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

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.”