Lafarge boosts fortunes with subsidiary’s sale
Shareholders of Lafarge Africa Plc have expressed optimism that the sale of its 33.82 million ordinary shares in Lafarge South Africa Holdings Proprietary Limited (LSAH), to Caricement B.V, a subsidiary of LafargeHolcim Group, will turn around its fortunes and boost profitability.
The shareholders, who endorsed the sale of the South African subsidiary at the company’s 60th yearly general meeting, in Lagos, said the decision would also increase value on investment through dividend.
Reviewing its performance, the board Chairman, Mobolaji Balogun, said $316.289 million proceeds from the planned sale will enable it pay off Lafarge Africa shareholder loan as at July 31, 2019, and represents the only existing foreign currency loan in its books.
He explained that LSAH’s operations have been faced with a challenging market in South Africa, with shrinking demand in an aggressively competitive market, but after due deliberation, its disposal was the best option to restrict further downside, especially for minority investors.
Balogun assured shareholders that the management will continue to drive improvements in results, noting that for the year ended December 31, 2018, despite the challenging economic and regulatory environment, the company made significant progress across board, thereby ensuring solid operating performance.
“The Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margins in the Nigerian operations stood at 27 per cent at close of the year, resulting from a stable pricing environment, stabilising industrial operations, the use of alternative energy, and the implementation of our commercial and logistics performance improvement plan.
“On the basis of the results for the year, the board is unable to propose dividends. With the sale of LSAH as proposed by the board to shareholders, the only debt that will remain on the books of the company will be the second tranche of the corporate bond due for redemption in June 2021.
And the subsidised loan in respect of CBN Power Intervention Funds through the Bank of Industry. This significant reduction in debt holds prospects for dividend distribution in future,” he said.
Also, the Managing Director of Lafarge Africa, Michel Puchercos, maintained that the management is determined to deliver on the trust reposed by shareholders.
“We are delighted with the understanding by our shareholders on the need to focus our business in Nigeria.
The approval of the proposed sale of Lafarge South Africa by the shareholders will cut debts service obligation, and curtail substantially financial charges which will have positive impact on liquidity, and the opportunity to expand our operations in Nigeria,” he added.
The company, in the year under review, declared revenue of N308.4 billion, as operating profit increased by 215 per cent, while improvements in cost and execution of new routes to market had a positive impact on operating profit, which increased from N7.9 billion in 2017 to N24.8 billion in 2018.