Lafarge Africa suffers N28b forex loss as profit declines

Lafarge Africa Plc, the Nigerian arm of LafargeHolcim- world largest cement and building materials group, has alerted that it could record decline in its profit in the second quarter as the cement company booked heavy loss from its foreign-based loans.

In a profit warning released this weekend, Lafarge Africa- which includes Lafarge’s cement businesses in Nigeria and South Africa, stated that it recorded unrealized foreign exchange (forex) loss of N28 billion following the recent change of forex policy from fixed regime to free market by the Central Bank of Nigeria (CBN).

The cement group stated that the forex loss adversely impacted the 2016 second quarter results while the current gas supply shortage also compounded the problem.

Lafarge Africa stated that the N28 billion unrealised exchange rate loss arose dollar-based borrowings, which at the time of the devaluation consisted of $300 million shareholder loans and $85 million external loans.

The cement group explained that the loans were related to United Cement Company of Nigeria  (Unicem) Limited and were mainly set up prior to the acquisition by Lafarge Africa Plc of its original 35 per cent stake in Unicem. Lafarge has since then increased its stake in Unicem and held at the time of the devaluation 50 per cent of Unicem, which was fully consolidated. Lafarge now holds 100 per cent of Unicem.

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Lafarge Africa however said the N28 billion unrealised exchange loss will have no immediate impact on cashflow, reassuring that Unicem is strategically positioned with its existing 2.5 million metric tonnes capacity and additional 2.5 million metric tonnes expected to come on stream later this year.

The board of directors of Lafarge Africa recently approved the acquisition of 50 per cent equity stake in Unicem, in a bid that will increase Lafarge Africa’s equity stake to 100 per cent. The 50 per cent equity stake that is the subject of acquisition is currently held by Egyptian Cement Holding (ECH) BV, an entity that is jointly owned by LafargeHolcim Group and Lafarge Africa. LafargeHolcim’s interest in ECH is held through Holcibel SA. Lafarge Africa will purchase the shares from Holcibel.

The board of directors also approved the issue of 413.18 million shares as full consideration or payment for the acquisition. By the conclusion of the acquisition, Lafarge Africa will own an indirect 100 per cent equity stake in Unicem, which makes the Calabar-based cement firm a wholly-owned subsidiary of Lafarge Africa.

The latest acquisition bid comes on the heels of the approval of the Securities and Exchange Commission (SEC) to Lafarge Africa to proceed on a new tender offer to acquire the entire equity stakes held by minority shareholders in Ashaka Cement Plc. Minority shareholders hold 392.864 million ordinary shares in Ashaka Cement, representing 17.54 per cent of the entire issued share capital of the Gombe State-based cement company.

 

 

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