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LAFARGE AFRICA PLC Q1'24 Earnings Release - FX losses weaken bottom line

For the first quarter, Lafarge recorded strong revenue growth of 50% y/y to ₦137.7 billion, driven by improved sales volumes, and higher cement prices. On the other hand, cost of sales increased by 59% y/y to ₦72.1 billion. Despite management’s efforts to rein in the cost pressures, cost of inputs such as fuel, power, and raw materials (+61% y/y: ₦45.5 billion) was exacerbated by the rising inflationary pressures and the continuous weakening of the currency. In light of this, gross margin declined by 2ppts to 48% y/y, bringing gross profit to ₦65.6 billion, up 59% y/y.

Operating expenses surged 45% y/y higher to ₦35.5 billion, driven by a surge in selling and distribution expenses (+46% y/y) to ₦27.2 billion. As such, EBIT margin declined to 22%, bringing EBIT to ₦30.2 billion, up 36% y/y. Moving on, finance cost surged 34x to ₦23.0 billion, due to the jump in FX losses to the tune of ₦21.8 billion. That said, the passthrough effects from the higher finance cost pressured PBT, causing a 61% y/y decline to ₦8.7 billion.  Despite a lower tax expense of ₦3.5 billion (-53% y/y), PAT declined by 65% to ₦5.1 billion, weighed down by the impact of these FX losses.

Looking ahead we expect the commencement of the rainy season to dampen construction activities and ultimately cement volumes. However, we expect that the higher pricing environment will remain prevalent despite the government’s intervention. That said, we forecast a revenue growth of 3% y/y to ₦453.7 billion.