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Investors dump Lafarge Africa’s shares on disappointing Q3 earnings

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By Nkiruka Nnorom

SHARES of Lafarge Africa Plc fell by 28.6 percent in three weeks as equity investors continue to sell-off the shares following the release of a disappointing quarter three and nine month earning reports by the company.

Though the company’s revenue grew by 4.8 percent in the nine month to September 2018, it recorded N14.361 billion loss before tax and N10.373 billion loss after tax, a steep decline of 1,413 percent and 1,206 percent respectively compared to the profit position in the corresponding period in 2017, a development financial analysts attributed to the company’s highly leveraged position which weighed on finance cost during the period.

Lafarge Africa’s finance cost surged by 22.5 percent to N34.928 billion from N28.512 billion in 2017.

Nigerian Stock Exchange

Consequently, the shares fell to N15.00 per share at the close of trading on Friday, November 9, 2018 from N21.00 on October 17, 2018 when it released it Q3 earning statement.

Analysts at Cordros Capital had said while reviewing financial performance of cement companies for the nine month period that “Dangote Cement result was impressive, leading to a boost in investor interest in the stock (+1.95 percent month-on-month (m/m), while Lafarge Africa’s performance was disappointing, as the cement producer’s highly leveraged position weighed on finance costs and bottom line performance.”

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Following the poor performance, which analysts said was not unexpected, Cordros Capital revised its full year loss after tax estimate for the company to N9.12 billion.

“We have increased our loss after tax estimate for 2018  to N9.12 billion from N4 billion to adjust for the miss in Q3, and as we look for lower net profit in Q4 than previously expected.

“We believe the group will deliver its first profit in two years in 2019 earnings, wherein we expect finance charges will be some way lower compared to 2018 earnings. While the on-going restructuring/turnaround activities across the group appear to be yielding little results, the associated costs remain elevated, with continued negative pass-through to margins and profitability,” they said.

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