Lafarge Africa, a prominent cement manufacturer in Nigeria, has announced profit before tax (PBT) of N8.7 billion for the second quarter of 2017, beating consensus analysts forecast on annualized basis.
This represents more than 800 per cent increase from the N28 billion pre-tax loss recorded in the corresponding quarter of 2016.
The company’s fortunes came in spite of a tough operating environment that saw operating expenses surge 78 per cent; operating expenses also spiked 138 per cent within the period.
The growth in PBT was driven by sales, which rose 34 per cent to 73.53 billion. Gross margin climbed to 32 per cent compared to 13.36 per cent the previous year.
“These positives completely offset a 78% year-on-year (y/y) rise in operating expenses (opex) and a 138% y/y spike in net interest expense,” said equity report released by FBN Quest, a Lagos-based investment firm. “Thanks to a tax credit of N5.9bn and a positive result of N5.8bn on the other comprehensive income (OCI) line, after tax profit (PAT) accelerated to N20.3bn.”
The company’s key performance indicators were, however, subdued from the first quarter levels. Sales slipped 10 per cent compared to the previous quarter; PBT dropped 8 per cent.
PAT expanded by 44 per cent quarter-on-quarter thanks to the positive results on the tax and OCI lines, according to the FBNQuest report.
Compared to our forecasts, sales missed by 11 per cent, the report said. “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.”
The report said that in terms of the H1 performance, sales grew by 44 per cent year-on-year to N154.8 billion. PBT grew to N18.2 billion compared with the pretax loss of N34.5 billion recorded in the corresponding quarter of last year. PAT jumped to N30.2 billion versus after tax losses of and N30.7 billion that the company delivered in the first half of 2016.
Lafarge Africa Q2 2017 results: actual vs. FBNQuest Research estimates (N millions)
| Lafarge Africa Q2 2017 results: Actual vs. FBNQuest Research estimates
(N millions) |
|||||
| Actual | Y/y | Q/q | FBNQuest est. | Actual Vs FBNQuest est. | |
| Sales | 73,529 | 33.80% | -9.60% | 82,802 | -11.20% |
| Cost of sales | -49,974 | 5.00% | -17.30% | -61,094 | -18.20% |
| Gross profit | 23,555 | 220.10% | 12.70% | 21,708 | 8.50% |
| -Gross margin | 32.00% | 1864bps | 1864bps | 26.20% | 582bps |
| Opex | -10,222 | 77.70% | 22.40% | -8,363 | 22.20% |
| Operating profit | 13,333 | 730.40% | 6.30% | 13,345 | -0.10% |
| Other income / (expense) | 1,391 | n/a | 63.00% | 162 | 758.30% |
| Net interest inc/ (exp) | -6,010 | 138.10% | 52.20% | -4,890 | 22.90% |
| PBT pre-exceps. | 8,714 | n/a | -7.70% | 8,617 | 1.10% |
| -PBT margin | 11.90% | 6276bps | 6276bps | 10.40% | 144bps |
| PBT | 8,714 | -131.20% | -7.70% | 8,617 | 1.10% |
| – PBT margin | 11.90% | 6276bps | 6276bps | 10.40% | 144bps |
| Tax | 5,857 | n/a | n/a | -2,585 | n/a |
| -Tax rate | -11.90% | ||||
| PAT (ex disc. ops & other comp) | 14,571 | -151.40% | 182.30% | 6,032 | 141.60% |
| Other Comp inc. | 5,763 | 0 | |||
| Minority interest | -1 | -99.90% | -99.70% | -379 | -99.70% |
| PAT | 20,334 | -159.00% | 43.80% | 5,653 | 259.70% |
Source: NSE; FBNQuest Estimates
“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,” FBN Quest said.
The report noted that the investment firm had expected significantly improved results in the second quarter of 2017, driven by base effects caused partly by an unrealised foreign exchange loss of N27.5 billion that the company reported last year.
Earnings were buoyed by significant rise in gross margin due to higher pricing and energy efficiency. Product prices rose 40 per cent from 2016 while the company made significant savings from improved gas supply that drove energy costs down.
When annualised and adjusted for seasonality, Lafarge’s 2017 second quarter PBT beat the consensus forecast of N30.8 billion, prompting the investment house to review the PBT forecast for 2017.
“Lafarge Africa shares have broadly tracked the NSE ASI year-to-date. Year-to-date, the shares have gained 26.9% vs. the 24.1% return on the NSE ASI,” said FBN Quest. “We rate Lafarge Neutral. Our estimates are under review.”
Innocent Unah, Bunmi Banjo
