Lafarge Africa Plc 9M 2019 - Reaping Benefits of LSAH Sale

Monday, October 28, 2019 / 05:26PM / By CardinalStone Research/ Header Image Credit: Lafarge Africa Plc

Lafarge Africa Plc (WAPCO: TP N24.2 - BUY) reported a profit after tax of N20.6 billion from continuing operations in 9M'19. Significant savings on input costs and lower finance expenses supported the impressive performance in the review period. 

Some Positives: 

• We highlight the significant plunge in operating cost in Q3'19 consequent on the sale of the old and relatively inefficient South African production lines. Specifically, the company reported lower cost of raw materials (-78.2% YoY) and haulage costs (-45.7% YoY) in the quarter. The 76.2% YoY moderation in administrative and technical expenses also drove operating margin to 17.1% in Q3'19 (Q3'18: 3.9%).
• Interest expense moderated by 71.7% YoY to N3.1 billion in Q3'19. The lower finance cost was largely driven by significant contraction in WAPCO's borrowings. This comes after the company paid off most of its related party borrowings from the proceeds of LSAH sale.
• Consequently, its debt to equity ratio now favorably stands at 18.4% compared to the 89.3% reported at the end of H1'19.  

Some Concerns: 

• Revenue declined by 37.0% YoY in Q3'19, largely due to the 21.9% contraction in cement volumes (-5.0% YoY) and the stripping out of LSAH operations. Additionally, we posit that WAPCO may have faced increased competition in the Northern region of the country as CCNN pushed our more volumes amid additional capacity (4x increase in existing capacity in 2018).

Related News

1. Lafarge Africa Declares N20.57bn PAT in Q3 2019 Results,(SP:N14.70k)
2. Alleged SEC Probe of Lafarge Africa: We Are Not In Receipt Of Any Letter From SEC - Lafarge
3. WAPCO Declares N9.01bn PAT in Q2 2019 Result,(SP:N13.10k)
4. WAPCO to Hold 60th AGM on July 22 2019
5. WAPCO Announces Delay in Filing of the Company's Q1 2019 Unaudited Financial Statements
6. WAPCO Declares N2.0bn Loss in Q1 2018 Result,(SP:N45.95k)
7. Lafarge Africa Plc Notifies of Court Ordered Meeting with Lafarge Ready Mix
8. Nigeria's Cement Market Battles: Lafarge Africa Plc in Focus
9. Lafarge's U-turn on LSAH and Valuation Implications
10. Lafarge Africa Q4'18 and Q1'19 Results Review: Positive Earnings Outlook Post Divestment of LSAH
11. Lafarge Africa Plc: Equity Update
12. Lafarge Africa Plc Redeemed Its N26.4 Billion Series 1 Bond Due On June 15, 2019
13. Lafarge Africa Releases Q1 2019 and Q4 2018 Results; Declares N3.15bn PAT in Q1,(SP:N9.55k)
14. Lafarge Africa Notifies of Further Delay in Filing of Its 2018 AFS
15. WAPCO Announces Delay in Filing of the Company's Q1 2019 Unaudited Financial Statements
16. WAPCO Declares N2.0bn Loss in Q1 2018 Result,(SP:N45.95k)
17. WAPCO Declares N19.73bn PAT in Q2 2017 Result,(SP:N54.60k)
18. WAPCO Declares N5.16bn PAT in Q1 2017 Result,(SP:N46.00k)
19. WAPCO Declares N16.9bn PAT in 2016 Audited Result,(SP:N37.80k)
20. WAPCO Declares N37.41bn Loss in Q3 2016 Result,(SP:N47.50k)