November 1, 2024/InvestmentOne Report
Robust Sales Growth: In 9M:2024, Lafarge Africa Plc grew revenue by 65.87% YoY to NGN479.50bn driven by strong sales in the third quarter of the year. This impressive performance stemmed from strong volume growth due to improved plant stability and uptick in product prices. The launch of Water-shield cement in the first quarter of 2024 has continued to support topline growth. Specifically, cement sales inched upwards by 66.66% YoY to NGN466.27bn, aggregates and concrete rose by 45.32% YoY to NGN12.89bn. Meanwhile, revenue from other products moderated by 23.41% YoY to NGN335.42mn, with no sales was recorded in Q3:2024 for this category. Rising cost of sales (COS) limited gross margin expansion, as the production cost accelerated by 71.42% YoY to NGN241.73bn, particularly due to the increase in production variable costs like fuel, power, raw materials and consumables – reflective of the high inflationary environment. Consequently, gross margin contracted by 163bps to 49.59%. Despite the heightened cost pressures across selling and distribution and administrative costs, operating profit significantly rose by 87.57% YoY to NGN130.08bn. This was due to the support from increase in other income which amounted to NGN2.27bn – a 320.37% advancement from the previous year. Furthermore, this was as a result of government grant (NGN981.14bn), gain on disposal of property, plant & equipment (NGN923.17bn) and sales of scrap (NGN365.77bn). Additionally, operating margin edged higher to 27.13% from 23.99% in the previous year.
Operational Efficiency Support Bottom Line: Due to the depreciation of the local currency, the group recorded a finance cost of NGN36.56bn from NGN11.57bn in the previous year, following a foreign exchange loss of NGN21.45bn in 9M:2024 (vs NGN9.42bn in 9M:2023). Additionally, bank charges amounted to NGN13.23bn, from NGN1.03bn in the previous year. Moreso, interest on borrowings posted an uptick due to the increase in the benchmark interest rates by the Central Bank of Nigeria thus far this year. Finance income printed at a mere NGN810.54mn during the period. Notwithstanding the macroeconomic headwinds, Profit Before Tax (PBT) advanced by 54.24% YoY to NGN94.33bn in 9M:2024 owing to the group’s operational efficiency. After the deduction of NGN34.25bn income tax, the company posted a Profit After Tax (PAT) of NGN60.08bn – marking 52.85% YoY advancements in earnings during the period. Consequently, the Earnings Per Share (EPS) rose to NGN3.73 kobo from NGN2.44 kobo in the corresponding period of 2023.
Balance Sheet: As of 30th September 2024, total assets rose by 25.69% YoY to NGN810.24bn, majorly due to the 13.53% YoY increase in property, plant and equipment to NGN390.67bn. Inventory and other asset also rose by 90.84% and 143.67% respectively to NGN101.58bn and NGN146.19bn. Conversely, cash and cash equivalent decreased by 43,03% to NGN89.52bn. On the other hand, total liabilities advanced faster by 56.85% YoY to NGN345.72bn, due to increases in trade payables (+60.71% YoY to NGN102.57bn), contract liabilities (+186,79% YoY to NGN1067.75bn), and deferred tax liabilities (+132.09% to NGN58.14bn). At the end of the reporting period, shareholders’ funds stood at NGN464.52bn.
Outlook: Looking ahead, we expect the positive momentum to be maintained as Lafarge Africa
Plc focuses on volume growth through its continuous product innovation. For instance, the introduction of ECOPlanet cement nationwide by year end and ongoing plans to launch Supa whyte product this month should bode well for future performance. These initiatives, along with
improved operational efficiencies, should help mitigate the impact of the prevailing macroeconomic headwinds on earnings. We hence place an OVERWEIGHT rating on WAPCO.
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