Lafarge Africa Plans N90bn Fresh Capital Injection to Boost Profitability

The board of Lafarge Africa Plc has approved the extension of existing shareholder loan of $315 million and a new Right Issue of up to N90 billion as part of efforts to reduce the company’s leverage and strengthen its profitability.

The Chief Financial Officer (CFO) of Lafarge Africa Plc, Mr. Bruno Bayet disclosed this in a statement following the release of the company’s half year(H1) results ended June 30, 2018. According to the results, Lafarge Africa recorded a revenue of N162.292 billion in 2018 and operating profit of N16.33 billion. But a high financing cost of N23.715 billion pushed the company into a loss position of N3.902 billion for the period.

However, Bruno said the company has a refinancing plan that is aimed at preparing for future development in Nigeria, improving the company’s leverage as well as strengthen its profitability. Hence, the proposed N90 billion right issue subject to all corporate and regulatory approvals. The company had last year successfully raised N132 billion through a rights issue.

Lafarge reported strong sales in Nigeria which increased volumes in second quarter (Q2) 2018 while in total, 68 kilotons(kt) of cement have been exported to Ghana with 28kt shipped in Q2 2018. The company posted a profit of N1.9 billion in its Nigeria operation.

Commenting on the performance, Chief Executive Officer of Lafarge Africa, Michel Puchercos, said: “Our company saw strong market growth in Nigeria reflecting the end of the recession in the cement market. Cement demand has been on the rise since the beginning of 2018. We saw a 22 per cent increase in volume, benefiting from export to Ghana which began in fourth quarter (Q4) 2017. Earnings before interest tax, depreciation and amortisation (EBITDA) for our Nigeria operations was N19.1 billion and EBITDA margin of 32.2 per cent, thanks to robust operational performance and continuous effort to reduce cash costs.’’

He added that the lack of large infrastructural projects impacted volumes in the company’s South Africa operations, but revenues improved by 7.7 per cent on the back of price increase in all segments in first quarter (Q1) and FX translational effect.

‘’Aggregates, however, turned positive in Q2 despite low infrastructure spending. Success in the Nigeria operations has been due to operational stability, success of the turnaround plan implementation and volume improvement,” Puchercos added.

Looking forward, Puchercos said new route-to-market initiatives will deliver and continuous focus on cash cost reduction will drive operational performance in second half (H2) of the year.

“Our South Africa management is focused on executing the turnaround plan implemented in Q1, the target for H2 is to deliver volumes. The focus is on growing the contribution margin. Actions around efficiency and cost management are on track and will contribute to significant savings in production costs across all the segments in H2,” he said.