The global cement business will remain modest amid geopolitical tensions and economic fragmentation. Outlooks put the market's growth at between 2 and 3% in 2024. The Middle East, India, and Africa would drive the growth in the year. Growth in China and Europe is expected to drop by an average of 5% as softer economic growth and tight monetary policy put the breaks on gross domestic output (GDP). In Nigeria, things are slightly different.
The country's infrastructural gap and rising population have given the cement industry elbow room to shove forward, ensuring sustained demand. However, in 2023, the business was troubled by a few headwinds. The naira currency redesign policy, FX scarcity, energy drawbacks (inadequate gas supply), and high operating costs snapped at operating profit. Regardless of these difficulties, Nigerian cement companies stumped up impressive performances in 2023, taking advantage of higher product prices and strong demand from the real estate sector.
Lafarge Africa Plc saw topline revenue grew by +8.64% to N405.50bn despite the shutting of the Mfamosing plant in Q3 2023. The group earned additional income from finance income, which grew by +203.38% to N4.65bn and other income at N891.70m, raising the operating profit to N102.02bn in FY 2023 from N84.19bn in FY 2022. The company's strong revenue shouldered the +22.7% rise in administrative expenses and the +62.56% spike in finance costs triggered by FX revaluation loss. The clinker maker saw a +15.33% growth in profit before tax to N78.78bn in FY 2023. However, Lafarge's exemption from the pioneer status incentive in 2023 resulted in a +88.50% rise in income tax expenses, which nibbled away at the company's profit after tax by --4.67 %, leading to a PAT of N51.14bn in FY 2023.
Lafarge's cash position improved in 2023 as cash and cash equivalent rose to a record high at N168.37bn in FY 2023, complementing its ability to cover debt obligations with an acid test and liquidity ratio of 0.85 and 1.17 in FY 2023. Additionally, the company's historically low trade receivables and rising trade payables had helped lock in liquidity for the group. The group maintained a relatively low inventory at N54.34bn in FY 2023, suggesting growing demand to fuel the need to expand production capacity beyond 10.5MTPA to achieve a larger market share. Lafarge maintained its reliance on equity for funding as shareholder's equity increased by +4.55% to N435.05bn, and the leverage ratio trimmed to 0.06x in FY 2023 from 0.09x in FY 2022.
Independent Auditor:
Ernst & Young Professional Services
Principal Bankers:
- Access Bank Plc
- Citibank Nigeria Limited
- Citibank Europe Plc
- First Bank of Nigeria Ltd
- Guaranty Trust Bank Plc
- Standard Chartered Bank Nigeria Ltd
- Stanbic IBTC Bank Plc
- United Bank for Africa Plc
- Wema Bank Plc
- Zenith Bank Plc
- Ecobank Nigeria
- First Coty Monument Bank Ltd
- Globus Bank Limited
- Union Bank of Nigerian Plc