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‘’Health, Cost & Cash” action plan delivers stellar FY2020 earnings result for Lafarge Africa Plc

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By Audrey Lotechukwu

THUR 25 MARCH, 2021-theGBJournal- Lafarge Africa Plc published its FY-2020 audited financials Wednesday. The result showed that Profit After Tax grew 98.8% y/y to NGN30.84 billion while EPS settled at NGN1.91/share, up 98.8% y/y after adjusting for gains from discontinued operations (NGN99.58 billion) in FY-2019.

Khaled El Dokani, CEO of Lafarge Africa said of the performance; “Our “HEALTH, COST & CASH” action plan delivered results in 2020 amidst the COVID-19 pandemic, which triggered inflationary and Naira devaluation pressures and production challenges.

HIGHLIGHTS

Net sales up 8.3% vs PY1 with recurring EBIT up 30.8% vs PY1

Free cash flow generation of N47.4bn

Net cash position of N3.6bn

Final dividend of NGN1.00/s

On the EPS of NGN1.91, the board has proposed a final dividend of NGN1.00/s (same as in FY-2019), translating to a yield of 4.4% based on the last closing price of NGN22.50/s.

Revenue grew by 8.3% y/y in FY-2020, on the back of improvement in cement sales (+9.1% y/y), which offset the decline in aggregate and concrete sales (-25.5% y/y).

It is believed that volumes drove the growth in cement sales as the relaxation of lockdown measures in Q2-20 drove a strong rebound in construction activities in the second half of the year. 

Gross margin increased by 164bps in FY-2020, as the topline growth (+8.3% y/y) outpaced the increase of 5.3% y/y in cost of sales (excluding depreciation).

However, the rise in the cost of sales was driven mainly by energy costs (+21.7% y/y), which were substantially above the increase in cement sales (+9.1% y/y). This reflects the pass-through impact of the local currency’s devaluation on gas contracts.  

EBITDA rose by 16.0% y/y to NGN75.46 billion in FY-2020, supported by the increase in gross margin and a 1.6% y/y decline in operating expenses (excluding depreciation). Accordingly, the EBITDA margin increased by 217bps to 32.7% in FY-2020.  

Earnings continued to benefit from the deceleration in finance cost (-51.9% y/y), reflecting gains from the company’s deleveraged balance sheet, as gross debt declined by 22.5% y/y to NGN49.73 billion in FY 2020 (FY 2019; NGN64.19 billion). Lafarge made principal repayments of NGN7.75 billion on its power sector loan and another NGN7.48 billion on lease liabilities in FY-2020.

Overall, PBT grew by 110.0% y/y to NGN37.52 billion in FY-2020, due to the combined impact of (1) revenue growth of 8.3% y/y, (2) decline of 1.6% y/y in operating expenses (excluding depreciation) and (3) the steep decline in finance cost (-51.9% y/y).

The post-tax profit of NGN37.52 billion is also the highest since 2014 (NGN40.36 billion), suggesting that the divestment from its loss-making South African subsidiary in 2019 and the debt restructuring programme have continued to yield positive results.

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