WAPCO Grows Sales by 3% as Both PBT & PAT Fall in Q4'15 Results; Proposes N3 Dividend


Friday, March 18, 2016 9:32AM /FBNQuest Research

Event: Lafarge Africa reports 2015 results

Implications: Marked downward revisions to consensus 2016 PBT forecast expected

Positives:  Sales were up 3% y/y

Negatives: PBT and PAT both fell by 28% y/y and 20% y/y respectively due to a surge in other expenses and net interest expense 


Yesterday, the NSE published Lafarge Africa’s (Lafarge) 2015 results which showed that PBT and PAT declined by -28% y/y and -20% y/y to N29.8bn and N27.0bn respectively, despite the consolidation of UNICEM’s numbers to Group results for the first time.

The y/y decline on the bottom line was driven by a 135% y/y spike in other operating expense to N13.3bn, a 14% y/y rise in net interest expense to -N9.0bn and to a lesser extent a -95bps y/y contraction in gross margin to 30.9%.

These negatives completely offset a 3% y/y growth in sales to N267.2bn and resulted in PBT declining by 28% y/y. Thanks to a lower effective tax rate of 11.0% (vs 15.5% in 2014), the y/y decline on the PAT line narrowed slightly to -20% y/y.

On a divisional basis, the drag on the bottom line was underpinned by the weak performance of UNICEM, Lafarge South-Africa Holdings (South Africa) and Ashaka Cement (Ashaka).

While UNICEM delivered an after-tax loss of -N4.2bn in 2015, Ashaka and South Africa both saw their PAT declining by -40% y/y and -33% y/y to N2.8bn respectively. Specifically, an unrealized exchange rate loss of N10.0bn related to UNICEM and one-off restructuring costs of N4.6bn weighed on earnings

Excluding these one-off costs, PBT would have increased by 9% y/y to N43.9bn. Relative to our forecast, sales of N267.2bn are not directly comparable due to the consolidation of UNICEM.

However, if we exclude revenues of N54.3bn attributable to UNICEM, sales were broadly in line (-3.0%) with our N219.6bn forecast. In contrast, PBT and PAT missed our forecasts by 27% and 19% respectively largely because of negative surprises on the other expense and net interest expense lines.  

Lafarge’s management has proposed a dividend per share of N3.00 (-16.7% y/y). The DPS implies a yield of 3.6% and is around 18% higher than our N2.54 DPS forecast.

Lafarge Africa 2015 results vs. FBNQuest estimates (N millions)

Unlike its major rival Dangote Cement whose unit volume for Nigeria grew by 3% y/y to 13.3 million metric tonnes (mmt), Lafarge’s cement volumes came in flattish (-1%) at 6.3 million metric tonnes, Consequently, we believe that its market share declined marginally to about 29% in 2015 from 30% in the prior year.

Apart from the weak macro-economic fundamentals in Nigeria, we believe that increased competition and a tough operating environment played a part in the slight reduction in unit volumes.

Although volume and market share numbers for South African operation were not provided, the segment’s contribution to sales and PAT fell to 28.3% and 10.4% from 29.4% and 12.1% in 2014 respectively.

Lafarge’s PBT came in behind consensus 2015 PBT forecast of N44.7bn. As such, we expect to see marked downward revisions to consensus 2016 PBT forecast and a negative reaction from the market. Lafarge shares have underperformed the ASI this year. Ytd they have shed -13.2% compared with the -10.3% return delivered by the ASI.

At current levels, on our published forecasts, the shares are trading on a 2016E P/E multiple of 11.1x for 25% EPS growth in 2016E. These compare with the 15.9x P/E multiple for 11% EPS growth that rival Dangote Cement is trading on. 

Related NEWS


1.       WAPCO Declares N26.99bn Profit in 2015 Audited Result,(SP:N84.00k)

2.      Lafarge Africa Plc Appoints Mr. Michel Puchercos as New Group MD CEO Effective 1st April 2016

3.      Lafarge Africa Plc Q3 15 Low market demand price cut shrinks margins

4.       Lafarge Africa Pre-tax and After-Tax Margins Contract by Over 200bps in Q3 2015

5.      WAPCO EBIT Falls by 46 in Q3 15 Financials

6.      WAPCO Net Interest Expenses Rises as PBT and PAT Fall in Q3 15 Result

7.      WAPCO Grows Revenue by 5.5 in Q3 15 Result PAT Dips by 7 SP N98.50k

8.     Lafarge Africa Plc increases Stakes in UNICEM

9.      WAPCO s Investment Income Supports Bottom-line Performance

Related News