Finance Costs Shrinks Lafarge Africa’s Profit

Kayode Tokede

Lafarge Africa Plc show its profit before tax reduced to N68.31 billion in financial year ended December 31, 2022 from N61.79 billion reported in 2021 financial year over 202.9per cent significant increase in finance cost.

Profit for the period stood at N53.65billion in 2022, representing an increase of 5.2 per cent from N51billion in 2021.

The cement manufacturing company reported significant increase in cost of sales, operating expenses to post 11 per cent increase in profit before tax and declare N2.00 per 50 kobo ordinary share (2021: N2.00) on every ordinary share in issue amounting to N32.22billion (2021: N32.22billion) dividend payout to shareholders.

Lafarge Africa in the year under review reported N13.13billion net foreign exchange loss in 2022, instigated by scarcity of foreign exchange, a contributing factor to growth in finance costs.

Other contributing factor to finance cost was N1.64billion bank charges & other interest cost in 2022 from N1.22billion in 2021.

The multinational cement maker reported N177.02billion cost of sales in 2022, representing an increase of 17.6 per cent from N150.51billion in 2021, as total operating expenses stood at N112.15billion in 2022 from N78.13billion in 2021.

Fuel & power and raw materials &consumables and were driving forces behind increase in cost of sales last year.

As Lafarge Africa show it fuel & power expenses moving to N62.21billion in 2022 from N51.51billion in 2021, Raw materials and consumables expenses rose by 32.3 per cent to N48.99biillion in 2022 from N37.03billion reported in 2021.

Production costs that include personnel expenses, by-products costs, inventory write-offs and electrical energy expenses increased to N25.25billion in 2022 from N12.4billion in 2021.

Amid increase in revenue and hike in cost of sales, Lafarge Cement announced N196.22 billion gross profit in 2022 from N142.58 billion in 2021 to bring its gross profit margin to 52.57per cent from 48.65per cent in 2021.

Lafarge Africa 2022 performance showed strength in topline, given the group expansion in cement sales and Readymix & other products.

In the year under review, the group declared N373.244billion revenue, an increase of 27.34 per cent from N293.09billion in 2021.

The breakdown of revenue revealed N361.96billion cement sales in 2022, representing an increase of 27 per cent from N285.12billion in 2021, while sales from Readymix and other products increased to N11.28billion in 2022, an increase of 42 per cent from N7.96billion in 2021.

The group spent N170.99billion production cost of sales on its cement in 2022 from N146.26billion in 2021, while Readymix & other products production cost of sales was at N6.03billion in 2022 from N4.23billion in 2021.

Operating profit on cement production stood at N79.98billion in 2022 as against N62.018billion loss reported in 2021. The group reported N4.21billion operating profit for its Readymix & other products in 2022 from N3.04billion in 2021.

The group, thus closed 2022 with N3.33 basic earnings per share in 2022 from N3.17 in 2021.

Rising loans and borrowings

Lafarge Africa in 2022 financial grew its balance sheet position as its loans & borrowing and Property, plant and equipment expanded.

Total assets stood at N600.7billion in 2022, representing an increase of 14 per cent from N526.84billion in 2021, driven by N341.4billion               Property, plant and equipment in 2022 from N338.72billion reported in 2021.

As Total non-current assets increased to N404.43billion in 2022 from N390.26billion in 2021, Total current assets moved from N136.57billion in 2021 to N196.3billion in 2022.

Total liabilities closed the year under review at N184.61billion, representing an increase of 25 per cent from N148.3billion in 2021.

Lafarge Africa show its loans & borrowings at N35.06billion in 2022 from N20.81billion in 2021 as Trade and other payables rose significantly by 35 per cent to N80.8billion in 2022 from N59.82billion in 2021.

Lafarge Africa had accessed N5.3 billion from the unsecured CBN/BOI Power and Aviation Intervention Fund through Guaranty Trust Bank Plc. Principal and Interest are paid quarterly.

The facility has a 10-year tenure with a fixed interest rate of four per cent per annum and an effective interest rate of 15.23%. per annum The outstanding balance disclosed in the Company’s books amounts to N430 million (2021: N904 million), which is the amortised cost to date.

The Group also assessed an additional N6.4 billion from the unsecured CBN/BOI intervention fund in 2019 through Zenith Bank. The loan assessed amounted to N6.4 billion. Principal repayment commenced in December 2019. The facility has a 7.5-years tenure and an interest rate of 5% per annum.

The outstanding balance, at amortised cost, amounts to N1.7 billion (2021: N2.4billion) bringing the total balance in the Group’s books to N2.1billion (2021:N3.3billion).

Remark

The CEO of Lafarge Africa, Khaled El Dokani in a statement said “In 2022, we recorded 27.3per cent and 29.3per cent improvement in net sales and recurring EBIT respectively, compared to FY 2021 results.

“The worsening exchange rate situation led to revaluation losses, thereby constraining our Net Income growth to 5.2per cent.

“We remain committed to our sustainability ambitions by utilizing affordable clean energy in our operations and optimizing our green logistics strategy; among other initiatives that are in alignment with our net zero pledge journey’’.

On outlook for 2023, the company said, it expected good demand momentum in 2023, albeit moderated due to the impact of the general elections.

It added that, “We will continue to maximize volume opportunities across our markets and actively manage our costs. We will consolidate our efforts on sustainability.”