LAFARGE AFRICA PLC - Well on track for FY’17 earnings recovery
​Well on track for FY’17 earnings recovery
Lafarge Africa PLC (WAPCO) reported an impressive 247% y/y rise in Q1’17 EBITDA to ₦17.7 billion, supported by sustained recovery in operations over the quarter and a low base from 2016. When annualized, the earnings line came in 17% ahead of our estimate. Revenue over the 3-month period rose 55% y/y and 39% q/q to ₦81.3 billion (Vetiva estimate: ₦60 billion), majorly buoyed by strong cement prices in both Nigeria and South Africa (also lifted by naira depreciation) – offsetting impact of the 17% and 31% volume drop in the respective regions. Asides the support of the strong topline growth, earnings were further buoyed by improved efficiency over the quarter, with Operating Expenses down 21% q/q. Overall, PBT (₦9.4 billion vs. Q1’16: loss of ₦2.2 billion) came in 22% higher than our estimate. However, with an effective tax rate of 45% vs. Vetiva estimate and prior year’s 16%, PAT came in at ₦5.1 billion – 21% behind our ₦6.5 billion estimate.
After adjusting our model to reflect the q/q moderation in margins amidst persistent cost pressure as well as our revision to revenue estimates, our FY’17 EBITDA estimate is revised to ₦63.4 billion (Previous. ₦59.1 billion), and our FY’17 PBT to ₦33.2 billion (Previous: ₦29.5 billion). Overall, we revise our target price to ₦77.32 (Previous: ₦74.63).
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