LAFARGE AFRICA REBOUNDS WITH N1.09BN Q3 PROFIT, SEEKS SEC APPROVAL FOR N131.7BN RIGHTS

• AshakaCem Holds Court-Ordered Meeting For Lafarge Merger Monday

Building materials making giant, Lafarge African Plc, on Friday, reported that it got out of the woods in the third quarter of 2017, while continuously being hampered by the soaring cost of sales and administration, added to the finance costs, hence the need to quickly seek for fresh capital via rights issues for which an application has been made to the Securities & Exchange Commission (SEC) for approval.
According to the result, the group earned N223.66bn from sales revenue, representing a growth of N62.617bn or 38.88% from N161.043bn in the nine-month of 2016, boosted by N177.07bn from sale of cement, up from N125.164bn; followed by income from aggregate and concrete, which fetched N42.632bn, up from N33.035bn. This was just as the company’s major business occurred in Nigeria from where N155.61bn or 69.57% was generated, while the remaining N66.057bn came from its South African operations.

Cost of sales rose 15.96% from N142.933bn in the nine-month of 2016 to N165.757bn, pushed by the N103.879bn variable costs, which increased from N87.507bn; comprising the distribution variable cost of N41.715bn, up from N32.43bn. Fuel and power cost dropped from N33.794bn to N32.237bn; while raw materials and consumables got N29.926bn, up from N21.282bn.
Production fixed cost stood at N24.139bn from N21.642bn; N14.467bn maintenance costs, as against N12.414bn; just as depreciation rose from N12.139bn to N15.915bn; leaving gross income therefore stood at N57.311bn, up from N18.11bn.
Selling and marketing expenses dropped from N3.898bn to N2.985bn, buoyed by ‘other selling and marketing expenses’ of N2.48bn, down from N3.61bn. Advertising expenses fell to N287.038m from N189.575m, just as campaign and innovation expenses rose to N216.111m from N99.024m.

Administrative expenses increased to N29.436bn from N16.307bn, with administrative expenses alone accounting for N21.938bn from N13.44bn; while technical fee for the period, representing the industrial franchise agreement with Lafarge S.A., the ultimate parent company of the group, came to N7.089bn from N2.402bn. COT and other bank charges dropped to N269.812m from N315.68m.These left operating income at N26.4191bn from just N2.096bn in 2016.
Net other operating expenses dropped drastically to N7.088bn from N30.876bn, the lion’s share of which was the net foreign exchange loss of N9.921bn, a significant improvement over the previous N31.448bn; just as gains on disposal of property, plant and equipment jumped from N205.858m to N2.416bn.

Net finance and investment income grew to N928.432m from N518.888m, comprising N532.022m interest income on bank accounts, a rise from N345.509m; and other finance income was far better at N396.41m, after rising from N42.847m.
Finance cost of N18.321bn, up from N8.192bn in the corresponding period of 2016, the lion’s share of which was the N17.949bn interest on borrowings, compared to N8.192bn in the 2016 nine-month.
Income before tax therefore stood at N1.09bn, from a loss of N40.367bn.
Exchange gain for the period was flat at N12.548bn from N12.657bn, resulting in total comprehensive income for the period of N13.653bn, compared to the loss of N24.744bn, which translated to Earnings Per Share of 10 kobo, compared to the preceding third quarter’s 827 kobo.
While the wait for the SEC approval continues, the company noted that on September 27, 2017, its board provided details of the rights issue earlier approved by shareholders, including that the offer size is N131.7bn from 3.098bn new shares offered to existing shareholders at the ratio of five new units for every nine currently held, at the price of N42.50 each, a discount to the current N56 per unit.

Proceeds of the offer expected to open by second week in November, 2017, would help the company refinance its debt, including to its parent firm LafargeHolcim, expected to partly convert its quasi-equity to equity; in addition to the issuance of a N25bn Commercial Papers on Monday under a N60bn programme, according to Reuters International.
Reuters quoted Bruno Bayet, Chief Finance Officer- Lafarge Africa Plc, as saying: “We have returned to profits and … now we are investing in energy for next year that would further improve the performance.”
Bayet said the company had gained market share in Nigeria though volumes fell 18.6%. Nigeria exited recession in the second quarter but growth remains fragile.
He said the short-term focus is on Nigeria and growth in South Africa was disappointing, leading to a management change.

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