Lafarge Africa optimistic of more rewarding H2

Lafarge Africa plc is positive that its performance in this second-half (H2) of 2016 will be more rewarding to all its stakeholders.

The company had recorded earnings contraction in first-half (H1) due majorly to the impact of the Naira devaluation against the US Dollar which resulted to an unrealised exchange loss. This is in addition to the negative impact which gas shortage had on the company’s H1’16 volume and cost of production.

Despite all these, in aggregates and concrete, Lafarge Africa plc continues to benefit from its strong network to drive business growth.

“We expect to benefit from the synergies of our integrated operations, in spite of the gas shortages. Our objective is to deliver innovative and good quality building solutions to meet the specific needs of our customers, while also achieving good value creation for our shareholders,” Lafarge noted.

Lafarge Africa plc is very positive about the future outlook for UNICEM, which is strategically located in Mfamosing, Calabar, in Cross River State and is a major cement plant in the South-South and South-East Region of Nigeria. The plant has a cement capacity of 2.5mm tones and will double capacity with the commissioning of a 2.5mm tones line during the second half of 2016.

While the new line (Mfamosing plant) is to be commissioned in the fourth-quarter (Q4) of this year; other existing plants are now fully operational with the exception of the gas supply limitations.

“The possibility of operating more plants on alternative fuels are being fully explored and on the fast-track. Our ReadyMix business will continue to secure high quality contracts to deliver strong performance in the second half of the year.”

Analysts expect the cement market to be strong mainly driven by the Individual Home Segment with a marginal contribution from the public sector.

Explaining H1’16

Lafarge Africa witnessed eight weeks of gas shortage due to restriction by Nigeria Gas Company to about 30% of normal volume. Priority supply to Ewekoro I & II led to the shut-down of Sagamu plant for about two months, with corresponding implication on the volume of cement produced in this quarter.

“This meant we had to use Low Pour Fuel Oil (LPFO) which is two to three times more costly than gas, more coal and Alternative fuel”, the company explained.

The resultant implication is higher cost of production due to sourcing of LPFO and more coal which is much more expensive than gas. This is in addition to increase in inflation as well as the removal of the fuel subsidy; and increase in costs of spare parts

Before the Nigerian Stock Exchange published Lafarge Africa plc first-half (H1) results, the company had earlier in an earnings warning told investors that it envisaged a N28 billion unrealised foreign exchange loss in Q2 as a result of Unicem’s Dollar denominated borrowings.

“Following the devaluation of the Naira, $310 million shareholders loans and $85 million external borrowings were revalued from N200 per USD to N285 in June 2016,” Lafarge noted. The downturn in Nigeria’s economy has in no doubts affected the construction sector which has a big effect on the Readymix business.

Despite noting that the South African market will remain challenging, Lafarge Africa is optimistic that with the reinforced sales team and route to market strategies, financial performance will improve. 

Lafarge Africa plc, member of the LafargeHolcim group enjoys doing business in Africa, noting that it will continually invest in the continent’s economy whilst building on its values to make the best building and construction solutions available in all parts of Africa – not just the best products but Lafarge’s building expertise as well.

Combining Lafarge Africa operations in Nigeria – 4.5MMT in WAPCO (with three plants in Ogun State), 1MMT in Ashaka Cement Plc (Gombe State), 2.5MMT in United Cement Company of Nigeria Limited (Cross Rivers State) and a terminal in Atlas Cement Company Limited (Rivers State) – with operations in South Africa 3.6MMT, Lafarge Africa Plc has a current installed cement capacity of 12MMT, which is expected to grow to 17.5MMT by 2017. This is in addition to strong market leading positions in aggregates, ready mix concrete and fly ash.

Iheanyi Nwachukwu