Lafarge Africa Plc shareholders back plan to issue ₦100 billion bond

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Shareholders of Lafarge Plc have approved the plan by the company to issue a ₦100 billion bond later this year.

The approval was given at the Annual General Meeting of the company. The company said the proceeds of the bond will be used to refinance the company’s debt. Many companies in the country have announced their intention to issue bonds this year to raise additional capital for their operations leveraging on lower-interest rates and improved economic indices.

The management also approved the payment of ₦13.01 billion dividends, at ₦1. 50 per share, to its shareholders as against the ₦5 .75 billion at ₦1 .05 per share paid in the corresponding period of 2016.

Mobolaji Balogun, chairman of the company said the company’ s recent ₦131 .6 billion rights issue significantly reduced its foreign exchange debt from ₦389 billion to ₦238 billion. He said the ₦151 billion reduction was through the rights issue and cash generated from the company’ s operations.

He further said the proceeds from the subscription provided the opportunity to repay another $82 m of the LafargeHolcim shareholder loans, including accumulated unpaid accrued interest.

Balogun revealed that the board of directors is already reviewing options to deal with the remaining foreign exchange debt.

According to him

“ WE CANNOT CONTINUE TO SIT WITH A LARGE CONTRIBUTION OF DOLLAR-DENOMINATED DEBT IN A COMPANY GENERATING MOSTLY NAIRA. WE NEED A MATCH IN CURRENCY PERSPECTIVE,” HE SAID.

He assured shareholders that restructuring of the capital structure of the company would significantly reduce the cost of financing and currency translation risk.

Recall that Lafarge Africa Plc raised ₦132 billion through a rights issue which was the biggest ever by a Nigerian company.

The company inherited a $507 million in shareholder loans and $88 million of third-party foreign currency debt when it acquired Nigeria’s third-largest cement manufacturer United Cement Company of Nigeria (UNICEM) in 2015.

This debt profile exposed the cement company to a heavy foreign currency loss after the Naira lost more than a third of its official value when the Central Bank of Nigeria (CBN) depreciated the currency.

In its full year 2017 financial reports for the year ended 31st December 2017, its revenue increased from ₦219 billion in 2016 to ₦299 billion in 2017. The company, however, made a loss before tax of ₦34 billion.

The chairman attributed the loss to the drop in domestic cement demand. According to him, the cement sold in 2017 was lower by 15.6 percent compared to 2016 this led to the reduction in operating profit to ₦7.9 billion in 2017, as against ₦12.4 billion in 2016.

Lafarge Holcim was in 2015 formed from a global merger of Lafarge and Holcim. Lafarge Holcim, the majority shareholder has a 71.4% stake in the Nigerian unit is the world leader in building materials industry with a local presence in 90 Countries.

The company share price currently trading at ₦41.00 and its 1-year return are down by 3.57%.

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