National Wire About Nigerians, Nigerian Business and Other Stories
FRIDAY EKEOBA
Lafarge Africa Plc, one of the leadingcement manufacturer in the domestic economy has posted a material loss of N28.0billion in its second quarter financial result for the year end June 2016, even as it attributed the dip to foreign exchange losses that impacted negatively on its operations to the tune of N27.5billion.
In a filling to the Nigerian StockExchange on Wednesday for verification, the cement giant said the company’s pre-tax loss was however narrowed by positive result of N5.1 billion in other comprehensive income which reduces its losses to N24.3 billion.
Expert at FBN Quest Research said the losses incurred by Lafarge Africa will see to the likely downward revisions of the company’s 2016 profit before tax forecast.
According to the company’s filling and moving up its profit and loss account, there was 30 per cent year-on-year reduction in sales to N54billion indicating a 2411 basis point contraction in gross margin to 13.3 per cent, just as sales grew by 5 per cent.
However, the pretax and after tax losses in Q2 are more significant than the –N2.2 billion and –N6.4 billion that the company reported in Q1 2016. The pretax loss reported in Q2 makes it the third consecutive quarter of negative earnings for Lafarge.
FBN Quest Research said when compared withits forecasts, sales for the company missed by -22 per cent. “We had also expected the company to turn a profitin the quarter (prior to the profit warning which was triggered by the naira devaluation) compared with the pre-tax and after-tax losses posted by the company.
It would be recall that following the Central Bank Nigeria (CBN) adoption of a more flexible exchange rate regime, and the naira’s downward move to c.N282.5 from N197 previously, Lafarge had issued a profit warning which stated that it expected Q2 2016 earnings to be materially impacted by a N28.0 billion unrealised foreign exchange loss. The losses arise from forex denominated loans consisting of shareholder loans of US$310 million and external loans of US$85million. While Lafarge was able to refinance most of its naira debt via its N60 billionbond issue, it has not been able to refinance the forex component. Management also disclosed that it also brought in some forex loans of UNICEM into the Lafarge books.
Further in its forecast, FBN Quest Research said it estimate that Lafarge has close to US$600 million in forex denominated loans and its debt-to equity ratio is now up to around 1.6x from 0.9x previously. “Excluding the exchange rate loss, we note that core operations and volume dispatches were also hampered by gas supply disruptions following vandalism to gas supply infrastructure. The gas utilisation for Ewekoro II dipped to as low as 40 per cent from around 70 per cent previously during the quarter. Barring operational issues and a further sharp downward movement in the naira exchange rate, we expect H1 numbers to come in much better.
“Consensus 2016 PBT forecast for Lafarge Africa is N13.6 billion. Given the weak set of results, we expect to see a marked reduction to this forecast. Lafarge shares have underperformed the ASI this year. Year-to-date they have shed -28.5 per cent compared with the -0.8 per cent return delivered by the index. Although the shares have been relatively resilient since the profit warning was announced, we expect them to come under more pressure over the coming days/weeks”, it added.
The Chairman, Board of Directors, Lafarge Africa Plc, Mobolaji Balogun, had revealed recently that the company plans to go beyond cement production and marketing to building Nigeria and other geographies in
the world.
