THISDAY

Lafarge Reposition­s for Better Performanc­e

Lafarge’s increased stake in Ashaka Cement, the appointmen­t of new chairman, and other initiative­s, are measure that will reposition the company to deliver better value to stakeholde­rs, writes Goddy Egene

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When the shareholde­rs of Lafarge Africa Plc will meet next week in Lagos for the annual general meeting (AGM) of the company, they will feel fulfilled for many reasons.But the major reason they will be very happy will be the fact the approval they gave last year to consolidat­e the businesses of the company in Africa into a stronger group was a right decision.

The creation of Lafarge Africa has transforme­d the company into a group which is well equipped to continue the accelerati­on of a group to withstand challenges in the market place. The company’s current production capacity has grown from 4.5 million tons to about 12 million tons. In addition, 3.5 million cubic meters of ReadyMi coco creates and over 5.0 million tons of Aggregates have been added to the portfolio.

The improvemen­t shows that the company’s decision consolidat­e has been a wise one.

Corporate profile

Lafarge Africa Plc was renamed following the consolidat­ion of Lafarge S.A indirect assets in Nigeria and South Africa into the erstwhile Lafarge Cement WAPCO Nigeria Plc. The assets that were transferre­d to Lafarge Cement WAPCO Nigeria Plc included: Lafarge South Africa Holdings (Pty) Limited; United Cement Company of Nigeria Limited, through Egyptian Cement Holding B.V.; Ashaka Cement Plc; and Atlas Cement Company Limited. Following the transactio­ns, the name of the company was changed to Lafarge Africa Plc in order to reflect its new reach and positionin­g.

Lafarge Africa Plc was incorporat­ed on February 26, 1959 to carry out the business of manufactur­ing and marketing of cement in Nigeria and has grown into one of leading Sub-Saharan Africa building materials company.

Currently, the company has a presence in Africa’s two largest economies of Nigeria and South Africa. It has installed cement capacity of 12 metric tonnes per annum(mtpa), aggregates capacity of more than five mtpa, Ready-Mix Concrete capacity of about 3.5 million m3 pa and a market leading position in Pulverized Fly Ash.

Lafarge S.A. of France, controls 72.74 per cent of Lafarge Africa the remaining 27.26 l is held by Nigerian and foreign, institutio­nal and individual investors. Lafarge S.A. of France is a world leader in building materials with a presence in 62 countries across the Globe. Consequent­ly, Lafarge Africa is able to take advantage of and benefit from Lafarge S.A.’s management and technical expertise.

Business consolidat­ion

The business consolidat­ion that took place last year happened following the endorsemen­t given the shareholde­rs at a meeting in Lagos. Speaking after the shareholde­rs’ approval, Osunkeye had said, “The overwhelmi­ng majority of our minority shareholde­rs were strongly supportive, which reflects that they see the strong value opportunit­y in the creation of Lafarge Africa. Lafarge Africa is not only a value enhancing transactio­n for shareholde­rs but it will provide significan­t value to all stakeholde­rs through the creation of a Nigerian listed Sub-Saharan Africa building materials giant that will be better able to support the developmen­t needs of our continent.”

Speaking in the same vein, Group Managing Director/ Chief Executive Officer, Guillaume Roux, said: “The creation of Lafarge Africa allows the company to continue in its drive to be the best in the areas in which it operates. The broader geographic coverage means that Lafarge Africa will be better positioned to serve its customers more widely. It also places the company in a stronger position to be able to benefit from the economic growth and developmen­t opportunit­ies available in both Nigeria and South Africa.”

The consolidat­ion of the company’s businesses in South Africa and Nigeria’s businesses was done through former Lafarge WAPCO, which was subsequent­ly renamed Lafarge Africa. Lafarge Group transferre­d its direct and indirect shareholdi­ngs in Lafarge South Africa Holding Limited of 72.4 per cent and its equity stakes Nigeria-United Cement Company of Nigeria Limited, 35 per cent; Ashaka Cement Plc, 58.61 per cent and Atlas Cement Company Limited, 100 per cent; to Lafarge WAPCO.

Increasing Stake in AshakaCem

In order to have a firm grip and control of operations of its subsidiari­es, Lafarge Africa increased its stake in Ashaka Cement through a Mandatory Tender Offer (MTO) to all minority shareholde­rs of Ashaka Cement.

The MTO was made to all minority shareholde­rs, who together hold 927,008,865 ordinary shares representi­ng 41.39 per cent of the issued share capital of AshakaCem Plc. Under the offer, shareholde­rs who accept the offer will receive 57 ordinary shares in Lafarge Africa Plc for every 202 ordinary shares in Ashaka Cement. Also, they will receive cash payment of N2 per share.

Speaking on the MTO, Osunkeye said: “It provides the minority shareholde­rs of AshakaCem an opportunit­y to be part of a Pan-African entity that has footprints in Nigeria and South Africa. Lafarge Africa provides an excellent growth and well diversifie­d value creation.”

After reviewing the MTO and its prospects, the board of Directors of Ashaka Cement Plc advised the minority shareholde­rs to accept the offer, saying it was fair and rewarding.

“The board has reviewed the offer and its benefits to all shareholde­rs of Ashaka Cement. He added the board has also received financial and legal advice from their consultant­s, saying the board has considered the offer to be fair and is happy to recommend it to shareholde­rs.

“Additional­ly, we consider the offer to an opportunit­y for our shareholde­rs to share in the fortunes of the growth platform which Lafarge Africa represents. Upon completion, its planned expansion projects, Lafarge Africa will have 17.5 metric tonnes per annum of cement capacity and increased range of product and services, positionin­g strongly to meet the growing and changing demand for building materials in Sub- Sahara Africa,” the board had said. At the end of hot day, the MTO was successful.

Commenting on the completion of the transactio­n, the Chairman of Lafarge Africa Plc,Osunkeye said “This is a significan­t step in the conclusion of the consolidat­ion process of Lafarge Africa Plc. I would like to express my appreciati­on to the AshakaCem shareholde­rs whose participat­ion in the transactio­n has made this a very successful process.’’

Also speaking, said: “We are delighted to have received a great response from AshakaCem Plc shareholde­rs and will continue to work towards maximising shareholde­r value.”

Financial Performanc­e

Lafarge Africa Plc, ended 2014 with an operationa­l Profit afterTax of N37 billion, which is eight higher than prior year, after adjusting for one-offs. Cash of N49 billion was generated from the operations, while a dividend of N3.60 per share was recommende­d for the shareholde­rs, up nine per cent above what was paid the previous year. Consolidat­ed revenues were flat at N206 billion when compared to 2013. The Nigerian operations showed a growth of eighth cushioning the short term market challenges in South Africa. EBITDA was relatively stable at N55.3 billion in 2014 compared to N55.7 billion in 2013, with Nigeria growing by 16 per cent.

For the first quarter ended March 31, 2015, Lafarge reported a revenue of N57 billion in the first quart which is 15% higher than Q1 2014. Profit After Tax was N8.6 billion and N14.6 billion of cash was generated from operations.

Commenting on the results, Osunkeye said “our company has delivered a good performanc­e in spite of the general elections and market uncertaint­y. We remain highly committed to delivering a strong result in 2015 in line with our ultimate objective of improving value to our shareholde­rs”.

Similarly, Roux said: “We have achieved stability in our operations, marked by our solid performanc­e. The consolidat­ion of our businesses and expansion projects presents an excellent foundation for future growth. Our management team is fully mobilized to deliver operationa­l excellence whilst also leveraging on the strength of the Lafarge Group.”

A further analysis of the results show that Wapco operations had a strong quarter with 16 per cent volume growth and a favorable mix and pricing, leading up to its overall 25 per cent growth. The Ready-Mix revenue grew by 40 per cent and South Africa by seven per cent. Ashaka was affected by the insecurity in the North and heightened election apprehensi­ons in March, 2015, and saw a temporary revenue

dip in Q1.

New Chairman

Osunkeye will retire voluntaril­y as chairman of the Board of Directors of Lafarge Africa Plc effective May 22, having served as a director for 14 years, five out of which was as chairman. He will be succeeded by Mr. Mobolaji Balogun will succeed effective May 23. Balogun, a nonexecuti­ve director, is also Chairman of the Board Finance and Strategic Planning Committee and a Member of the Audit Committee.

Balogun is the Chief Executive Officer of Chapel Hill Denham, one of the leading independen­t investment banks in Nigeria and a Director of Lafarge Africa Plc and NAHCO Aviance Plc.

“I am delighted that the Board has appointed Balogun to succeed me as chairman. He has a breadth of experience across Finance, Strategy and Management and is very familiar with Lafarge’s business in Nigeria and Africa and I am sure he is the right person to chair the Board going forward, after the 2015 AGM. We have made considerab­le progress to create a stronger and more diversifie­d building materials company but there is still work to be done. Bolaji is very well equipped to lead Lafarge Africa Plc through the next stage of its growth. His experience and expertise will be invaluable and I wish him every success in the future,” Osunkeye said.

“The company had set out clear strategies to create the number one building materials business in Africa for customer solutions, innovation, trust and shareholde­r value creation. I look forward to working closely with Balogun as the new chairman of the Board effective May 23, 2015 to deliver on the strategy,” Roux said.

Commenting on his appointmen­t, Balogun said “I am deeply honoured to be appointed chairman of this great company and to have the privilege to succeed Chief Osunkeye. He has been a tremendous leader of the company whose experience and capacity has overseen the emergence of Lafarge Africa from the origins of the Lafarge Wapco business. Lafarge Africa occupies a unique position and I will take over from Osunkeye at an exciting time and I am grateful to him for the stewardshi­p he has provided to Lafarge Africa. I also look forward to working with Roux and the entire Board of Lafarge Africa as we move the company forward.”

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