Lafarge Africa Plc, a member of the Lafarge Holcim Group, which is the biggest building and concrete solutions company in the world, let out its Full Year 2020 earnings result to the investing public on Wednesday, 24th of March, 2021, which showed that the company recorded an increase of 8.25% (from ₦213.00 billion in FY’2019 to ₦230.57 billion in FY’2020) in its Revenue as a result of 9.14% increase in the sale of cement and additional revenue from the sale of mortar.
Similarly, the company recorded a growth of 30.83% in its Operating Profit (from ₦34.91 billion in FY’2019 to ₦45.67 billion in FY’2020) due to a decrease in some of its expenses line items such as; 17.16% decrease in Selling and Marketing Expenses (to ₦4.22 billion in FY’2020), 20.33% dip in Impairment on Trade Receivables (to ₦20.61 million in FY’2020), and 94.33% reduction in Other Operating Expenses (to ₦41.03 million in FY’2020) supported by the decline in assets write off and impairment of loan receivables.
However, Lafarge Africa’s other incomes declined by 58.49% (from ₦2.35 billion in FY’2019 to ₦976.15 million in FY’2020), and its Administrative Expenses also rose by 4.23% (from ₦17.56 billion in FY’2019 to ₦18.30 billion in FY’2020) owing to increase in salary, directors’ cost, and spare part cost, and others.
Furthermore, the company’s PBT increased significantly by 109.99% (from ₦17.89 billion in FY’2019 to ₦37.19 billion in FY’2020), which should have also resulted in an increase of 98.75% (i.e., ₦30.84 billion in FY’2020 compared to ₦15.52 billion in FY’2019) in the company’s PAT, but its PAT for the year dropped by 73.21% (from ₦115.10 billion in FY’2019 to ₦30.84 billion in FY’2020) due to a notable ₦99.59 billion realized from the sale of its South African Subsidiary to Caricement B.V in 2019; which is also an indirect subsidiary of Lafarge Holcim Limited.
Consequently, the Earnings Per Share reduced by 73.29% to 191k in FY’2020, in comparison to 715k EPS in FY’2019.
Nevertheless, despite the decline in the EPS, Lafarge Africa is set to reward the shareholders with a dividend of ₦1.00 per ordinary share, to be paid on May 25th, 2021, and the qualification date is slated for April 30th, 2021.
However, the firm’s Cash Ratio stood at 0.42x in FY’20 as against 0.32x in FY’19, indicating an increase in the liquidity rate of the company, while the Current ratio decreased by 9.11% (0.81x in FY’2020 as against 0.89x in FY’19).
In light with the mentioned performance of Lafarge Africa in the year 2020 despite various headwinds, we recommend a HOLD on the stock as against the closing price of ₦21.15 as of Thursday, 25th March 2021.