lafarge africa plc. - stanbic ibtc stockbrokers 2015 analyst... · lafarge africa plc. full year...

Lafarge Africa Plc. Full Year & Quarter 4 2015 Results

Analysts’ Presentation: March 17 2016

Lagos Port, Nigeria

View of Lagos at Night

Victoria Island, Lagos at Night Victoria Island, Lagos Victoria Island Lagos

© 2016 Lafarge Africa Plc. 2

Not for distribution directly or indirectly into the United States, Canada, Australia or Japan or to US persons.

Disclaimer

This presentation is based on Lafarge Africa Plc’s audited financial results for the full year ended December 2015 consistent with IFRS reporting

standards. Lafarge Africa Plc (“Lafarge Africa” or the “Company”) has obtained information in this presentation from sources it believes to be

reliable. Although Lafarge Africa has taken all reasonable care to ensure that the information herein is correct and accurate, Lafarge Africa makes

no representation or warranty, express or implied, as to the accuracy, completeness or correctness of such information. Furthermore, Lafarge

Africa makes no representation or warranty, express or implied, that its future operating, financial or other results will be consistent with results

implied, directly or indirectly, by information contained herein or with Lafarge Africa’s past operating, financial or other results. Any information

herein is as of the date of this presentation and may change without notice.

Lafarge Africa undertakes no obligation to update the information in this presentation. In addition, some of the information in this presentation may

be condensed or incomplete, and this presentation may not contain all material information in respect of the Company.

This presentation also contains “forward-looking statements” that relate to, among other things, Lafarge Africa’s plans, objectives, goals,

strategies, future operations and performance. Such forward-looking statements may be characterized by words such as “estimates,” “aims,”

“expects,” “projects,” “believes,” “intends,” “plans,” “may,” “will” and “should” and similar expressions but are not the exclusive means of identifying

such statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause

Lafarge Africa’s operating, financial or other results to be materially different from the operating, financial or other results expressed or implied by

such statements. These factors should be considered carefully and undue reliance should not be placed on the forward-looking statements. For

additional information with respect to certain risks or factors, reference should be made to Lafarge Africa’s continuous disclosure materials filed

from time to time with the Nigerian Stock Exchange and other relevant regulatory authorities.

Although Lafarge Africa believes the basis for such forward-looking statements to be fair and reasonable, Lafarge Africa makes no representation

or warranty, express or implied, as to the fairness or reasonableness of such forward-looking statements. Furthermore, Lafarge Africa makes no

representation or warranty, express or implied, that the operating, financial or other results anticipated by such forward looking statements will be

achieved. Such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most

likely or standard scenario. Lafarge Africa undertakes no obligation to update the forward-looking statements in this presentation.

© 2016 Lafarge Africa Plc.

Agenda

Group Key Highlights

Highlights by Business Units

Group Financial Highlights

Outlook

Conclusion

Q&A

Quarter 4 & Full Year 2015 Analyst Presentation 3

Group Highlights

Johannesburg , South Africa Marina, Lagos Island Nigeria


Solid topline growth, in a challenging transitional market

o Annual Group sales up 2% vs. LY, in a very competitive market

o Mfamosing (ex Unicem) controlled by Lafarge Africa since July.

o South West operations grew by 8% in FY 2015 vs. LY, supported by a continued strong Individual Home Building segment

o Continued strong growth in Nigeria ReadyMix, with sales up by 29% vs. FY 2014

o South Africa returning to growth in Q4 with a 7% top-line growth and production up by 28% vs Q4 2014

o Ashaka impacted by insurgency in the first half of the year

Continued Nigeria price pressures in Q4 2015 o Prices adjusted in Nigeria, as required, to ensure customer competitiveness

o Nigeria demand resilient in 2015, despite macroeconomic trends and downward trend in infrastructure

o Market share unchanged in the year, despite Q4 affected by production challenges in Mfamosing. Reverting back towards normal levels thereafter

Solid operational performance despite 15-20% Nigeria price reductions during 2nd HY

o 67.8b Ngn overall EBITDA in 2015

o Nigeria grew by 2% in 2015 versus FY 2014 supported by turn around in Unicem (+35% on FY basis and +42% in Q4) and Ready-Mix (+15% on FY basis and +18% in Q4)

o South Africa declined on a full year basis, following 1st HY challenges, but grew by 27% in Q4 vs LY, behind top line growth and strong industrial performance

Robust Cash Flow generation with 57.9b Ngn cash generated from Operating Activities

Key Highlights – Full Year & Quarter 4 2015



Lafarge Africa – 2015: Unification, Rationalisation and Growth

6

Mandatory Tender Offer in AshakaCem increased shareholding from 58.61% to 82.46%.

Unicem shareholding up from 35% to 50% + Unicem results now fully consolidated.

N136B debt now consolidated, with 40% shareholder loans and Lafarge Africa leverage of 82.2%

35% investment in CBI Ghana for 0.6Mt grinding station in Tema, near Accra

3 new ReadyMix plants under construction and 1 new aggregate quarry in 2015

Global merger of Lafarge and Holcim => integration of all Nigerian companies

Major restructuring exercise completed by year end. o One unified management team driving and optimising operations nationwide

o Organization right sized in Q4 and new employment contracts issued

o Shared Service Center operational as of January 2016


2018 annualised synergies estimated at about 8-10B Ngn annually including:

o Procurement: supplier rationalisation and contract consolidation/renegotiation

o Quarry costs and contracts being overhauled

o Fixed cost dilution arising from Mfamosing 2 coming on line

o Kiln fuel: Renegotiation of gas contracts + focus on alternative fuels

o Electricity: New 220MW gas-fired power plant at Ewekoro + coal-fired power plant at Ashaka

o Optimising route to market + network => reducing average journey + increasing truck turnaround

o Employment costs reduced by rightsizing, elimination of gratuity and profit share + streamlining

of compensation packages and benefits

o +2B Ngn savings on restructuring of Unicem 136B Ngn loan

o Significant savings on General & Administrative expenses expected

Lafarge Africa – 2015: Unification, Rationalisation and Growth

7


Differentiation in product offerings o Nigeria and S Africa: Single offer for major contracts for readymix concrete, aggregate and cement

supply => faster, higher quality, lower hassle construction

o Securing key contracts (e.g Eko Atlantic) based on low heat of hydration of cement

o Concrete roads being built in Ogun, Cross River and Gombe => strong support from State and Nigerian Governments for massive expansion

o Sulphate Resistant Cement now available to withstand aggressive sulphate/salt water environments prevalent in Nigeria

o Supaset, high performance block makers brand, now launched nationwide with rapid sales ramp-up

o Roadcem, specialised cement for roads, entering final phase of accreditation

Affordable Housing: Nigeria => 5-8t cement per home with 17M housing deficit.

o Partnerships with 2 Microfinance institutions signed with 2 more in the pipeline. 3,500 homes (c14,000 beneficiaries) in 16 States to be built in 2016.

o 1,500 homes to be built in 2016 in partnership with governments and developers using mass housing techniques based on RMX in Abuja, Lagos and Delta State

Lafarge Africa - Driving Differentiation & Innovation


Laying Concrete Road in Calabar Prototype 1 bedroom house built for

N1.5M Laying concrete road in Calabar


Key Financial Figures – Full Year & Quarter 4 2015

9 Quarter 4 & Full Year 2015 Analyst Presentation

Full Year Q4 - (3 months)

2015 2014 Variation 2015 2014 VariationBillion Naira

Sales 267.2 260.8 2% 52.2 58.9 -11%

EBITDA 67.8 69.5 -2% 6.4 9.9 -35%

EBITDA Margin 25.4% 26.6% -1.3bps 12.2% 16.8% -4.5bps

EBIT - pro forma 52.9 54.0 -2% 2.5 0.9 -

One-off expenses (1) (14.6) (5.7) - (5.6) (0.9) -

EBIT 38.3 48.3 -21% (3.0) 0.1 -

Profit Before Tax - pro forma 43.9 46.0 -5% 0.7 (0.5) -

Profit Before Tax 29.3 40.4 -27% (4.9) (1.3)

Profit After Tax - pro forma 41.6 39.2 6% 2.6 (0.7) -

Profit After Tax 27.0 33.5 -20% (3.0) (1.5) -95%

Earning per Share - kobo 629 767

(1) Included in One-off expenses are Redundancy / Restructuring cost: FY N4.56b; Q4 N2.29b (FY-2014 N2.79b; Q4-2014 N0.76b) and Exchange loss

on financing: FY N10.06b; (FY-2014 N2.87b) respectively.


Key Figures – Full Year 2015 Results

10 Quarter 4 & Full Year 2015 Analyst Presentation

Naira billion / Index vs 2014

Nigeria

Operations

South Africa

Operations

Group

Results

Cement volume (kt) 6,323 -1% 1% 0%

Ready-Mix volume (m3 k) 230 26% -13% -8%

Aggregates volume (kt) 38 - 2% 3%

Fly Ash (kt) 6% 6%

Sales 192 3% 76 -1% 267 2%

EBITDA 61.5 2% 6.3 -32% 67.8 -2%

One-off expenses (1) (14.6) (14.6)

After Tax - pro forma 38.8 10% 2.8 -33% 41.6 6%

After Tax Profit - consolidated units 24.2 -18% 2.8 -33% 27.0 -20%

(1) Included in One-off expenses are Redundancy / Restructuring cost: FY N4.56b; (FY-2014 N2.79b; ) and Exchange loss on financing: FY N10.06b;

(FY-2014 N2.87b) respectively.

Operational Highlights

Lagos City, Nigeria

Lafarge Africa Plant


2015 FY volumes grew by 6% vs LY and Q4 volumes by 7% o Individual Home Builders segment continues to drive growth

o Efficient road to market and key distributor scheme enabled the growth

Strong and improving industrial operations across the plants o Ewekoro II production grew by 12% vs. LY. Best performing plants

o The other plants’ production volumes were at prior years levels.

o Kiln utilization factor ranged from 76% to 86% with an overall cement capacity utilization in mid 80s

o Sagamu plant is increasingly converted into a special purpose cement plant

Continuous reduction of production costs o Gas utilization in the mid 90s throughout the year

o Alternative Fuel at 14% in Sagamu by December 2015 vs 6% by December 2014.

o Ewekoro is set to start alternative fuel by 2nd HY 2016, when equipment is installed o Variable cost savings, primarily driven by lower combined sourcing and realized savings on quarry

operations, gypsum and packaging

Nigeria: South West Operations


Ewekoro Plant Ewekoro Plant Sagamu Plant


Strong full year performance o Sales up 24% vs. Q4 LY, and by 29% for full year

o Concrete volumes grew by 23% vs. Q4 LY, 26% vs. prior year. Concrete pricing was stable in the Quarter

o Commercial Aggregate volumes ramping up, with 180kt contracts for Epe and Abule Egba

New contracts signed to supply estimate of 800km3 of concrete o Aba Mega Mall (+ 100km3)

o Asaba Affordable Housing units (+ 100km3)

o Lekki Atlantic city (+300km3)

o Office complex in Port Harcourt (+300km3)

New readymix plants in Trans Amadi (Port Harcourt) now operational, additional plants in Aba and Abuja 2 underway. 3 more plants foreseen for 2016

Nigeria: ReadyMix & Aggregate Operations

Quarter 4 & Full Year 2015 Analyst Presentation

13

Aggregates Pouring Concrete Concrete Plant

Concrete Truck ReadyMix Quality Verification Aggregates from Ajanaku


Ashaka fully normalized, North East foreseen to return to strong growth in 2016 o 2015 was affected by insurgency in Q1 and limited market growth during the year

o EBIDTA reduced to 4b Ngn, behind a 20% volume drop, reflecting the market conditions

o In the NE, Ashaka is the largest business, private sector employer and taxpayer. The increasing stability in the region and Government’s agenda to rebuild/industrialize the North East are foreseen to drive a turn-around in 2016 and beyond

Efficient operations with coal substitution in the mid 80s

Captive Power Plant with additional 16 megawatts fully on track with annualised savings as from 2018 of N3B

Nigeria: AshakaCem Plc


Ashaka Cement Plant Ashaka Cement Plant Ashaka Cement Plant Ashaka Cement Plant


Profit turn around in 2015 with the highest EBITDA margin in the Group o Volume declined by 35% in Q4 behind production challenges and flooding in Q4 which resulted in

~160k tons lost production. Gaps addressed to ensure no recurrence

o EBITDA still increased by 42% in Q4 vs. LY

o FY EBITDA of 19.2b Ngn is 35% above LY

o Annual EBITDA margin of 35% vs 26% LY. At 39% until Q4 challenges

Industrial efficiencies at high levels & improving o Gas usage in the 90s versus 50s LY.

o Capacity utilization in the mid 70s

o Kiln utilization in the 70s

Line II expansion plans on track, to start 2nd HY of 2016

Nigeria: South East Operations


Mfamosing Operations Line I

Line II Expansion

Line II Expansion Line II Expansion

Line II Expansion

Line II Expansion


Good performance in Quarter 4, more stable Lichtenburg plant o Cement volumes grew by 28% vs. Q4 LY, relatively flat position for full year

o Sales up 6% in Q4 2015, flat for full year vs. LY

o EBITDA up 27% vs. Q4 2014

o Turnaround strategies on track =>Kiln Reliability factor in the 80s

Aggregates and Concrete business strong contributor to operations

Strong aggregate network further augmented with 2 new operations in Gauteng

Commercial transformation showing results o New markets being opened up inside and outside SA

o Sales team reinforced with FMCG recruits, new bagged aggregate products introduced

o Route to market: First new service centre in Soweto + branded containers

o Targeting buildings, using our green building solutions

Strong FX cash flows generation for Lafarge Africa o Dividend cash flow generated in 2015 cushioned exchange rate impact on operations

Lafarge South Africa Operations


Limestone Domes Lichtenburg Cement Plant

Peak Quarry, Cape Town Integrated Cement Plant North West Lichtenburg Plant

Financial Highlights

Lagos City, Nigeria Lagos Marina Skyline Lagos Oriental Hotel

Marina, Lagos Island Nigeria


Key Financial Highlights


Nigeria cement sales up 2% in a flat to challenging economy, driven by strong 1st half

Step change performance in South Africa

o Group EBITDA down 35% for the 4th Quarter

o Challenging Q4 for UNICEM & Ashaka, operations are now stabilized

One-off expenses impacting operational profit

o Redundancy/Restructuring cost of N4.6bn for full year, with N2.3bn in Q4 2015, to prepare grounds for

future synergies

Accounting impact of unrealized exchange loss of N10bn from UNICEM operation

o Refinance UNICEM’s loan portfolio at cheaper rate under Lafarge Africa being considered

Strong cash flow generation at N57.9bn

o Dividend cash paid to Lafarge Africa from the South African Business of (N3.5bn/ US$17.5m) cushioned

foreign exchange fluctuation

Overall, strong balance sheet position


Group P & L


Full Year Q4 - (3 months)

2015 2014 Variation 2015 2014 VariationBillion Naira

Sales 267.2 260.8 2% 52.2 58.9 -11%

EBITDA 67.8 69.5 -2% 6.4 9.9 -35%

EBITDA Margin 25.4% 26.6% -1.3bps 12.2% 16.8% -4.5bps

EBIT - pro forma 52.9 54.0 -2% 2.5 0.9 -

One-off expenses (1) (14.6) (5.7) - (5.6) (0.9) -

EBIT 38.3 48.3 -21% (3.0) 0.1 -

Profit Before Tax - pro forma 43.9 46.0 -5% 0.7 (0.5) -

Profit Before Tax 29.3 40.4 -27% (4.9) (1.3)

Profit After Tax - pro forma 41.6 39.2 6% 2.6 (0.7) -

Profit After Tax 27.0 33.5 -20% (3.0) (1.5) -95%

Earning per Share - kobo 629 767

(1) Included in One-off expenses are Redundancy / Restructuring cost: FY N4.56b; Q4 N2.29b (FY-2014 N2.79b; Q4-2014 N0.76b) and Exchange loss

on financing: FY N10.06b; (FY-2014 N2.87b) respectively.


Revenue Development


Billion Naira 2015 2014 Variation 2015 2014 Variation

South West Operations 114.6 105.8 8% 23.2 23.5 -1%

Ready-Mix Nigeria 7.5 5.8 29% 1.9 1.5 24%

Ashaka Operations 17.4 21.1 -18% 2.9 4.1 -30%

Mfamosing operations 54.3 55.0 -1% 7.4 12.4 -40%

Others - IC elim (2.1) (1.8) - (0.5) (0.5) -

Nigeria - Current Operations 191.7 185.9 3% 34.8 41.0 -15%

South Africa 75.6 76.6 -1% 17.4 16.3 7%

Total Revenues - exch. neutral 267.2 262.5 2% 52.2 57.2 -9%

Exch. impact - (1.7) - - 1.6 -

Total Revenues 267.2 260.8 2% 52.2 58.9 -11%


EBITDA Development



South West Operations 37.7 39.5 -5% 4.3 7.4 -42%

Ready-Mix Nigeria 0.7 0.6 15% 0.1 0.1 18%

Ashaka Operations 4.0 6.7 -40% (0.8) 0.2 -

Mfamosing Operations 19.2 14.2 35% 0.9 0.6 42%

Other - Atlas and IC elim (0.1) (0.6) - (0.1) (0.2) -

Nigeria - Current Operations 61.5 60.4 2% 4.4 8.2 -46%

South Africa 6.3 9.3 -32% 1.9 1.5 27%

Total EBITDA - exch. neutral 67.8 69.7 -3% 6.4 9.7 -34%

Exch. impact - (0.2) - - 0.2 -

Total EBITDA 67.8 69.5 -2% 6.4 9.9 -35%


After Tax Development



Wapco 29.7 28.4 5% 3.7 4.7 -22%

Ready-Mix Nigeria 0.5 0.6 -15% 0.2 0.2 -

Ashaka Operations 2.8 4.6 -40% (1.1) 0.2 -

Mfamosing Operations (4.2) (3.3) -29% (5.0) (6.9) 27%

Other - Atlas and IC elim (4.4) (0.7) - (2.0) (0.3) -

Nigeria - Current Operations 24.2 29.5 -18% (4.2) (2.0) -

South Africa 2.8 4.1 -33% 1.2 0.4 -

Total AT Profit - exch. neutral 27.0 33.6 -20% (3.0) (1.6) -91%

Exch. impact - (0.1) - - 0.0 -

Total AT Profit 27.0 33.5 -20% (3.0) (1.5) -97%


Lafarge Africa – Group Balance Sheet


2015 2014Billion Naira

Cash and cash equivalents 16.5 20.3

Inventories 33.0 31.5

Debtors and other receivables 24.4 20.3

Total current assets 73.8 72.2

Total non current assets 379.1 343.7

Total assets 453.0 415.9

Trade and other payables 76.8 67.5

Current financial liabilities 9.2 5.1

Provisions 2.1 1.6

Current tax liabilities 1.3 1.6

Total current liabilities 89.3 75.7

Other financial liabilities 147.3 116.0

Provisions 6.8 14.5

Deferred tax liabilities 33.4 34.2

Total non current liabilities 187.5 164.6

Total equity 176.2 175.6

Total liabilities and equity 453.0 415.9

Full Year


Lafarge Africa – Cash Flow


2015 2014 VariationBillion Naira

Net cash from operations 57.9 57.8 0%

Capital expenditures (13.7) (9.0) 53%

Capital expenditures - Mfamosing line 2 (46.3) (16.8) -

Disposal of assets 0.3 0.1 -

Net movement in long term receivables / cash

outflow on acquisition of subsidiaries(5.0) (34.6) -

Investment Income 1.8 3.5 -49%

Interest paid (1.3) (2.2) -41%

Dividend paid (13.2) (15.0) -12%

Repayment of borrowings / additional borrowings (10.6) (13.0) -18%

Repayment of borrowings / additional borrowings -

Mfamosing 25.8 3.5 -

Increase in cash (4.3) (25.6) -

Cash at beginning of the period 17.5 43.1 -59%

Cash at end of the period 13.2 17.5 -25%

Borrowings 145.0 118.3 23%

Net cash (131.8) (100.8) -31%

Full Year

Outlook

Abuja City, Nigeria Lafarge Africa Plant


Cement market is foreseen to return back to solid growth of about 7-10% in 2016. With

new line in SE, Lafarge Africa positioned to benefit

Budget 2016 reflects Government support for Development o New government undertakes to facilitate construction => 6000km roads, action on the 17M housing deficit

and new power projects. N335B committed before 2018

o Despite 50% reduction in major construction projects in 2015, overall cement and concrete demand is rising driven by a buoyant housebuilding sector. Lafarge Africa poised for restart of project pipeline

o Disproportionate growth foreseen in the North East behind the government driven rebuilding initiatives. Ashaka supremely well located 700km from the next nearest plant with ample reserves and permits to expand.

New Contracts/projects in ReadyMix to sustain double digit growth o Aba Mega Mall (estimated volume above 100km3)

o Asaba Affordable Housing units (estimated volume above 100km3)

o Lekki Atlantic city (estimated volume above 300km3)

o Gravitas Phonex Island Development (estimated volume above 100,000km3 over 2 or 3 years)

o NLNG HO complex in PH ( estimated volume above 30,000km3)

o Aggregates volumes to ramp up significantly

Fast track expansion plans o 5 additional ReadyMix plants to be commissioned in 2016

o Aggregate business to ramp up, with second quarry in 2016

o UNICEM additional line (2.5Mt) to be delivered H2 2016

o 16MW Ashaka power plant to be built in 2016 with commissioning in 2017/18

o 40MW to be exported onto the grid in Ewekoro in mid 2016, then additional 220MW to follow by 2018

Nigerian Operations



Lafarge South Africa’s Route to Market strategy geared to tap new market channels o RTM geared towards investing in category growth initiatives aimed at stimulating trade in

building/construction space

o Ensuring close proximity to key markets and end-users

o Deploying a market presence program and position portfolio of brands into the market

Outperforming a sluggish market in 2016 o Overall new strategies in penetrating retail, new geographies and the technical segment are expected

to allow Lafarge Africa volumes to grow above a flat market in all three product lines

o Turn around of overall market not foreseen with continued challenging industrial landscape

o Impact of new entrant foreseen to be partly offset by lower imports

o Stability of Lichtenburg plant to remain and commercial gains during second HY to be leveraged

o Continue to secure a disproportionate amount of the infra-structure projects

Growth in Aggregates to continue

Operation to generate strong cash flow & contribute FX income to Lafarge Africa

operations

South African Operations

27

Cape town stadium built with Lafarge

Holcim’s value added concrete Randfontein Grinding Station Risk Assessment- key priority for

Safety

lafarge africa plc. - stanbic ibtc stockbrokers 2015 analyst... · lafarge africa plc. full year...

Documents