October 30, 2024/Cordros Report
Lafarge Africa Plc (WAPCO) published their Q3-24 unaudited financials after the close of business yesterday (29 October). The company reported an impressive 703.0% y/y surge in Q3-24 standalone EPS to NGN1.91, driven by robust revenue growth (+101.2% y/y) and a significant reduction in FX losses (-86.7% y/y). Consequently, 9M-24 EPS grew by 52.8% y/y to NGN3.73 (9M-23: NGN2.44).
The 101.2% y/y surge in revenue in Q3-24 (9M-24: +65.9% y/y) was driven by growth across the cement (+104.0% y/y; 97.5% of revenue) and aggregates (+41.9% y/y; 2.5% of revenue) segments. Management attributed the strong revenue performance to increased output driven by improved plant stability, enhancements in supply chain operations, and effective cost management initiatives.
However, gross margin declined by 326bps y/y to 52.9% due to the elevated (+116.2% y/y) cost of sales ex-depreciation. The rise in the cost of sales was primarily driven by a high variable cost (+121.2% y/y | 71.8% of COGS), which comprises raw material and energy costs, reflecting the impact of the naira depreciation and elevated energy costs.
Nonetheless, EBITDA and EBIT margins expanded by 600bps y/y and 915bps y/y to 32.1% and 27.8%, respectively, driven by the strong revenue growth, which offset the impact of a 39.8% y/y increase in OPEX (ex-depreciation). The higher operating expenses stemmed from a 62.5% y/y increase in distribution costs, including diesel/gasoline and freight costs.
Furthermore, net finance costs fell sharply by 69.1% y/y in Q3-24, largely driven by an 86.7% y/y dip in FX losses to NGN1.55 billion (Q3-23: NGN11.66 billion). The decline in FX losses stems from a 16.1x year-to-date (YTD) reduction in loans and borrowings to NGN1.54 billion, following the company’s settlement of 93.7% of their gross debt (of which 51.9% were letters of credit) in Q2-24.
As a result, Q3-24 standalone profit before tax (PBT) grew markedly by 716.5% y/y to NGN47.69 billion, while profit after tax (PAT) surged by 703.0% y/y to NGN30.72 billion after accounting for a tax expense of NGN16.97 billion (Q3-23: NGN2.02 billion).
Comment: WAPCO has demonstrated a strong recovery from the substantial FX losses that impacted Q3-23 earnings due to naira depreciation, with reduced FX exposure supporting Q3-24 earnings amid solid revenue growth. Impressively, YTD EPS has reached NGN3.73, surpassing 2023FY EPS of NGN3.17. We expect this positive earnings trajectory to extend into Q4-24, bolstered by sustained demand and anticipated favourable response to new product lines, including the upcoming launch of ‘Supa Whyte’, alongside higher pricing and reduced finance costs. Our estimates are under review.