Lafarge Africa: Supporting shareholder return on investment

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Kayode Tokede

Since posting a loss in fiscal 2017, Lafarge Africa Plc has maintained superior performance and a sustained dividend payout to shareholders.

Over the past five years, the company has maintained impressive revenue growth that has translated into strong earnings and a proposed dividend on shareholder return.

Lafarge Africa between 2019 and 2021 reported a profit of N104 billion of which N64.4 billion was paid to shareholders as a dividend.

This represents a 61.43% return to shareholders as a dividend on investment in Lafarge Africa shares at the Nigerian Exchange Limited (NGX).

Lafarge Africa in its fiscal year 2021 recorded a 27.1% increase in net sales, mainly due to a strong improvement in volumes and prices. The audited financial result for 2021 is an indication of the strength of the company’s execution of its strategy, which has led to impressive results.

However, in its unaudited financial statements for the first quarter (Q1) period ended March 31, 2022, Lafarge Afrique posted solid results, mainly thanks to an impressive increase in revenues and effective cost management.

The cement maker posted impressive revenue performance which impacted pre-tax profit and after-tax profit which increased by 68.09% and 92.2% respectively.

Unaudited financials showed sustained performance in Basic Earing Per Share, the company maintained the third most profitable cement manufacturing company on the Nigerian Exchange Limited (NGX).

With earnings growth, Lafarge Africa closed the first quarter of 2022 with earnings per share (EPS) of 1.09 kobN compared to 0.59 kobN in the first quarter of 2021.

Double-digit revenue growth

Lafarge Africa recorded a 27% increase in revenue to N90.61 billion in the first quarter of 2022 from N71.47 billion in the first quarter of 2021, driven by cement revenues.

Cement revenue increased nearly 26% to N87.99 billion in the first quarter of 2022 from N69.86 billion in 2021.

Additionally, Revenue, Aggregates and Concrete increased by 62.3% to N2.52 billion in 2022 from N1.55 billion in 2021, while “Other Products” revenue increased by 60.4% to reach 98.94 million naira in the first quarter of 2022 from 61.68 naira. million in Q11 2021.

Lafarge Africa’s cost of sales increased by 20.26% in 2022 to reach 48.43 billion naira in the first quarter of 2022, compared to 40.27 billion naira in the first quarter of 2021.

The growth in cost of sales mainly due to variable costs of production which increased from 24.44 billion naira in the first quarter of 2021 to 31.38 billion naira in the first quarter of 2022, while the fixed costs of production increased by 3 .18% to reach N6.499 billion in Q1 2022 from N6.29 billion in Q1 2021.

In December 2021, the group and the company changed the classification of distribution costs on its products to better reflect the nature of the charge, which is consistent with the accounting policy of the group and the company.

Comparative amounts in the statement of profit or loss have been reclassified for consistency. As a result, N14.1 billion (2021: N12.1 billion) for the Group and N13.2 billion (2021: N10.8 billion) for the company relating to distribution costs have been reclassified from cost of sales to selling and distribution costs. .

As a result, CoS/Revenue fell to 53.5% in Q1 2022 from 56.35% in Q1 2021.

Lafarge Africa reported gross profit of N42.17 billion in the first quarter of 2022, an increase of 35.18% from N31.2 billion in the first quarter of 2021, to position the gross profit margin at 46, 5% in the first quarter of 2022, compared to 43.65% in the first quarter of 2021.

With a double-digit inflation rate, total operating expenses increased by almost 18% to N20.26 billion in the first quarter of 2022 from N17.17 billion in the first quarter of 2021.

The breakdown of operating expenses showed a 16.9% increase in sales and distribution costs to N15.02 billion in Q1 2022 from N12.86 billion in Q1 2021, while expenses administrative increased by 21.3% to N5.23 billion in the first quarter of 2022 from N4. .32 billion in Q1 2021.

The cement maker thus reported “other income” of around 165.66 million naira in the first quarter of 2022 compared to 147.97 million naira in the first quarter of 2021 to lead to a 50.4% increase in operating profit to 22 .12 billion naira in the first quarter of 2022 against 14.7 billion naira. published in the first quarter of 2021.

While finance income fell to N26.19 million in Q1 2022 from N171.7 million in Q1 2021, finance expense fell 67.9% to N675.7 million in first quarter of 2022, compared to N2.1 billion in the first quarter of 2021.

In total, pre-tax profit increased by 68.09 percent to N21.5 billion in the first quarter of 2022 from N12.77 billion in the first quarter of 2021. percent to N19.56 billion in the first quarter of 2022, compared to N9.14 billion in the first quarter of 2021.

With the increase in profits, Lafarge Africa closed the first quarter of 2022 with a profit margin of 23.7% compared to 17.9% in the first quarter of 2021.

Lafarge Africa’s basic earnings per share decreased from 0.57 naira per share in the first quarter of 2021 to 1.09 naira in the first quarter of 2022.

Balance sheet from a position of strength

Lafarge Africa improved its balance sheet positioning which contributed to its profitability. The company reported total assets of N535.6 billion as of March 31, 2022, compared to N526.84 billion as of December 31, 2021, full year results and accounts.

Its non-current liabilities increased by 6% to N413.7 billion as of March 31, 2022 from the N390.26 billion reported in FY2021, while current assets fell by 10.7% to reach N121.95 billion as of March 31, 2022 from N136.57 billion reported in FY2021.

Total equity increased slightly by 4.6% to N396.12 billion as of March 31, 2022 from N378.56 billion in FY2021.

Also from the balance sheet position, total liabilities fell by almost 6% to N139.52 billion as of March 31, 2022 from N148.3 billion reported in FY2021.

The company reported current liabilities of N123 billion as of March 31, 2022 from N131.05 billion in fiscal 2021, while non-current liabilities also fell by 4.1% to 16.5 billion naira as of March 31, 2022 compared to 17.22 billion naira reported in 2021. 2021AF.

Outlook 2022

In its 2022 outlook, the company said good demand momentum is expected to continue into the second quarter (Q2) of 2022, emphasizing that it will continue to maximize volume opportunities in our markets and actively manage our costs.

The company added that it remains focused on its sustainability efforts.

Lafarge Africa Managing Director Khaled El Dokani said in a statement: “Our performance in the first quarter of 2022 shows a significant improvement compared to the first quarter of 2021, with net sales of +26.8%, recurring EBIT of +50.4% and a net result of +92.2″. percent.

“After our very good results for the 2021 financial year, our performance in the first quarter of 2022 confirms the continued growth trajectory of our business.

“We are also pleased with the progress we are making on sustainability; our use of affordable clean energy and our agro-ecological footprint are in line with our net zero commitment journey.

Addressing shareholders at the company’s 2021 Annual General Meeting, the company’s Chairman of the Board, Prince Adebode Adefioye, articulated the company’s success on the growing demand for cement as activities Construction and construction were picking up across the country. “The cement industry experienced another year of strong growth, driven primarily by increased government spending on infrastructure and improved real estate investment by private and commercial homebuilders.”

According to Adefioye, the company benefited from these improved market conditions with growth in volumes and prices; with net sales up 27.1% year-on-year to close at N293.1 billion. “The positive impact of increased net sales, moderation in cost of sales, selling, distribution and administrative expenses amid inflation and devaluation pressures resulted in improved margins recorded for the year.”

“Through effective governance frameworks, reviews, and monitoring and evaluation, we embed a culture of ownership, ethics and corporate responsibility in our operations. We also continue to seek out and leverage strategic partnerships that help maintain value and positively impact our stakeholder groups. We offer thought leadership initiatives to strengthen our voice and position as a leading company in Nigeria committed to Environment, Social and Governance (ESG),” he remarked.

Lafarge Africa has the largest presence in Nigeria with cement operations in the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka in Gombe State), South East (Mfamosing, Cross Rivers State) with Ready-Mix operations in Lagos, Abuja and Port Harcourt. Lafarge Africa currently has an installed cement production capacity of 10.5 Mtpa.

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