July 30, 2024/CSL Research

In its recently released unaudited H1 2024 results, Lafarge Africa reported a 49.5% y/y Revenue growth to N295.58bn in H1 2024 from N197.68bn in the prior period (H1 2023). Similarly, on a q/q basis, Revenue was up by 14.5% to N157.80bn in Q2 2024 from N137.77bn recorded in Q1 2024. The broad-based growth in cement sales (up 49.6% to N287.01bn), aggregate and concrete sales (up 47.25% to N8.23bn), and other products (up 79.59% to N335m) drove the topline growth in H1 2024. While no information has been provided on the Revenue breakdown, we attribute the company’s top-line growth to a mix of price and volume growth.

Given a y/y increase in variable costs (up 63.1% y/y to N96.19bn), production fixed costs (up 53.58% y/y to N20.81bn) and maintenance fixed costs (up 109.65% y/y to N17.81bn), Cost of Sales (adjusted for depreciation) increased by 66.4% y/y to N134.81bn in H1 2024 from N81.02bn in H1 2023. We attribute the rise in cost to the impact of the steep devaluation of the currency, elevated inflationary pressures, and rising energy costs. Despite the increase in Cost of Sales, Gross Profit grew by 37.8% y/y to N160.76bn in H1 2024. However, the Gross Margin declined by 4.6 ppts to 54.39% in H1 2024, down from 59.01% in H1 2023.

LAFARGE AFRICA H1 2024

Source: Company data, CSL Research

In H1 2024, Operating Expenses (adjusted for depreciation) increased by 36.58% y/y to N69.85bn, up from N51.14bn in H1 2023. This rise in OPEX was driven by a 33.2% increase in Selling & Distribution Expenses (adjusted for depreciation), which reached N53.65bn, and a 49.1% rise in Administrative Expenses (adjusted for depreciation), totaling N16.20bn. Despite these cost pressures, EBITDA grew by 40.4% to N92.59bn in H1 2024, up from N65.93bn in H1 2023. However, the EBITDA margin decreased by 2.0ppts to 31.32% in H1 2024 down from 33.35% in H1 2023. Depreciation and Amortisation rose slightly by 0.3% to N13.68bn.

Other Income, which includes gains from the disposal of property, plant, and equipment, government grants, sale of scraps, and other miscellaneous sources, surged by 290.0% to N1.66bn from N425m in H1 2023. The company’s Operating Profit increased by 50.9% y/y to N78.91bn from N52.29bn in H1 2023.

In H1 2024, Lafarge reported a Net Finance Cost of N32.28bn, a significant shift from the Net Finance Income of N3.03bn recorded in H1 2023. This sharp increase in Net Finance Cost was driven by a rise in Finance Cost to N33.31bn, up from N1.41bn in H1 2023, coupled with a decline in Finance Income to N1.03bn from N4.44bn in H1 2023. The growth in Finance Cost was due to a substantial increase in Net FX losses. In H1 2023, the company reported total FX loss of N19.91bn. We note that in Q2 2024, the company did not incur any FX loss but instead recorded FX gain of N1.89bn. The reported FX loss stems from Q1 2024.

Pre-tax profit decreased by 15.7% y/y to N46.63bn in H1 2024, down from N55.32bn in H1 2023 while Net Income fell by 17.3% y/y to N29.35bn in H1 2024, compared to N35.48bn in H1 2023. Earnings per share also declined by 17.3% y/y to N1.82 in H1 2024, down from N2.20 in H1 2023.

We have a target price of N45.96/s for Lafarge Africa with a Buy recommendation. Current Price; N36.80/s.

Kindly click on the below link to download the full report.

​CSL Lafarge Africa Earnings Quick Take H1 2024 .pdf​​​

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