Lafarge Profit Slumps 15% as Pioneer Status Incentives Expire

Cement producer, Lafarge Africa Plc, posted a double digit decline in bottom line following economic uncertainties that underscore its first quarter of 2023 operations.

A decline in its profitability was supported by the expiration of the company pioneer status incentives that pushed tax obligations higher in the period.

Though profit slumped, the company’s cash flow improved significantly in the period, up from more than N5 billion debit to about N4.66 billion at the end of the first quarter in 2023.

Its chief executive said in a statement that 2023 election and cash shortage crisis have negative impacts on the company’s performance in the period.

Its unaudited financial statement show that Lafarge profit after tax slumped to N14.935 billion, representing about 15% year on year decline when compared with N17.558 billion posted in the comparable period in 2022.

Its financial statement showed a 1.3% year on year increase in net sales from N90.606 billion in Q1-2022 to N91.82 billion.

Its recurring earnings before interest and tax payments inched upward marginally, less than 1% year on year amidst uncertainties in the Nigeria economy in the period.

The cement company said its pretax profit surged 4.7%, though it maintained healthy balance sheet despite margin dilutive development in its key market.

“Lafarge Africa remains committed to accelerating green growth in line with our sustainability ambitions and targets”, management said in a statement.

Speaking to the result, Khaled El Dokani, CEO of Lafarge Africa said “Q1 2023 was a challenging first quarter due to the economic impact of the general elections and shortage of cash in circulation following the currency redesign policy.

“These constrained our financial performance. However, we remain focused on delivering sustainable value to all stakeholders as market recovers post-election and through the rest of the year”.

On the claim over its quality of the cement company’s balance sheet, its financial scorecard show that net cash settled at N71.6 billion.

Lafarge closed the quarter with positive free cash flow of N4.7 billion, thought the company said its net income contracted by 14.9% due to higher tax expense.

The surge in tax expenses in the period was attributed to expiry of the Pioneer Status Incentive (PSI). The company said it will continue to focus on Health and Safety; and acceleration of its sustainability initiatives.

“We maintain our positive outlook, with market recovery expected for the rest of the year. We will continue to maximize volume opportunities across our markets and actively manage our costs”, Lafarge Africa stated.

Lafarge Africa has the widest footprint in Nigeria with cement operations in the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka, in Gombe State), South East (Mfamosing, Cross Rivers State) with Ready-Mix operations in Lagos, Abuja and Port Harcourt. Lafarge Africa has a current installed cement production capacity of 10.5Mtpa.