Lafarge: Q2 result shows 34% sales growth /78% opex rise

Lafarge Africa Nigeria Plc may have sent signals of what its 2017 audited financial statement is likely to look like with the release of its second quarter 2017 results for the period ended 30 June, which showed improved performance.

The company’s Q2 result, was however lifted by tax credit and remarkable other comprehensive income (OCI), even as an upward review of consensus PBT of N30.8 billion is being worked out by analysts.

The result released by the Nigerian Stock Exchange (NSE) on Thursday showed profit before tax grew to N8.7 billion, against a pre-tax loss of -N28.0bn in Q2 2016. The growth in PAT was buoyed by sales growth of 34 per cent year on year (y/y) and 1864bps y/y expansion in gross margin to 32.0 per cent.

The company’s remarkable performance in the second quarter, informed the commitment of FBNQuest research analysts for upward revision of consensus 2017 PBT forecast.

Lafarge Africa’s Q2 result further showed that the key drivers of the PBT growth were sales growth of 34% y/y and a 1864bps expansion in gross margin to 32.0%.

The company posted 78 per cent rise in operating expenses, however, the positives, volume growth and PBT expansion completely offset a 78 per cent y/y rise in opex and a 138 per cent y/y spike in net interest expense.
Tax credit of N5.9bn and a positive result of N5.8bn on the other comprehensive income (OCI) line, PAT accelerated to N20.3bn.

Sequentially, sales and PBT were down by 10% q/q and 8% q/q respectively. However, PAT expanded by 44% q/q thanks to the positive results on the tax and OCI lines.

FbnQuest’s report on the result noted “Compared to our forecasts, sales missed by 11%. Although, PBT was in line with our N8.6bn forecast, PAT beat by 260% mainly due to the tax rebate of N5.9bn and the positive result of N5.8bn on the OCI line.

In terms of the H1 performance, sales grew by 44% y/y to N154.8bn. PBT and PAT also grew to N18.2bn and N34.5bn compared with the pretax and after tax losses of -N30.2bn and –N30.7bn that the company delivered in H1 2016.

Compared with our forecasts, although H1 sales missed by around 6%, the PBT was in line with our N18.1bn forecast.

However, thanks to a positive result of N15.1bn on the OCI line and a tax credit of N1.6bn, PAT came in around 74% higher than our forecast.

The analysts however, pointed that it expected significantly improved results in Q2/H1 2017, driven by base effects due in part to an unrealised foreign exchange loss of –N27.5bn that the company reported in Q2 2016.

It however noted that the earnings were also underpinned by a marked expansion in gross margin driven by significantly higher pricing (c.+40% y/y) and a noticeable reduction in energy costs (due to a higher gas-to-total fuel ratio) following improvements in gas supply.