5.8 billion in 1Q23, mainly due to Salaries and other staff-related costs and Office and general expenses. Subsequently, Operating Profit increased 36.0% YoY to N30.2 billion, while Operating margin contracted 227 bps YoY to 21.9%. While the Company’s EBITDA witnessed a 26.8% YoY growth to N37.1 billion, the EBITDA margin shrank 495 bps YoY to 27.0% in 1Q24.
   
• The Company’s Finance Income increased to N1.6 billion from N914 million in 1Q23, while Finance Costs substantially rose to N23.1 billion in 1Q24 from just N672 million in 1Q23, majorly due to foreign exchange losses increasing to 21.8 billion (1Q23: N324 million). Further, Income tax expenses reduced to N3.5 billion from N7.5 billion in 1Q23. Consequently, Profit After Tax sharply fell 65.2% YoY to N5.2 billion during the quarter (1Q23: N14.9 billion), materially impacted by elevated FX losses arising from Naira devaluation. The Company’s Earnings per share declined to N0.32 from N0.93 in 1Q23.
   
• Sequentially, the Company’s revenues increased 18.3% QoQ to N137.8 billion. Although the Cost of Sales surged 24.9% QoQ to N72.1 billion, the Gross Profit increased 11.9% on a QoQ basis to N65.6 billion. However, Operating Profit declined 7.5% QoQ to N30.2 billion due to higher selling and marketing expenses. The FX losses resulted in a 56.3% QoQ decline in Profit After Tax to N5.2 billion, while the Net margin declined 644 bps YoY to 3.8% (4Q23: 10.2%).

Market Reaction: The investor reaction to the 1Q24 results was subdued as the Lafarge Africa stock declined 8.75% to close at N32.85, versus a 0.35% gain for the All-Share Index (30/4).

Lafarge Africa Earnings Highlights 1Q24

Source: Company Financials, FSDH