Lafarge Africa achieved record level fuel flexibility at its Ewekoro I plantand Sagamu plant are operating at optimal levels with capex provisions for 2017 aimed to consolidate energy optimization at Ashaka, Ewekoro 2 and Mfamosing.
The Mfamosing 2 line, which came on stream, on time and below budget, contributed to Group cement production in Q4 2016 with cost savings expected in the future and progress with its turnaround plan, all its plants are operating at optimal levels, with a significant increase in profit after tax in Q4 2016.
Net sales and operating EBITDA also increased respectively by 12% and by 288% in Q4 2016.
In the quarter, the third-party syndicated loan of 88.4 million USD was pre-paid, through a loan refinancing arrangement with LafargeHolcim Group. This inter-company loan was hedged through a Non-Deliverable Futures (NDF) transaction. Consequently, overall 581 million USD debtwas restructured, which removed the FX impact on Lafarge Africa’s results. Net debt was reduced to N108.3 billion, below the N120billion announced notably supported by capex control and solid cash flows.
Operating EBITDAfor FY 2016 reached N29.0billion from N67.3 billion in 2015, on operationalchallenges in the first part of the year, while Profit after tax for 2016 financial year came to N16.9billion.
Commenting on the company’s 2016 performance, Michel Puchercos, CEO of Lafarge Africa said”Our turnaround plan delivered solid results in Q4 2016 in spite of the challenging environment in Nigeria and South Africa. Technical challenges have been resolved with all our plants operating at high reliability. Our energy optimization plan has proved successfulwith increased use of Alternative Fuel (AF) to offset gas shortages. Ewekoro 1 plant migrated from 100% reliance on gas and LPFO to about 40% use of alternative fuels at the plant. Logistics and commercial turnaround plans arein place and enabling to restore market share”.
Speaking further, he stated “Mfamosing line 2 was delivered ahead of time and above specification, and is now fully operational. The new Line contributed 338kt in Q4 2016 to cement production volume and is expected to deliver significant cost savings going forward”.
Looking ahead, the CEO remarked that”Our immediate objective is to deliver fully on our turnaround plan by optimizing our processes, developing our alternative fuel strategy, reducing operational costs to deliver strong EBITDA margins returning to historic levels.”
In the quarter, a tax credit of N39.7billion was reported mainly resulting from deferred tax assets generated from Unicem operations. This contributed significantly to profitability in Q4 and for the full year 2016.
CEMENT DEMAND 2017 OUTLOOK
Cement demand in Nigeria is expected to grow between 0and +2% for the full year, on account of the macroeconomic environment. In addition, business turnaround actions will be further consolidated in 2017through energy optimization plan, local sourcing of production inputs, and logistics as well as commercial excellence initiatives to deliver tangible results going forward.
With expectation that cement demand in South Africa to be stagnant, with 0 to -2% decline for the full year. South African operations will intensify on its cost containment programme and commercial transformation plan, to deliver in the short term.
For 2017, Lafarge Africa specifically expects to return operating EBITDA margin back to historical levels,capital expenditure of N31billion for Nigeria and South Africa operations, mainly to consolidate energy optimization plan principally for Ashaka coal fired captive power plant, Alternative Fuel in Ewekoro 2 and Coal in Mfamosing as well as the divestment of non-core assets.