Lafarge Africa Plc realised its hopes for strong product demand momentum in the final quarter of the 2021 financial year. However, some major cost savings that helped to propel profit failed to stay on track.
Audited accounts of the cement producing company show that product demand remained firm in the last quarter, as expected by the management but the quarter contributed N10.6 billion or less than 21 per cent of the N51 billion profit the company has posted for the 2021 financial year.
The main cost deviant is tax expenses, which reversed from a credit of almost N5 billion in the third quarter to an expense of N7.3 billion in the fourth quarter. The development raised the year-on-year tax expense for the company from N3.5 billion at the end of the third quarter to N10.8 billion at full year.
From a drop of 42.5 per cent in tax expenses at the end of September, the full-year figure is an increase of nearly 70 per cent at the end of December 2021. This had a limiting effect on the company’s profit capacity in the final quarter.
Profit margin went down from 16.2 per cent in the third quarter to 13.5 per cent in the final quarter. Part of the weakness was remedied by reinforced cost savings from finance expenses in the final quarter.
Cost of finance gained speed on the downward side in the fourth quarter from a 25 per cent decline year-on-year at the end of the third quarter to a 45.6 per cent drop to N5.3 billion at full year. The cost-saving here pushed up the full-year profit margin to 17.4 per cent, yet down from 18.4 per cent in September.
Management has slashed balance sheet debts from roughly N51 billion at the end of 2020 to N23 billion in 2021.
The cement market tilted to the sellers’ side in 2021, which enabled producers to jerk up prices and yet push sales to record growth. For Lafarge, the good product demand momentum that its management expected in the final quarter was realised.
The company generated sales revenue of N74 billion in the final quarter, topping its third-quarter figure of N219 billion to N293 billion at the end of the year. Year-on-year sales growth accelerated from 22 per cent at the end of the third quarter to 27 per cent at the end of the year.
This is a big leap in sales for the company from just an 8 per cent increase in the 2020 financial year. The company’s chief executive officer, Khaled Abdelaziz El Dokani has therefore lived up to his promise to capitalise on firm product demand to maximize volume opportunities across markets.
The company’s turnover of N308 billion posted in 2018 however remains unmatched three years after.
The company’s management also succeeded in adding cost-saving from input expenses to the gains in sales in the final quarter. A trend of cost of sales growth ahead of sales revenue through the quarters was reversed in the final quarter.
The company closed with unusual figures where the full-year cost of sales of N150.5 billion was below the third-quarter figure of N155 billion. This worked out a slowdown from a 29 per cent rise in the cost of sales quarter-on-quarter in the third quarter to a 23.6 per cent increase at full-year – lower than the 27 per cent growth in sales revenue for the year.
Input cost claimed 51 per cent of sales revenue at the end of the year, down from 71 per cent at third-quarter closing.
The development improved gross profit, which rose by 31 per cent to N142.6 billion at the end of the year. The company’s numbers show that gross profit soared from N64 billion at the end of the third quarter to the year’s closing figure, generating close to N79 billion or 55 per cent in the final quarter alone.
Selling and distribution costs took a flight from the closing figure of N2.5 billion the company reported at the end of the third quarter to land at roughly N57 billion at full year. The impact of the huge increase was countered by the drop in cost of sales that was growing at an average of about N52 billion per quarter.
The in and out changes left selling and distribution expenses moderated relative to turnover, which powered a 42.6 per cent growth in operating profit to over N65 billion at the end of the year.
The company earned N3.17 per share in full-year, improving from N1.91 per share in the preceding year. It has announced a cash dividend of N1 per share for the 2021 operations.
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