Lafarge secures ₦131.65bn in Right Issue, Plans to Refinance Loan & boost Profits!

Companies, Industry December 4, 2017December 4, 2017 Kelvin Emmanuel

On the 30th November 2017, Lafarge Africa Plc, the makers of Elephant Cement presented a facts behind the figures Right Issue at the Nigeria Stock Exchange. Group Managing Director & Chief Executive Officer, Mr. Michel Pucheros stated that a total of 131.65bn was raised from existing shareholders of the company  in order to refinance a part of the company’s foreign currency denominated loan by  way of a debt to equity conversion and also boost its profitability. In a statement the Group CEO said:

“Despite the challenging economic and regulatory operating environment, our company has continued to make significant progress on a number of fronts; thereby ensuring solid operating performance. I am pleased to inform you stockbrokers and other stakeholders that the results of the company’s transformation are already evident, as seen in first quarter, Q1, and second quarter,Q2, 2017 unaudited results of the company. We have returned to profitability and we hope that part of the proceeds from this Rights Issue will further boost our profitability in the future.” Fielding questions from stockbrokers on the dismal performance of the company over several successive quarters, he says,

“The harsh operating environment, lower sales due to recession faced in Nigeria and turbulent macro- economic conditions including the naira devaluation, amongst others, affected the our performance. However, the company has robust cash flow generating capability, as evidenced by operating cash flows of N57.8 billion and strong balance sheet at the end of the 2016 financial year. But, in half year 2017, we have grown Profit Before Tax, PBT to N18.160 billion, Profit After Tax, PAT to N34.803 billion from losses recorded in 2016.” Stating further that,

“The company’s performance shows that revenue grew at Compound Annual Growth Rate, CAGR, of 20 percent between 2012 and 2016 driven by improved operating activities, increased production capacity and operational consolidation. Revenue jump in 2013 was largely due to increased production in Ewekoro II cement plant; Earnings, Before Interest, Tax, Depreciation and Amortization , EBITDA, declined to N29.1 billion in 2016 from N67.3 billion in 2015 in line with general market conditions.” Bola Adeeko, the Nigeria Stock Exchange Head of Corporate Services Division in a statement on the facts behind the figures says,

“Lafarge Africa’s N131.65 billion Rights Issue is the highest offer in the history of the Nigeria’s capital market in recent time and we encourage their shareholders to participate in the offer as the proceeds from the offer would reposition the company for greater height. We also encourage other companies to approach the market for funds to boost their businesses.” Buttressing the objectives of the Company as stated by the Group CEO of Lafarge, Bola Adeeko, stated further that,

“Lafarge’s Rights Issue will help the company to finance working capital and expand operations that will yield better results to shareholders in the form of dividend in the future.”

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Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.