Lafarge Africa PLC, a composite cement manufacturer and second largest producer of cement after Dangote Cement has issued a profit warning to the Nigerian Stock Exchange.
In a statement released shortly, the company said “The Board of Directors of Lafarge Africa PLC wishes to inform the Nigerian Stock Exchange that its 2016 Quarter 2 results are expected to be affected by the impact of the Naira devaluation against USD resulting in an unrealised exchange loss. The current gas supply shortage is also expected to impact volumes for this quarter.”
Lafarge said ” the impact of the Naira devaluation is expected to be a 28 billion Naira unrealised exchange loss arising from USD borrowings, which at the time of the devaluation consisted of 310m USD shareholder loans and 85m USD loans.”
Attributing the underlying reasons for the loan, the statement said “These loans relate to United Cement Company of Nigeria Limited (Unicem) and were mainly set up prior to the acquisition by Lafarge Africa PLC of its original 35% stake in Unicem. Lafarge Africa PLC has since then increased its in Unicem and held at the time of the devaluation, 50% of Unicem, which as fully consolidated. Lafarge Africa PLC now holds 100% of Unicem. The 28 billion Naira unrealised exchange loss will have no immediate impact on cash flow.”
The company said it is “confident that the various initiatives put in place by management will provide an improved future performance of Lafarge Africa PLC”
Three months ago, the company issued a NGN60 billion to refinance Unicem’s debt. Lafarge said it is assessing the refinancing part of the USD debt.
However, Global Credit Rating, GCR affirmed Lafarge’s long term Issuer rating at AA- in April (The rating means- Very high credit quality. Protection factors are very strong. Adverse changes in business, economic or financial conditions would increase investment risk although not significantly). GCR said in its rating outlook on the bond that net ‘proceeds from both issues will be applied towards refinancing of United Cement Company of Nigeria Limited’s (“UniCem”) UniCem’s local currency and USD denominated bank loans‘.
GCR in its rating opinion said “As a result of the merger, UniCem’s N136bn debt has been consolidated into the Group numbers, pushing up total debt to N148.3bn at FYE15, from just N28.3bn at FYE13. From a net ungeared position at FYE13, net gearing increased 76% at FYE15 (FYE14: 58%). Net debt to EBITDA also increased from 145% at FYE14 to 194% at FYE15.”
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