July 30, 2024/Cordros Report
Lafarge Africa Plc (WAPCO) released its Q2-24 unaudited results yesterday (29 July), reporting an EPS growth of 17.9% y/y to NGN1.50 (Q2-23: NGN1.27). The growth was driven by a 49.1% y/y increase in revenue. However, for H1-24, EPS declined by 17.3% y/y to NGN1.82 (H1-23: NGN2.20), influenced by the substantial FX loss reported in Q1-24.
WAPCO’s revenue grew by 49.1% y/y in the quarter, which we attribute to improved sales volume and price increases. A breakdown of revenue by product shows growth across all segments – cement (+49.9% y/y), aggregates (+21.9% y/y), and other products (+82.9% y/y). H1-24 revenue increased by 49.5% y/y (cement +49.6% y/y | aggregates +47.3% y/y | other products +79.6% y/y).
Gross margins declined by 372bps y/y to 56.0% (H1-24: -462bps y/y to 54.4%) due to a 62.9% y/y rise in the cost of sales (ex-depreciation). The combined costs of fuel, power, raw materials, and consumables surged by 64.5% y/y in Q2-24, representing 73.0% of the total cost of sales. This was primarily influenced by exchange rate fluctuations due to the depreciation of the naira and the high cost of diesel.
OPEX (ex-depreciation) increased by 28.6% y/y, largely due to inflationary pressures further impacting EBITDA margin, which declined by 8bps y/y to 34.5% (H1-24: -203bps y/y to 31.3%).
Although there were no FX losses in Q2-24, the company reported a net finance cost of NGN9.78 billion compared to the net finance income of NGN2.74 billion in Q2-23 as a result of the high-interest rate environment which drove finance costs to NGN12.13 billion (Q2-23: NGN0.41 billion), offsetting the NGN2.35 billion finance income reported. Specifically, interest paid on borrowings (+34.6% y/y) and bank charges (+65.3x y/y) contributed to the rise in finance costs during the period. For H1-24, net finance costs totalled NGN32.28 billion, compared to NGN3.03 billion in H1-23.
Nonetheless, WAPCO’s pre-tax profit increased by 15.7% y/y to NGN37.92 billion (Q2-23: NGN32.79 billion), while profit after tax advanced by 17.9% y/y to NGN24.16 billion (Q2-23: NGN20.50 billion).
Comment: WAPCO’s impressive topline growth, along with the elimination of FX exposures, positively impacted bottom-line performance. Increased product demand and higher pricing, coupled with the successful launch and market acceptance of Watershield Cement, drove revenue growth. Looking ahead, we anticipate continued revenue expansion driven by rising demand for cement and contributions from new innovative products, including ECOPlanet Unicern, which was launched in July. Our estimates are under review.
