Q3 Earnings: Lafarge Wapco records N37.4 billion loss

Lafarge Africa Plc has reported a loss after tax of N37.4 billion for the nine month period ended September 30, 2016. The loss represents a 215 percent decline from a profit after tax of N32.4 billion recorded in the corresponding period of 2015.

The cement manufacturing group’s results showed Net sales for the period reduced 25 percent to N161 billion in 2016 from N215 billion recorded in 2015. Cost of sales declined marginally to N142.9 billion from N143.3 billion as selling and marketing expenses grew 18 percent to N3.9 billion from N3.3 billion. However, Admin Expenses was reduced by 14 percent to N16.3 billion in 2016 from N19.1 billion expended one year ago.

The group further cut down finance expenses by 5 percent to N8.2 billion from N8.6 billion, but income before tax fell from N36.5 billion to a loss before tax of N40.4 billion following a 79 percent reduction in investment and finance income  of N797 million in 2016.

Commenting on the group’s performance, Michel Puchercos, CEO of Lafarge Africa said: “Our focus on volume and prices started to deliver during the 3rd Quarter. In September, all our plants were running at record performance level, Mfamosing Line 2 started its operation on August 28th (clinker) and prices increased by 650N/bag in September representing above 40 percent price change. 

In spite of the recessionary economic environment and market uncertainties, our company is positioned to deliver improved performance going forward. Our immediate objective is to optimize our processes, reduce operational costs and deliver strong EBITDA margins. However, uncertainty remains on the macroeconomic environment and its effect on the cement market. 2016 Outlook In light of the development in Nigeria, we expect a soft landing of the cement demand in Nigeria in the low range of 7-10 percent for the full year.”

For 2016, we expect: Pricing to remain robust during Q4 and benefiting from commercial excellence initiatives, Synergies and excellence costs savings on track to our ambitions by year end, Significant recovery in Q4 vs Q3 2016 with Op. EBITDA around 30 percent, Mfamosing Line 2 to deliver first cement before year end, Third party USD denominated loans of 85 million USD to be refinanced by end of Q4, Capex expected to reach N46 Billion by year end.

Although the South African economy is showing slower growth compared to 2015, the business continues to adapt to the economic challenges. Debt restructuring Subsequent to the acquisition of 100 percent of Unicem equity on June 26, 2016, the terms of the Lafarge Africa USD shareholders loans have been renegotiated in order for them to be treated in compliance with IFRS as quasi equity starting from July 1, 2016. 

Lafarge Africa Performance During the quarter, despite a slight improvement in the cement market in Nigeria, sales volumes were affected by gas availability, logistics challenges and interconnection of the new line in Mfamosing. All plants are running with reliability factor of 98 percent in September. Fuel flexibility is being implemented to secure production reliability, reduce impact from devaluation and lower costs. Average price increased in September by above 40 percent; this represents a price increase of 16 percent QoQ. Only a portion of the price increase fully translated in our September prices due to the backlog effect. The South African cement operations reported an Operating EBITDA of N1,1 Billion in Q3 reflecting an improvement despite the current stagnant economy, high competitive cement market and poor labor relations resulting in a loss of production due to unplanned work stoppages. Ashaka Power Plant As part of its Development and Expansion program, Ashaka has successfully signed a contract with RUNH Power and the Captive Power Project is expected to be commissioned in H1 2018. Mobilization on site expected before year-end.”