The Chairman of Lafarge Africa Plc, Mobolaji Balogun, on Wednesday said the overall drop in domestic cement demand was instrumental to the group’s N34.3 billion Loss Before Tax in the 2017 financial year.
Addressing shareholders at the group’s 59th Annual General Meeting in Lagos, Mr Balogun said the cement sold in 2017 was lower by 15.6 per cent compared with 2016 and, as a result, operating profit plummeted to N7.9 billion in the year under review, as against N12.4 billion the previous year.
“Cement selling prices recovered in 2017 which helped to partly offset the impact on cost of production of the over 40 per cent devaluation of the local currency in 2015 and the consequent spike in local inflation,” Mr Balogun said.
“This helped to strengthen group turnover to N299.2 billion from N219.7 billion recorded in 2016, an increase of 36 per cent.”
Lafarge Africa Plc – a member of the LafargeHolcim Group – is a publicly quoted company on the Nigerian Stock Exchange that provides building and construction solutions to the Nigerian and South African markets.
With plants in Ewekoro and Sagamu in the South-west, Mfamosing in the South-south, and Ashaka in the North-east, the company currently has an installed cement production capacity of 10.5 Million Tons Per Annum (MTPA).
In addition to its local cement production capacity, Lafarge Africa Plc also owns 100 per cent of Lafarge South Africa Holdings (Pty) +Limited, a subsidiary with a 3.6 million tons annual cement production capacity.
Mr Balogun said the gradual recovery of the Nigerian economy from recession in 2017 had meant stability in forex rate allowing businesses to source needed raw material for production as well as foreign direct and portfolio investments into the economy.
“While the impact of this recovery has gradually begun to be felt across various sectors of the economy, construction activities lagged this recovery in 2017 with overall domestic demand for cement which closed at 22.6mt for 2016, down to 18.5mt for 2017.”
Despite the Loss After Tax recorded, the company approved for its shareholders the payment of N13 billion dividend at N1.50 per share, as against N5.75 billion or N1.05 per share paid in 2016.
The company also announced a reduction in its total debt from N389 billion to N238 billion, a feat achieved largely through last year’s rights issue and cash generated from the company’s operations.
Mr Balogun urged the shareholders to remain optimistic as the management had embarked on a turnaround plan to increase its market share over the next one year.
He also said the Board of Directors had begun reviewing options for the repayment of the remaining debt being owed by the company.
“We cannot continue to sit with a large contribution of dollar-denominated debt in a company generating mostly naira, we need a match in currency perspective,” Mr Balogun said.
“The Board of Directors is mindful of the support of all our shareholders through the difficult but necessary journey to transform the company into a more agile and correctly financed business ready to benefit from the opportunity in the Nigerian market.”