Lafarge Africa Plc. (WAPCO): Basking in Restructuring Gains

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First Quarter Performance Overshadows Q2:2020 Slip

In the just-released H1:2020 financial scorecard, Lafarge Africa Plc. (WAPCO) recorded a topline growth of 2.25% (NGN120.54bn vs. NGN117.89bn in H1:2019) powered by higher cement sales (+3.47%), which offset the sharp drop (-40.22%) in revenue from aggregates and concrete.

The growth also masked the weaker performance in Q2:2020 with sales volume for the quarter dropping by 3.72% (due to the economic lockdown and as realized prices remained flat). This mirrored the performance of its peers, with half-year performances boosted by the strong showings in the first quarter.

The company showed resilience during the quarter as construction activities were not completely halted and lockdown measures to contain the spread of COVID-19 were eased subsequently.

Hence, we revise our revenue projection from NGN190.70bn to NGN216.48bn. This represents a year on year growth of only 1.63% as expectations of lower public CAPEX remain as downside risks.

Cost Optimization Initiative Support Operating Margin

In our Q1:2020 report on the company, we had alluded to its cost optimization efforts as a tailwind despite concerns around the cost implications of the FX devaluation by the CBN.

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