Lafarge Africa Gradually regaining lost ground

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Following the exit of LSAH (South African Business) in Q3’19, Lafarge Africa’s performance has been on a gradual recovery in 2020. So far, while topline expanded by a mild 2% y/y in the first half of FY’20, PAT has grown by 47% y/y in the same period, buoyed by stronger cost containment and deleveraging.

In spite of the rainy season experienced in the latter months of Q3, the outlook remains optimistic amidst stronger FG revenue and increased business activity. Accordingly, we forecast a 5% q/q growth in cement sales to 1.4 million MT in Q3.

Lafarge Africa Gradually regaining lost ground

Driven by increased competition due to promotion activities, we foresee a reduction in cement prices. Thus, we forecast a 1% q/q moderation in average revenue/tonne to ₦43,675, taking Q3’20 Revenue 4% higher q/q  and 31% y/y to ₦59.2 billion.

That said, we forecast a 700bps q/q moderation in EBITDA margin, dragged by weaker pricing and inflationary pressures. Overall, Lafarge Africa’s EBITDA is expected to have fallen by 11% q/q, but risen 67% y/y to ₦24.7 billion,  due to the weaker Q3’19 base.

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All in, we forecast a 26% q/q drop, but a 140% y/y rise in PAT to ₦11.4 billion in Q3’20.

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Lafarge Africa Gradually regaining lost ground Brandspurng
Source: Company Fillings, Vetiva Research

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