Lafarge Africa has demonstrated its tenacity in strategically deleveraging its balance sheet as data from its full-year audited financial results show that the cement maker’s net cash position surged by 205.6 percent to N81.81 billion in 2022 from N26.77 billion in 2021.
According to Kayode Eseyin, analyst, investment research and strategy, CardinalStone this indicates that money that would have been otherwise used to pay debts is sitting on the balance sheet.
“This is good seeing as they are mostly done with the deleveraging, and I think that’s one of the things supporting the cash position. Also, operating performance was solid and they don’t have any capital-intensive projects they are currently working on,” he added.
Net cash refers to the position of a company with regard to its liquidity position and is calculated by deducting its total borrowings from total cash and cash equivalents.
Lafarge Africa’s cash and cash equivalents surged by 136 percent to N118.4 billion in 2022 from N50.06 billion in 2021, showing that the cement manufacturer improved its ability to settle short-term debt while still preserving funds for long-term capital deployment.
Movement of its cash and cash equivalents reveals that the firm improved its ability to generate cash from its core business operations during the period, as net cash from operating activities after working capital changes and payment of taxes rose by 38.68 percent to N100.71 billion from N72.62 billion in 2021.
However, net cash used in investing and financing activities for the period was negative amounting to N21.70 billion and N11.55 billion respectively in 2022.
Net cash used in investing activities was negative due to the acquisition of property, plant, and equipment made during the period. The cement maker also received interest and proceeds from selling old property, plant, and equipment during the period amounting to N1.49 billion and N69 million respectively.
While net cash used in financing activities was negative due to the repayment of loans and borrowings, dividends paid to equity holders of the company, and repayment of lease liabilities and interests during the period. It also received inflow from loans and borrowings amounting to N27.13 billion in 2022.
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Lafarge Africa reported a profit after tax deductions of N53.65 billion in 2022, but this was constrained by the impact of foreign exchange translation which arose as a result of the naira depreciation which characterised most of 2022.
The cement maker reported a foreign exchange loss of N13.13 billion in 2022, having reported none in 2021, and as a result, finance costs grew by 202.65 percent to N15.98 billion in 2022 from N5.27 billion in 2021.
Total revenue hit an 11-year high, growing by 27.35 percent to N373.34 billion in 2022 from N293.09 billion in 2022, with the cost of sales accounting for 47 percent of it. The cost of sales grew by 17.61 percent to N177.02 billion in 2022 from N150.51 billion in 2021.
Revenue grew on the back of price increases which offset volume decline during the period. Price per tonne increased by 27.5 percent to N67,863 per tonne in 2022 from N53,221 per tonne in 2021, while volume declined by 0.1 percent to 5.50 million tonnes (Mt) in 2022 from 5.51Mt in 2021.
“Like its peers, the company noted LNG supply disruptions and record-high inflation impeded volume growth for 2022. Going into 2023, we believe the company is positioned for growth as it ramps up output on the back of the de-bottlenecking exercise strategy, barring any significant climate or gas supply-related challenges,” according to Coronation Research.
On the back of a 57.21 percent increase in selling and distribution expenses due to the sustained elevated cost of Automotive Gas Oil (AGO) in Nigeria remained a major headwind, operating expenses grew by 43.54 percent to N112.16 billion in 2022 from N78.14 billion in 2021.
“We reiterate that the company remains committed to its sustainability ambitions by utilizing affordable clean energy in its operations and optimizing its green logistics strategy, however – like its peers – incessant disruptions in gas supply have forced the company to be more reliant on diesel for distribution than it earlier planned. Our view is that in the medium term, these costs are likely to persist until a lasting solution to gas supply is found,” Coronation Research said in a note.
As a result, profit grew slowly by 5.20 percent and the profit margin declined by 308 basis points to 14.32 percent in 2022.
Khaled El Dokani, CEO of Lafarge Africa, commented: “The worsening exchange rate situation led to revaluation losses, thereby constraining our net income growth to 5.2 percent. We remain committed to our sustainability ambitions by utilizing affordable clean energy in our operations and optimizing our green logistics strategy; among other initiatives that are in alignment with our net zero pledge journey.”
Total assets grew by 14.02 percent to N600.71 billion in 2022 from N526.84 billion in 2021, while total shareholder’s equity grew by 9.92 percent to N416 billion in 2022 from N378.56 billion in 2021.
Ultimately, Lafarge Africa declared earnings per share of N333 per share in 2022, 5.05 percent up from N317 per share in 2021, and proposed a dividend of N200 kobo per unit of 50 Kobo ordinary shares.
On the outlook for 2023, Lafarge said “good demand momentum expected in 2023, albeit moderated due to the impact of the general elections, we will continue to maximize volume opportunities across our markets and actively manage our costs. We will consolidate our efforts on sustainability.”
