March 6, 2025/InvestmentOne Report
Improved Volume Drives Revenue Growth: In FY:2024, Lafarge Africa Plc s revenue accelerated by 71.83% YoY to NGN696.76bn, driven by strong sales recorded particularly in the second half of the year. The impressive performance stemmed from volume expansion, supported by the introduction of new product offerings including Watershield Cement in Q1:2024, ECOPlanet cement in Q3:2024 and Supa whyte plaster of Paris (POP) in Q4:2024 amid the uptick in product prices.
By segment, cement sales advanced by 72.60% YoY to NGN677.57bn, Readymix and other products edged higher by 48.38% YoY to NGN19.19bn. However, gross margin contracted by 122bps owing to the rise in cost of sales (COS) following prevalent inflationary pressures amid high energy cost. Consequently, COS was up by 76.09% to NGN350.05bn.
Despite the heightened cost pressures across selling & distribution and administrative costs, operating profit materially increased by 89.18% YoY to NGN193.01bn. This was due to the strong topline performance and a significant support from an increase in other income which amounted to NGN7.19bn – a 706.05% advancement from the prior year. This increase was due to the reversal of impairment of property, plant & equipment to the tune of NGN4.67bn, government grant of NGN1.03bn, gain on disposal of property, plant & equipment of NGN965.96mn and sales of scrap amounting to NGN520.97mn. Additionally, operating margin edged higher to 27.70% from 25.16% in the previous year.
Robust Topline growth Enhance Earnings: The group recorded a sharp increase in finance cost to the tune of NGN42.55bn from NGN25.98bn in the preceding year, due to the significant
depreciation of the Naira in 2024. Specifically, NGN24.27bn net foreign exchange loss was posted in the year (vs NGN21.04bn in 2023). Additionally, bank charges and other interest cost amounting to NGN16.25bn was also a major contributor to the finance cost pressures, driven by the increase in benchmark interest rates by the Central Bank of Nigeria. At the end of the financial year, the group posted a net finance cost of NGN40.49bn vs NGN21.33bn in 2023. Finance income printed at NGN2.06bn.
Despite the headwinds, Profit Before Tax (PBT) advanced by 89.01% YoY to NGN152.52bn in FY:2024 due to the group’s operational efficiency with an income tax deduction of NGN52.12bn. At the end of the reporting year, the group posted a Profit After Tax (PAT) of NGN100.15bn – marking a 95.82% YoY advancement in earnings. Consequently, the Earnings Per Share (EPS) jumped to NGN6.22 kobo from NGN3.17 kobo in 2023.
Balance Sheet: As of 31st December 2024, total assets rose by 45.37% YoY to NGN990.51bn, majorly due to the 41.37% YoY increase in property, plant and equipment to NGN409.76bn. Other asset and inventory also rose by 105.45% and 91.74% respectively to NGN165.08bn and NGN104.19bn. Cash and cash equivalent advanced by 41.27% to NGN237.86bn. On the other hand, total liabilities increased faster by 97.25% YoY to NGN485.87bn, due to advancements in contract liabilities (+183.34% YoY to NGN212.46bn), trade payables (+80.01% YoY to NGN181.73bn), and deferred tax liabilities (+135.72% YoY to NGN71.13bn). At the end of the period, shareholders’ funds stood at NGN504.64bn.
Outlook: Lafarge Africa Plc is well-positioned for continued growth, supported by its strategic
expansion initiatives, product innovation, and operational efficiencies. Upon completion of Huaxin Cement’s acquisition, we expect to see enhancement in production capacity, access to advanced manufacturing technologies and optimized cost efficiencies. This should potentially strengthen Lafarge’s competitive position in the Nigerian cement market. Additionally, expectations for a stable foreign exchange market, coupled with the likelihood of tempering interest rates later this year, are net positive. Lastly, the Federal government’s proposed NGN4.06trn infrastructural spending for Fiscal year 2025 should support industrial sector growth in the year. Hence, we place an OVERWEIGHT rating on WAPCO.
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