Event

Lafarge Africa Plc (‘the Group’) volume was under pressure in 2023, owing to plethora of macroeconomic headwinds. These factors include electioneering activities in the first quarter of the year, and an elevated interest rate environment throughout 2023, which we believe slowed down activities in the construction sector, particularly the private sector. In addition to these factors, we believe the shutdown of Mfamosing Plant in Q3 2023 for maintenance purposes also adversely affected total volume production. Despite these events, revenue grew by a single-digit, and profit before tax also improved by 16%. However, the expiration of its pioneer tax status incentive negatively impacted the Group’s profitability, resulting in a decline in its profit after tax in 2023.

In our 2024 outlook for the industrial sector, we projected an uptick in volume growth, as we expect the fiscal authorities to execute capital projects and further expectation of increased activities in the real estate industry. Consistent with our expectation, Lafarge Africa Plc (‘the Group’) reported a boost in volume sales in Q1 2024. Additionally, in line with other industry peers, the Group took prices increase to mitigate escalating input cost and operating cost in Q1 2024.

The Group’s bottomline in Q1 2024 remained consistent with what was seen in FY 2023, as the FX loss in Q1 2024 which worsened to N21.80 billion weighed severely on the Group’s operating profit. For Q1 2024, the Group reported a net profit of N5.19 billion in Q1 2024, down by 65% from Q1 2023 N14.94 billion net profit.

Outlook

Nigeria’s reliance on cement for building underpins our optimism for the industry’s strong fundamentals. In addition, Lafarge Africa’s Plc management has continued to demonstrate dedication to creating value to its shareholders by continuously improving its brand portfolio.

We are positive about the Group’s overall objective and long-term prospects. To this effect, we revise our fair value to N37.61 (previous: N27.71). At the current price of N35.00, we recommend a HOLD for the stock, with a total return of 12% (+7% price return, and a dividend yield of 5%).

Please follow the link “Lafarge Africa FY 2023 & Q1 2024 – Innovation and Robust Fundamental Drives Resilience” to view the whole report.

Thank you.