MON, APRIL 23 2018-theG&BJournal-LAFARGE Update: LAFARGE published Q1-18 result, showing 0.8% y/y decline in revenue and loss after tax of NGN2 billion. The published revenue and net loss were improvements over Q4-17 (+6.8% q/q and -94% q/q).
The slight decline in revenue y/y was attributed to lower sales volume, given the average cement prices which are currently higher by about 9% compared to Q1-17, on estimate.
”We estimate about 7-8% growth in volume vs. Q4-17, consistent with the guidance provided by most producers during the 2017FY call. Revenue break-down shows “cement” and “other” revenues declined by 2% y/y and 26% y/y respectively while “aggregate and concrete” revenue grew by 8% y/y,” says Cordros Capital analysts.
From a negative in Q4-17, gross and EBIT margins of 22.3% and 7.8% were reported in Q1-18. The margins are lower than the 25.7% and 16.5% respectively reported in Q1-17. Compared to Q4-17, CoGS was lower by 24%, owing to the non-occurrence of the significant one-off charges that were recognized in the final quarter of 2017 and impacted adversely on earnings. Gross profit was lower y/y (14%), reflecting both lower margin and volume.
EBIT and the margin were lower by 53% y/y and 872 bps y/y respectively, owing to (1) lower volume and gross margin and (2) and higher opex and the margin (41% y/y and 432 bps y/y). On opex, administrative spend increased by 36% y/y while campaign and innovation spend was more than 6x higher compared to Q1-17.
Though the net finance charge of NGN9.2 billion reported was much lower than the NGN24.5 billion reported in Q4-17, the amount is higher by 133% vs. Q1-17. Asides from the bump in Q4-17, the reported net finance charge is also high, in historical context. Interest on borrowings (NGN7.6 billion) alone was higher by 78%, reflecting the relatively higher borrowings of NGN269 billion (vs, NGN142 billion in Q1-17) in the balance sheet, following the reclassification of related party loans from quasi-equity, in H2-17. Net FX loss of NGN640 million was also reported during the quarter (nil in Q1-17).
Loss before and after tax of NGN2.95 billion and NGN2 billion were reported respectively. A deferred tax credit of NGN1.86 billion was recognized, resulting on net, to a tax credit of NGN944 million during the quarter.
