Lafarge Africa Plc closed 2023 operations with the group’s after-tax profit down by about 5 per cent to N51 billion, as tax expense surge claimed more than all the increase in pre-tax profit.
While pre-tax profit for the group grew by N10.5 billion to N78.8 billion in the year, the company’s income tax expenses rose by roughly N13 billion to N27.6 billion to stifle profit improvement in the year.
The audited financial report of the cement producing and marketing company for the full year ended December 2023 shows profit growth constrained for the second year.
An increase in tax expenses also claimed a good part of the increase in pre-tax profit in 2022, which permitted only a moderate increase of 5 per cent in after-tax profit to N53.6 billion.
Application of deferred taxation has been the spur for swollen tax expenses, accounting for N12.6 billion of the N14.7 billion tax expenses in 2022 and N23.6 billion of the N27.6 billion tax expenses in 2023.
There was however a more fundamental constraint in the company’s operations in the year in terms of the general cost-income balance that limited the improvement of pre-tax profit.
Sales revenue slowed down at an increase of 8.6 per cent to N405.5 billion from a growth of over 27 per cent to N373 billion the company achieved in 2022. Production costs however grew ahead of sales at 12.3 per cent to N198.8 billion, which lowered gross margin from 52.6 per cent in 2022 to less than 51 per cent in 2023. Gross profit grew by 5.3 per cent to N206.7 billion compared to the 8.6 per cent increase in sales.
Loss of gross margin was however remedied by a significant cost saving from selling and distribution expenses – which dropped by about 13 per cent to N78 billion and administrative expenses rose by 22 per cent to N27.6 billion to claim part of the cost saving from selling and distribution cost.
Further operating strength was added from an increase of 60 per cent in other income to about N892 million as well as an impairment reversal on trade receivables of about N32 million against an impairment loss of N431 million in the preceding year.
Cost savings plus revenue gains in operations powered an increase of 21 per cent in operating profit to N102 billion.
There was a major increase of 62.6 per cent in finance expenses to almost N26 billion in the year, which was partly moderated by finance income that tripled to N4.6 billion. Net finance cost still grew by 47.6 per cent to stand at over N21 a full year.
The company cut its interest-bearing debts from N36.5 billion at the end of 2022 to a little over N26 billion at the end of 2023 and closed the year with a pre-tax profit of N78.8 billion, which is an increase of over 15 per cent from the closing figure of N68 billion in 2022.
The upsurge in income tax expense stood in the way of converting the increase in pre-tax profit into net profit.
Lafarge Africa closed the year’s trading with earnings per share of N3.17, a decline from N3.33 per share in 2022. It has announced a cash dividend of N1.90 per share for shareholders for the 2023 operations.
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