Cement maker Lafarge Africa intends to expand its factories in the South West and Northern parts of the country once it cuts down on its debt. Chairman of the company, Bolaji Balogun disclosed this in a chat with Bloomberg.
“As soon as the debt becomes more comfortable, we don’t sit there, we will put the foot down on the next round of expansion”
He did not, however, disclose the volume by which the company plans to expand.
Lafarge has a production capacity of 10.8 million tonnes in Nigeria as at FY 2017.
Balogun also disclosed that the company is targeting a leverage ratio between 60-70% from its current levels of a 100%.
Proceeds from a ₦131 billion rights issue last year were used to pay down its debt.
Still playing catch up
The company’s expansion plans come after its competitors have rolled out theirs. BUA Cement has completed a 1.5 million tonne expansion of its Cement Company of Northern Nigeria (CCNN) plant in Sokoto, at an estimated cost of $350 million.
Dangote Cement, Nigeria’s largest cement producer in July last year unveiled plans to expand its plants in Nigeria.
The company currently has a production capacity of 29.3 million tonnes per annum in Nigeria, according to its FY 2017 investor presentation. Dangote Cement sold 12.9 million tonnes of cement last year.
Profit ratios tell the same story
Lafarge had gross profit margins of 16.97% and a net profit margin of 11.57%. Return on equity was 32.64%
CCNN had a gross profit margin of 33.94% and a net profit margin of 12.69%. Return on equity was 20.73%
Dangote Cement had a gross profit margin of 56.39% and a net profit margin of 25.35% and a Return on Equity (ROE) of 26.35%.
Gross profit margin is the percentage of revenue left after deducting the cost of goods sold.
Net profit margin is the amount of revenue left after all expenses have been deducted from sales.
Return on Equity is how much Naira the company generates as profit for every ₦1 of shareholders funds.
Q1 2018 results tell the same story
Q1 2018 results show the company is lagging behind its competitors. Revenue dropped from ₦81 billion in 2017 to ₦80 billion in 2018.
Revenue for Dangote Cement (the company) increased from ₦152 billion in 2017 to ₦173 billion in 2018.
Revenue for Sokoto Cement increased from ₦4.3 billion in 2017 to ₦5.3 billion in 2018.
Lafarge Africa PLC (Lafarge Africa) was incorporated in Nigeria on 26 February 1959 and commenced business on 10 January 1961.
The Company formerly known as Lafarge Cement WAPCO Nigeria Plc changed its name, following the acquisition of shares in Lafarge South Africa Holdings (Proprietary) Limited (LSAH), United Cement Company of Nigeria Limited (UNICEM), AshakaCem PLC (AshakaCem) and Atlas Cement Company Limited (Atlas).
Lafarge Africa shares are currently trading at ₦38.50, down 4.94% in today’s NSE trading session.