July 28, 2026/Cordros Report
HBM Nigeria Plc (HBMNG; formerly Lafarge Africa Plc) released its Q2-26 unaudited results today, reporting a 31.4% y/y increase in standalone EPS to NGN6.85 (Q2-25: NGN5.22), bringing H1-26 EPS to NGN12.93 (H1-25: NGN8.24). The earnings growth was driven by revenue growth (+27.9% y/y) and a sharp surge in net finance income (+214.9% y/y to NGN18.93 billion). Notably, the Board declared an interim dividend of NGN16.00/share, implying a dividend yield of 4.1% based on the last closing price as of NGN389.90.
HBMNG revenue grew by 27.9% y/y in Q2-26 (H1-26: +31.2% y/y), supported by growth across all segments – cement (+27.6% y/y | 97.2% of revenue), aggregates & concrete (+39.8% y/y | 2.7% of revenue), and mortar and power (+16.8% y/y | 0.1% of revenue). We attribute the top-line growth to a combination of higher pricing (c. +16.0% y/y) and improved sales volumes, supported by resilient demand from ongoing public infrastructure projects. On a quarter-on-quarter basis, revenue rose by 2.6%.
Gross margin contracted by 135bps y/y to 63.0% in Q2-26 (H1-26: +497bps y/y to 62.2%), as cost of sales grew faster (+32.7% y/y) than revenue during the quarter. The faster cost growth was driven by higher production variable costs (+35.6% y/y | 64.3% of COGS) – comprising fuel, power, raw materials and consumables – and production fixed costs (+42.0% y/y | 16.9% of COGS), alongside a 39.9% y/y rise in depreciation (9.6% of COGS). The cost pressure largely reflects the impact of higher global oil prices during the quarter, which exerted upward pressure on fuel, power and distribution costs across the industry.
Similarly, EBITDA and EBIT margins declined by 90bps y/y and 133bps y/y to 47.4% and 43.6%, respectively (H1-26: +587bps y/y and +569bps y/y to 46.3% and 42.9%, respectively), further pressured by the uptick in OPEX. Precisely, OPEX rose by 18.4% y/y in Q2-26 (H1-26: +20.4% y/y), driven mainly by higher administrative staff costs (+62.8% y/y), advertising (+45.5% y/y), marketing staff costs (+34.4% y/y), and technical service fees (+22.2% y/y). However, we note that the OPEX-to-sales ratio improved to 19.3% in Q2-26 (Q2-25: 20.9%) and to 19.1% in H1-26 (H1-25: 20.9%), indicating sustained operating efficiency.
Below the operating line, HBMNG reported net finance income of NGN18.93 billion in Q2-26, up 214.9% y/y from NGN6.01 billion in Q2-25. This was driven by a 178.5% y/y increase in finance income to NGN14.86 billion, a 148.6% y/y rise in net FX gains to NGN4.96 billion, and a 32.9% y/y decline in finance costs to NGN885.07 million. In H1-26, net finance income rose by 258.8% y/y to NGN26.79 billion (H1-25: NGN7.47 billion), primarily reflecting a 276.2% y/y surge in finance income to NGN27.01 billion.
Ultimately, profit before tax increased by 33.2% y/y to NGN168.61 billion, while profit after tax increased by 31.4% y/y to NGN110.39 billion, after accounting for a tax expense of NGN58.22 billion. For H1-26, PBT and PAT grew by 59.1% y/y and 57.0% y/y to NGN317.73 billion and NGN208.35 billion, respectively.
Comment: HBMNG delivered another strong quarter in Q2-26, extending the earnings momentum established in Q1. This was supported by firm pricing, resilient sales volumes, and a significant contribution from finance income. Margins, however, moderated from the exceptionally strong levels recorded in the prior-year period, reflecting higher energy and logistics costs following the spike in global oil prices amid the US-Iran conflict. Separately, the declaration of an interim dividend of NGN16.00/share came as a positive surprise. The payout appears generous relative to H1-26 earnings and may indicate management’s confidence in the company’s earnings outlook and cash generation. Nevertheless, we look forward to further clarity from management on the rationale behind the distribution and whether it signals a change in HBMNG’s dividend policy. Looking ahead, we expect earnings to stay resilient in Q3, supported by sustained demand, firm pricing, and still elevated interest rate environment which should support finance income. That said, persistently high energy prices and logistics costs remain the key downside risks to margins. Our estimates are under review.
