Lafarge Africa’s 288% EBITDA growth in 2016 spikes positive reaction

The Nigerian capital market was on Wednesday thrilled with the release of Lafarge Africa’s 2016 audited financial statement for the period ended December 31, 2016, the result which cross section of analysts described as better than expected.

The company’s result for the 2017 financial year showed remarkable progress with its turnaround plan, with a significant increase in profit after tax in Q4 2016. Net sales and operating EBITDA also increased respectively by 12% and by 288% in Q4 2016.
The result, Daily Times gathered was buoyed by enhanced activities at all the plants, operating at optimal levels with record level of fuel flexibility achieved at Ewekoro and Sagamu.

The result released by the Nigerian stock Exchange (NSE) showed that in 2016 financial year, Lafarge Africa restored profit in fourth quarter (Q4) 2016, with operating Earnings Before Interest, Tax, depreciation and Amortization (ebitda) at N29 billion.
Amid country-wide gas shortages in Nigeria, Lafarge Africa achieved record level fuel flexibility at its Ewekoro I plant and Sagamu plant. All plants, the company revealed, are operating at optimal levels with capex provisions for 2017 aimed to consolidate energy optimization at Ashaka, Ewekoro 2 and Mfamosing.

The Mfamosing 2 line, which came on stream, on time and below budget, contributed to Group cement production in Q4 2016 with cost savings expected in the future.
Lafarge revealed that, in the quarter, the third-party syndicated loan of 88.4 million USD was pre-paid, through a loan refinancing arrangement with LafargeHolcim Group. This inter-company loan was hedged through a Non-Deliverable Futures (NDF) transaction. Consequently, overall 581 million USD debt was restructured, which removed the FX impact on Lafarge Africa’s results. Net debt was reduced to N108.3 billion, below the N120billion announced notably supported by capex control and solid cash flows.

Operating EBITDA for FY 2016 reached N29.0 billion from N67.3 billion in 2015, on operational challenges in the first part of the year, while Profit after tax for 2016 financial year came to N16.9billion.

Michel Puchercos, CEO of Lafarge Africa said “Our turnaround plan delivered solid results in Q4 2016 in spite of the challenging environment in Nigeria and South Africa. Technical challenges have been resolved with all our plants operating at high reliability. Our energy optimization plan has proved successful with increased use of Alternative Fuel (AF) to offset gas shortages. Ewekoro 1 plant migrated from 100% reliance on gas and LPFO to about 40% use of alternative fuels at the plant. Logistics and commercial turnaround plans are in place and enabling to restore market share”.

He added that “Mfamosing line 2 was delivered ahead of time and above specification, and is now fully operational. The new Line contributed 338kt in Q4 2016 to cement production volume and is expected to deliver significant cost savings going forward”.

Looking ahead, the CEO remarked that Lafarge Africa’s immediate objective is to deliver fully on our turnaround plan by optimizing our processes, developing our alternative fuel strategy, reducing operational costs to deliver strong EBITDA margins returning to historic levels.”
In the quarter, a tax credit of N39.7 billion was reported mainly resulting from deferred tax assets generated from Unicem operations. This contributed significantly to the company’s profitability in Q4 and for the full year 2016.

The Company proposed a dividend of 105 kobo, for approval at the Annual General Meeting scheduled for June 7th 2017.

Lafarge Africa assured that 2017 promises better returns on shareholders investments,” Lafarge Africa specifically expects to return operating EBITDA margin back to historical levels, capital expenditure of N31billion for Nigeria and South Africa operations, mainly to consolidate our energy optimization plan principally for Ashaka coal fired captive power plant, Alternative Fuel in Ewekoro 2 and Coal in Mfamosing as well as the divestment of non-core assets.” The company assured.

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