Lafarge set to regain its mojo after disposing of South African operations

After the sale of its troublesome South Africa operations, Lafarge South Africa Holding Limited (LSAH) to LafargeHolcim Group for the sum of $316.2 million, figures from its third-quarter result for the period ended 30^th September shows that the cement maker may be on the path to deliver stronger value for investors and shareholders.

The group revenue which comprises Nigeria and LSAH was lower by 25.1percent to N53.91bn in Q3. This result accounts for July-September financial performance for Nigeria and July for LSAH operations. Within the period, Nigeria revenue dropped 7.25percent to N45.17bn in the third quarter on the back of lower cement volumes and price competition.

Interestingly, despite this decline operating profit increased to N7.45bn with Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) growth of 73.9percent to N14.93bn supported by the sale of LSAH and reduction in cost base.

Lafarge declared a net profit of N4.73bn as compared to a loss of N6.47bn recorded in Q3 2018. Net finance cost dropped 70.6percent year-on-year and 33.4 percent quarter-on-quarter to N3.18bn due to the repayment of $293mn parent company loan.

The company had bought Lafarge South Africa Holdings to expand but the post-acquisition period in South Africa didn’t go as planned as the country’s cement sector became less unfriendly as the country slided into recession, increased in competitons, importation of cement in South Africa and increase in the price of cement price peaked.

Nigerian cement volumes dropped 5percent year-on-year and 23.1percent quarter-on-quarter to 1.03mt in third quarter due to torrential rainfall and strong sales promotion by Dangote Cement.