Lafarge Africa Plc achieved a big upturn in profit in the second quarter from N5.2 billion in the first quarter to over N24 billion in the second but remains locked in a situation of growing sales with falling profit.
The second quarter saw a rebound in the bottom line from N20.5 billion to N24.2 billion year-on-year, but a profit crash from N14.9 billion to N5.2 billion in the first quarter diluted the rebound and kept the half-year profit figure down at N29.4 billion.
However, the unaudited financial report of the cement producers for the half-year ended June 2024 keeps hopes high for delivering the strongest growth in group turnover in recent years this financial year.
The challenge in gaining sales and losing profit stems from foreign exchange losses that have posed a critical downside force in operations for the company so far this year.
A flicker of optimism however appeared in the second quarter when the position shifted from net foreign exchange losses of almost N22 billion in the first quarter to a net gain of close to N2 billion, lowering the half-year figure to roughly N20 billion.
The absence of foreign exchange losses in the second quarter provided the upside force for the upturn in profit delivery the company experienced. Net foreign exchange losses had consumed a good part of operating profit in the first quarter and jerked down the bottom line by two-thirds.
Apart from the relief from foreign exchange losses, the company added cost savings to sustain strong growth in sales revenue in the second quarter.
Group sales revenue grew by 49 per cent in the second quarter to N157.8 billion, better than the N137.8 billion turnover for the first quarter and production cost slowed down from 59 per cent growth to less than 55 per cent.
Gross profit grew from N65.6 billion in the first quarter to N82 billion in the second, also gaining speed from 41 per cent increase to 44 per cent over the period.
Significant cost savings from operating expenses lifted operating profit by almost 59 per cent in the second quarter to N47 billion, rising from N30.2 billion in the first quarter as well as accelerating from a 36 per cent increase in the preceding quarter.
The company’s improved operating story in the second quarter climaxed in the drop in finance cost from over N21 billion in the first quarter to N12 billion due to the absence of foreign exchange losses in the second quarter.
The second quarter therefore delivered N37.9 billion pre-tax profit and N24.2 billion after-tax profit, representing 81.3 per cent and 82.3 per cent of the half-year numbers respectively.
Lafarge Africa’s half-year position shows group sales revenue of N295.6 billion, which is a year-on-year growth of 49.5 per cent. This remains a strong upturn in sales from a limited growth of 8.6 per cent to N405.5 billion at the end of 2023.
Despite the slowdown in the second quarter, the cost of production keeps growing, well ahead of turnover at almost 57 per cent to nearly N148 billion at the half year. Gross profit grew by 42 per cent to N147.6 billion at the end of six months of trading.
With cost savings realised from operating expenses in the second quarter, the half-year operating profit accelerated from 36 per cent in the first quarter to a 50.9 per cent advance to close at roughly N79 billion at half-year.
A change in fortune however came with foreign exchange losses that occurred in the first quarter, which multiplied the cost of finance about 24 times to N33.3 billion in the half year. This is still a much-improved record from the first quarter reading when finance expenses multiplied more than 34 times year-on-year to N23 billion.
Finance costs claimed 42.2 per cent of operating profit, which changed the company’s operating story from strong growth in operating profit to a drop in pre-tax profit.
At N46.6 billion in the half-year, pre-tax profit went down by 15.7 per cent year-on-year and after-tax profit also dropped by 17.3 per cent to N29.3 billion at the end of half-year operations in June 2024.
Whether the company counts foreign exchange gains or losses in the second half will be the deciding factor of a profit recovery at the end of the full year or a drop for the second year.
Earnings per share went down from N2.20 in the same period last year to N1.82 at the end of June 2024.
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