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Nigeria Corporate Analysis | Public Credit Rating
Lafarge Africa Plc
Nigeria Corporate Analysis October 2017
Financial data:
(USD’m Comparative) ‡
31/12/15 31/12/16
N/USD (avg.) 193.1 253.2
N/USD (close) 197.0 305.0
Total assets 2,284.9 1,642.4
Total debt 752.7 418.1
Total capital 886.3 811.1
Cash & equiv. 83.7 63.2
Turnover 1,383.6 867.8
EBITDA 348.4 101.9
NPAT 140.6 66.7
Op. cash flow 357.6 (2.9)
Market cap. ° USD925.7m
Market share* c.25% ‡ Central Bank of Nigeria exchange rates.
°As at 22/09/2017 @ N305.35/USD.
*Estimated percentage market share of 2016 cement sales in Nigeria
Rating history:
Initial Issuer rating (July 2010)
Long-term: A(NG)
Short-term: A1(NG)
Rating outlook: Stable
Initial Bond rating (April 2016)
Series 1 Fixed Rate Bond: AA-(NG)
Series 2 Fixed Rate Bond: AA-(NG)
Last rating ( October 2016)
Long-term: A+(NG)
Short-term: A1(NG)
Rating outlook: Stable
Series 1 Fixed Rate Bond: A+(NG)
Series 2 Fixed Rate Bond: A+(NG)
Rating Outlook: Stable
Related methodologies/research:
Global master criteria for rating corporate entities, updated February 2017 Glossary of terms/ratios, February 2017
Lafarge Africa Plc (“Lafarge Africa” or “LAP” or
“the Group”), rating reports 2010-16; LAP bond rating report, October 2016
GCR contacts:
Primary Analyst
Adekemi Adebambo
Senior Credit Analyst
adekemi@globalratings.net
Committee Chairperson
Dave King
king@globalratings.net
Analyst location: Lagos, Nigeria
+234 1 462 – 2545
Website: http://www.globalratings.com.ng
Summary rating rationale
Lafarge Africa’s strong domestic market position is underpinned by an
established international brand, effective distribution network, and operational
support from its parent, LafargeHolcim. The recent completion of the new
2.5mtpa cement line at Mfamosing, Cross River State, has increased its
production capacity to 14.1mtpa and further enhanced earnings potential.
LAP’s cement sales volumes reduced by 16% in FY16, due to disruptions in gas
supply and scarcity of foreign currency, which impeded productivity. Coupled
with pricing pressures (in the first eight months of 2016), this drove an 18%
decline in revenue to N219.7bn in FY16. The significant escalation in energy
costs and the effect of a weaker Naira saw EBITDA margin contract sharply to
11.7% in FY16 (FY15: 25.2%), albeit this had corrected by 1H FY17. Increased
productivity and operating efficiencies are expected to support an EBITDA
margin of 29% for the full year.
1H FY17 cash generation rebounded N30.7bn, from the weak performance
reported in FY16, to match historical trends. This was, however, offset by the
accumulation of higher value inventory and debtors absorption, which drove an
N8.4bn operating cash outflow (FY16: N725m outflow; five year average:
N33.9bn inflow). While debt service and liquidity ratios are set to normalise by
FY17, GCR will continue to monitor performance over the rating horizon, with
an interest cover ratio of approximately 4x required to support stronger ratings
(inter alia).
In September 2016, LAP restructured USD493m (N139bn) of shareholder loans
into a hybrid instrument, repayable at its discretion. Following the introduction
of the dynamic Nigerian Inter-Bank Foreign Exchange Fixing (“NIFEX”)
market it hedged its USD shareholder loan exposure and thus reclassified the
quasi-equity to debt in 1H FY17. Borrowings therefore nearly doubled to
N244.7bn in 1H FY17 (FY16: N127.5bn), with shareholder loans accounting
for 52% of the total (FY16: 22%). Net gearing increased from 58% at FY14 to
peak at 117% at 1H FY17 (FY16: 44%) while net debt to EBITDA deteriorated
materially from 145% at FY14 to 420% at FY16, before improving to 300% in
1H FY17.
LAP is planning a N131.7bn Rights Issue in 4Q FY17. Through the offer,
LafargeHolcim, will subscribe to its rights by converting c.70% of dollar
denominated shareholders loans into equity. According to management, the
parent is also willing to extend the tenor of the remaining shareholder debt by
three years. While, the high short-term debt exposure at 1H FY17 (78%) is
concerning, this will be addressed by the Rights Issue, which should see net
gearing and net debt to EBITDA managed to around 50% and 200%
respectively.
Factors that could trigger rating action may include
Positive change: Upward rating migration in the medium term would depend on
stabilisation/normalisation of the Group’s earnings and free cash flows, together
with gearing and debt service metrics within guidance.
Negative change: Slower than anticipated economic growth, delays in rolling out
public infrastructure projects, foreign currency scarcity, and competitive pressures
may constrain demand and/or pricing flexibility. These factors could adversely
affect earnings and result in liquidity strain, increased gearing metrics and impede
debt service, placing downward pressure on the ratings.
Rating class Rating scale Rating Rating outlook Expiry date Long term National A+ (NG)
Stable August 2018 Short term National A1(NG)
Series 1 Fixed Rate Bond National A+ (NG) Stable August 2018
Series 2 Fixed Rate Bond National A+ (NG) Stable August 2018
Nigeria Corporate Analysis | Public Credit Rating Page 2
Background and recent developments
Incorporated in 1959, Lafarge Africa Plc1, is one of the
leading cement producers on the continent, with operations
in Nigeria and South Africa. It is a subsidiary of
LafargeHolcim, a global leader in cement, aggregates,
concrete and related services. LafargeHolcim operates in
80 countries (across 2,300 plants) and combined installed
cement capacity of 353.3mtpa. Lafarge Africa has five
subsidiaries namely AshakaCem Plc (“AshakaCem”);
Atlas Cement Company Limited (“Atlas”); United Cement
Company Nigeria Limited (“UniCem”); Lafarge Ready
Mix Nigeria Limited (“LRMN”) and Lafarge South Africa
Holdings (Pty) Limited (“LSAH”). LAP holds 86.5% stake
in AshakaCem while all other subsidiaries are wholly-
owned. (During 2Q 2017, the application for the voluntary
delisting of AshakaCem was approved by the Nigerian
Stock Exchange (“NSE”). Subsequently, the subsidiary has
been successfully delisted from the daily official list of
NSE).
Following the commissioning of additional 2.5mtpa
capacity at UniCem in 4Q FY16, LAP’s total production
capacity expanded to 14.1mtpa, and is expected to increase
in the medium term. The new line produced 338,000 tonnes
of cement in 2016, representing 6% of LAP’s Nigeria
cement volumes. At FY16, LAP had spent N82.3bn on the
project. The Group also has market leading positions in
aggregates, ready mix concrete (“RMC”) and fly ash.
1H FY16 was very challenging in view of increased
competitive pressures, and production challenges across its
domestic plants during the period, as pipeline vandalism
led to widespread disruption in gas supply. A total of two
months of gas shortage were recorded at the Ewekoro and
Sagamu plants, while the Mfamosing plant (UniCem) lost
12 working days. Accordingly, LAP’s Nigerian operations
could not fully meet customer demand during the period, as
production volumes declined 13% y/y in 1H 2016.
Domestic cement producers including LAP had to utilise
more Low Pour Fuel Oil (“LPFO”) to sustain production,
which is 2.5x more expensive than gas (per tonne of
cement). Consequently, industry players witnessed overall
contraction in margins during FY16, exacerbated by gas
shortages, currency devaluation and economic recession.
There was a 45% price increase effective September 2016,
which resulted in firmer profitability for 4Q 2016, albeit
that the impact on full year performance was limited.
Following three market price increases in Nigeria during
1H 2017, LAP reported strong turnover growth and
improved earnings margins from the materially subdued
performance in 1H FY16.
In March 2016, Lafarge Africa Plc secured approval from
Securities and Exchange Commission (“SEC”) to issue
bonds into the Nigerian capital market, under a N100bn
programme (“the Programme). In June 2016, the Issuer
raised an initial N60bn in two tranches of N26.4bn and
N33.6bn respectively. The net proceeds from both Issues
1 formerly Lafarge Cement WAPCO Nigeria Plc
(totalling N58.9bn) were applied towards part refinancing
of UniCem’s local currency and USD denominated bank
loans. At the June 2017 Annual General Meeting,
shareholders approved a N140bn Rights Issue proposal. In
the immediate term, LAP is planning a N131.7bn Rights
Issue in 4Q FY17, expected to conclude by November.
Through the offer, LafargeHolcim, will subscribe to its
rights by converting c.70% of dollar denominated
shareholders loans into equity. The inflow from minority
shareholders (if fully subscribed) will be utilised for
working capital and capital expenditure. The Rights Issue
is expected to reduce LAP’s foreign currency exposure by
around 50%.
Corporate governance and shareholding
Table 1: Corporate governance summary
Board Composition
Number of directors 11
Independent non-executives 2
Non-independent non-executives 8 (including the Chairman)
Executives 1 (the Managing Director)
Separation of the chairman Yes, Chairman is separate from MD
Frequency of meetings Minimum of quarterly. The Board met six times
during FY16
Board committees
Finance and Strategic Planning; Nomination and
Remuneration; Risk Management and Ethics; and
Property Optimisation
Internal control and compliance Yes, reports to the Board Risk Management and
Ethics Committee
External auditor
Ernst & Young. Unqualified audit opinion on the
2016 financial statements. Erstwhile auditor,
Akintola Williams Delloite also issued clean audit
opinions over the preceding four years under
review.
LAP’s corporate governance structure complies with the
relevant requirements of the Companies and Allied Matters
Act, Securities and Exchange Commission (“SEC”) Code
of Corporate Governance for Public Companies in Nigeria,
as well as NSE regulations. There were few changes in the
size and composition of LAP’s board of directors in 2016
and 1Q 2017, owing to resignations of the CFO, Mr. Anders
Kristiansson (to take another role within LafargeHolcim)
and Mrs. Adepeju Adebajo (who was appointed the
Commissioner of Agriculture by the Ogun State
Government). The board appointed Mr. Bruno Bayet as
Group CFO, effective September 30, 2016. He has worked
with the Group since September 2014 and has over 16
years’ experience in the materials and construction
industry. LAP’s board members are from diverse
backgrounds, with extensive experience in cement
manufacturing, engineering, marketing, law, banking and
finance (amongst others).
Table 2: Shareholder profile as at FY16 Holdings Holdings
(N’m) (%)
Associated International Cement Ltd. 1,204.5 21.9
Financiere Lafarge SAS 797.2 14.5
Lafarge Nigeria Ltd 776.6 14.1
Lafarge Nigeria (UK) Ltd 427.5 7.8
Lafarge Cement International BV 318.1 5.8
Holcibel S.A 454.5 8.3
LafargeHolcim Group 3,978.4 72.5
Odua Investment Company Limited 166.8 3.0
Stanbic Nominees Nigeria Limited 266.9 4.9
Others 1,078.4 19.6
Total 5,490.5 100.0
Nigeria Corporate Analysis | Public Credit Rating Page 3
Listed on the SIX Swiss Exchange and Paris Stock
Exchange, LafargeHolcim reported net sales of CHF26.9bn
(EUR25.1bn) in FY16 (FY15: CHF23,584; EUR, with a
market capitalisation of EUR35.7bn at 25/09/2017.
LafargeHolcim is rated BBB by Standard & Poor’s (stable
outlook) and Baa2 by Moody’s, with a negative outlook.
Although LAP’s long term, national scale rating is not
directly notched against that of LafargeHolcim, it is
reflective of the strong competitive position gained by the
capital and technical support provided by the parent. LAP
pays LafargeHolcim a technical fee for the provision of
technical and operational support, in line with terms of an
Industrial Franchise Agreement.
Table 3: LafargeHolcim
financial profile (CHF'bn) FY15 FY16 1H FY17
Revenue 23.6 26.9 12.5
EBITDA 3.7 5.2 2.5
Operating profit (0.7) 2.8 1.4
Operating cash flow 2.5 3.3 (0.1)
Net interest (0.9) (0.9) (0.3)
Debt 22.8 19.7 19.4
net debt 18.4 14.8 15.8
equity* 17.5 17.8 16.3
Net int. cover (x) n.a 3.1 4.8
Net debt to Equity (%) 105.2 83.1 96.9
Net debt to EBITDA (%)^ 499.7 282.3 316.9
*net tangible basis
^annualised
Operating environment
The Nigerian economy remained subdued throughout
2016, owing to a marked reduction in crude production,
amidst low and unstable international oil prices. This has
severely affected the country’s foreign reserve levels and
fiscal planning capacity. Specifically, international crude
oil prices declined from c.USD110/bbl in June 2014 to
USD30/bbl in January 2016, and averaged USD43 in 2016
(on the back of a rebound towards year-end, which saw
prices climb to USD53/bbl in December). The negative
economic trend was exacerbated by the resurgence of
disturbances in the Niger Delta region (which affected
crude oil production outputs) and the impact of reduced
foreign exchange earnings on the economy. The significant
fall in the value of the Naira against the US dollar further
heightened uncertainty. The country’s real gross domestic
product (“GDP”) contracted by 1.5% in 2016 (compared to
2.8% and 6.2% growth recorded in 2015 and 2014
respectively), placing the country in a recession. In 2Q
2017, Nigeria’s GDP recorded a 0.6% y/y growth (and 2%
q/q), indicating the nation’s exit from recession, following
five consecutive quarters of contraction since 1Q 2016.
Inflation climbed from 9.5% at end-December 2015 to
18.6% at end-December 2016, before easing to 16.1% at
end-August 2017, the seventh consecutive decline since
January 2017.
Despite Central Bank of Nigeria’s (“CBN”) restrictive
policy that denied access to forex (from the official CBN
window) for 41 items and removal the exchange rate peg to
the USD in favour of a flexible exchange rate policy in June
2 Benchmark interest rate 3 MPR has been left unchanged since July 2016
2016, the Naira remained under pressure, with the
inadequate forex supply from the official CBN window
driving much weaker exchange rates in the parallel market.
The NGN/USD exchange rate rose above N500/USD in
February 2017, remaining above N450/USD till mid-
March 2017. CBN established the Investors & Exporters
FX window in April 2017, to boost liquidity in the FX
market and to ensure timely execution and settlement for
eligible transactions. The recent intervention has increased
the dollar liquidity in the market with exchange rates
remaining below N400/USD since end-April. At its last
sitting in August 2017, the Monetary Policy Committee left
the monetary policy rate2 (“MPR”) unchanged at 14%3,
while the cash reserve ratio and liquidity ratio for banks
were also maintained at 22.5% and 30% respectively, in
line with efforts to combat inflation and maintain price
stability.
Given the current macroeconomic challenges, prospects for
growth remain mixed over the short to medium term. Both
the International Monetary Fund and World Bank expect
the economy to record a modest rebound in 2017 (of 0.8%
and 1.2% respectively). To stabilise the economy, the FGN
has maintained an expansionary policy for the 2017 fiscal
year, with a budget of N7.44trn4 (2016: N6.08tn, 2015:
N4.49tn). The budget is based on an oil benchmark of
USD44.5/bbl and a daily production output of 2.2mb/d,
inter alia. The Ministry of Budget and National Planning
has recently released the Economic Recovery and Growth
Plan (“ERGP”) 2017-2020. Based on the ERGP, the FGN
anticipates that accelerated infrastructural spend and the
diversification of earnings would drive an increase in
economic activities, thereby, resulting in an overall GDP
growth in 2017.
Industry overview - Nigeria
Nigeria, LAP’s main market, has strong potential for
traction in cement consumption, on the back of a population
of 180 million, a burgeoning middle class, and considerable
infrastructural deficiencies. The country also presents
substantial limestone reserves. Per capita consumption is
low at around 125kg (global average: 570kg) implying
significant potential for further growth, although this has to
be considered against the backdrop of high levels of FGN
indebtedness, and is also dependent upon strong economic
and FGN revenue growth and sustained improvement in per
capita income levels. The significant decline in crude oil
prices and shortfall in production placed material strain on
government revenue and expenditure. Government
expenditure is a critical growth driver in the construction
sector. In addition, the protracted delay in passing the
national budget, high inflation, reduced consumer
spending, higher lending rates and inadequate funding all
contributed to a 6% contraction in the construction sector
GDP in 2016 (2015: 4.4% growth). According to industry
sources, overall domestic demand for cement of c.22.6mt
in 2016 was flat (a departure from the five-year CAGR of
4 Signed into law in June 2017.
Nigeria Corporate Analysis | Public Credit Rating Page 4
c.9% to 2015) and is estimated to grow slightly to 24.4mt
in 2017 (1H 2017: 10.2mt).
DCP and Lafarge Africa Plc5 (“LAP”), controlled 90% of
industry volumes and revenues in 2016. BUA Group
accounted for around 9% of the industry while a few small
players, including Ibeto Group accounted for the balance.
The cement industry is highly capital intensive, posing a
significant barrier to entry. The anticipated recovery in the
Nigerian economy during 2H 2017 bodes positively for the
cement sector, albeit that the impact will likely be more
evident during 1H 2018 (especially with 2018 being a pre-
election year, with a lot of pending projects expected to be
completed. In this regard, the FGN committed to
investment in public infrastructure (in the ERGP), with the
capital spending retained at around 31% of 2017 budget
(2016: 31%; 2015: 12%).
Table 4: Competitive position - Lafarge Africa Plc vs Dangote Cement Plc
FY16 (N'm) LAP DCP
Revenue 219,714 615,103
EBITDA 25,804 256,778
Op. Income 9,927 182,028
Net interest income/(expense) (11,829) (42,719)
NPAT 16,899 186,624
Equity 247,389 793,200
Total debt 127,530 372,775
Cash and equiv. 19,265 115,693
Current assets 98,344 303,164
Total assets 500,927 1,573,741
Current liabilities 175,987 512,247
Cement Capacity in Nigeria 11mtpa 29.3mtpa
Total Cement Capacity 14.1mtpa 45.8mtpa
Ratios (%)
Market share (%) 25.0 65.0
Revenue growth (17.8) 25.1
EBITDA margin 11.7 41.7
Operating margin 4.5 29.6
Net gearing 43.8 32.4
Net debt :EBITDA 419.6 100.1
South Africa operating environment
The South African economy achieved real growth of just
0.3% in 2016, behind significantly revised expectations of
0.5% (2015: 1.3%). Weaker growth stemmed from the
curtailed agricultural performance due to a severe drought,
and a beleaguered mining sector, amidst weak commodity
prices. While manufacturing regained some of the ground
lost in an especially challenging 2015, the sector remains
depressed due to weak demand, with local goods poorly
positioned to compete with aggressively priced Asian
products both home and abroad. South Africa entered into
a technical recession in 2017, as GDP shrank by 0.7% in
1Q 2017 following a 0.3% contraction in 4Q 2016. SA has
reported a 2.5% q/q and 1% y/y growth in 2Q 2017, (IMF
2017: 1%) underpinned by the recovery in agricultural
productivity.
The fortunes of the cement industry are tied to those of the
construction sector, which itself remains constrained by the
scarcity of large public sector projects and private sector
infrastructure projects, which typically provide work across
the value chain. The construction sector reported a
5 Inclusive of revenues of subsidiaries (AshakaCem and UniCem)
slowdown in real growth y/y from 4.6% in 2013 to 0.7% in
2016, while a 1.3% QoQ contraction was evidenced in 1Q
2017 (4Q 2016: 0.4%). The construction sector contracted
further by 0.5% q/q in line with declining residential and
non-residential activities. The burgeoning fiscal deficit,
compounded by the rising cost of funding from the recent
sovereign rating downgrades could further slow
progression on potential major infrastructural
developments in the short term.
While the South African Government increased cement
import duties/tariffs in 2016 to protect local cement
producers, the relatively cheaper cost of transporting
cement and clinker has made Asian producers (especially
from China and Pakistan) a continuing threat to
manufacturers. Selling prices remained under pressure in
2016 due to oversupply (which increased the bargaining
power of retailers) and intense competition for market share
(including price wars). According to industry sources,
Market demand in SA is forecast to remain fairly flat at
13.2mt in 2017 (2016 estimate: 12.6mt) in line with
economic outlook while national capacity should register a
low 2% growth. Competition amongst local producers will
also intensify amidst weak demand, and could further
elevate pricing pressures. LAP is not likely to draw much
mileage from its SA business in the immediate term. Major
players in the South Africa cement industry include PPC
Limited, Afrisam, LAP, Cimpor, Mamba Cement and
Sephaku Cement (64% owned by Dangote Cement Plc).
There is the likelihood of consolidation between Sephaku
Cement and PPC Limited, albeit that negotiations are
presently at preliminary stages.
Operations and earnings diversification
Table 5: financial
highlights by
Segment (N'bn)
2015 2016 1H FY17
Nigeria South
Africa Nigeria
South
Africa Nigeria
South
Africa
Revenue 191.7 75.6 152.4 67.3 111.4 43.4
EBITDA* 61.3 6.0 26.0 3.0 37.7 0.9
Operating profit 47.6 4.0 9.3 0.6 26.9 (1.0)
Equity 155.7 20.4 227.3 21.6 154.1 35.8
Total Assets 411.9 41.1 458.6 43.9 519.5 88.0
Capex 57.7 2.4 38.0 3.5 5.5 0.3
Capacity (mtpa) 3.6 8.5 3.6 11.0 3.6 11.0
Sales vols (Mt) 6.3 n.a 5.3 n.a 2.5 n.a
EBITDA margin (%) 32.0 8.0 17.0 4.4 33.8 2.1
Op. margin (%) 24.8 5.4 6.1 0.9 24.1 (2.3)
Asset turnover (x) 0.5 1.5 0.4 1.6 0.5 0.7
*Operating EBITDA adjusted for restructuring and other one-off costs (1H FY17: N1.3bn;
FY2016:N3.1bn; FY15: N 4.6bn)
Cement sales accounted for 79% of the Group’s revenue in
FY16 (FY15: 82%), while aggregates contributed 19%
(FY15: 16%). Nigeria continues to dominate its operations,
and accounted for 69% (FY15: 72%) of revenue and a
much higher 94% of operating profit in FY16 (FY15: 92%).
Given the recent capacity expansion project at UniCem and
the constrained South African environment, this split is
expected to be sustained well into the medium term.
Nigeria Corporate Analysis | Public Credit Rating Page 5
Nigeria
LAP’s business in Nigeria is grouped into South West
operations (“WAPCO”); Southern Nigeria operations
(“Mfamosing operations” or “UniCem”); Ashaka
Operations (Northern Nigeria operations) and Atlas &
ReadyMix (Atlas & LMRN). WAPCO consists of three
cement plants in Ogun State, with a combined production
capacity of 4.5mtpa. UniCem’s installed capacity has
doubled to 5mtpa following the recent capex project.
Ashaka has a production capacity of 1mtpa, with additional
capacity of 3mtpa expected to come online in the medium
term. Part of this will derive from a debottlenecking project
at AshakaCem’s existing plant in Gombe State, which is
expected to be completed by 2020. Atlas is located in Onne
Free Trade Zone, Rivers State and operates a floating unit,
with capacity to pack 500,000 tons of imported cement per
annum. LMRN has six ready mix plants operational, with
flexible capacity.
Table 6:
Nigeria
earnings
perf.
2015 2016 1H FY17
Rev.
(N'bn)
EBD.
(N'bn)
margin
(%)
Rev.
(N'bn)
EBD
(N'bn)
margin
(%)
Rev.
(N'bn)
EBTD
(N'bn)
margin
(%)
WAPCO 114.6 37.7 32.9 87.2 17.4 20.0 52.1 20.9 40.1
UniCem 54.3 19.1 35.2 43.7 6.2 14.3 42.7 13.0 30.6
Ashaka 17.4 3.9 22.4 17.4 2.7 15.3 14.4 3.9 27.1
Atlas &
LMRN 8.6 0.6 7.0 6.2 (0.4) (6.5) 4.0 (0.1) (2.5)
*EBD means EBITDA
Production challenges and pricing pressures saw Nigeria’s
revenue and EBITDA decrease by 21% and 80%
respectively in FY16, with severely constrained margins
reported across all operating segments. WAPCO is the
dominant earnings contributor accounting for 56% and
67% of revenue and EBITDA respectively in FY16 (FY15:
59% and 62%). UniCem accounted for a stable 28% of
revenue in FY16, while its contribution to EBITDA
reduced to 24% (FY15: 31%), as a result of price attrition
and escalated energy costs during 1H FY16. Due to
security challenges in the North-Eastern region over the
past few years, infrastructural developments have been
scarce. This notwithstanding, Ashaka maintained some
stability in revenue during FY16 albeit that reliance on
LPFO during the upgrade of its coal mill adversely affected
earnings. Ashaka contributed 11% and 10% of revenue and
EBITDA respectively in FY16 (FY15: 9% and 6%).
Price increases in Nigeria have supported a 45% y/y topline
growth in 1H 2017. Combined with cost management
initiatives and operating efficiencies, EBITDA increased
by 273% y/y to N37.7bn in 1H FY17 at a 33.8% margin
(1H FY16: 13.2%). Cement selling prices are expected to
remain stable to offset devaluation and inflation impact
during the year. Further savings are expected from the
ongoing cost rationalisation project and EBITDA margins
are expected to be restored to firmer historical levels.
South Africa
Revenue and EBITDA declined 11% and 51% respectively
in FY16 due to constrained economic conditions, weak
demand (stemming from paucity of infrastructural projects)
6 Comprises personnel expenses, by-product costs, inventory write-offs and electrical
energy expenses
and pricing pressures. The EBITDA margin was severely
depressed in FY16. The 42% y/y revenue growth in 1H
FY17 was underpinned by foreign exchange translation
impact as the Rand strengthened against the Naira. The
translation impact also filtered through to the EBITDA line,
combined with cost management initiatives and slightly
better pricing (compared with 1H FY16), EBITDA
increased 78% y/y to N905m in 1H FY17. Management
anticipates a 5% revenue growth for FY17. The
competitive landscape and operating environment is
expected to remain challenging, and as such earnings, are
likely to remain muted over the rating horizon. LAP expects
a recovery for South Africa and intends to pursue a market
strategy of differentiation in key customer segments through
offering solutions that are focused on end-user needs.
Table 7: Operating
performance LSAH
(N’bn)
FY15 FY16 % Δ 1H
FY16
1H
FY17 y/y % Δ
Revenue 75.6 67.3 (10.9) 30.7 43.4 41.6
EBITDA 6.0 3.0 (50.8) 0.5 0.9 77.5
EBITDA margin (%) 8.0 4.4 - 1.7 2.1 -
Financial performance
A five-year financial synopsis and the unaudited interim
results to June 2017 are appended to this report, while
commentary follows. Audited financial statements are
prepared in accordance with IFRS, as well as the
requirements of CAMA and the Financial Reporting
Council of Nigeria Act, 2011.
Table 8: Income
statement (N'bn) FY15 FY16 %Δ
1H
FY16
1H
FY17
y/y
%Δ
Revenue 267.2 219.7 (17.8) 107.4 154.8 44.2
Gross Profit 82.6 40.7 (50.8) 15.1 44.4 193.6
EBITDA 67.3 25.8 (61.6) 10.6 36.6 246.4
Depreciation (16.1) (15.9) (1.7) (7.6) (10.7) 40.4
Op. Profit 51.1 9.9 (80.6) 2.9 25.9 785.2
Net interest* (8.8) (11.8) 35.2 (4.6) (10.0) 118.4
Other op. inc/exp† 1.4 1.8 29.5 (28.5) 2.2 (107.9)
Forex mvmt. (8.4) (22.7) 169.3 0.0 0.0 n.a
Combination. exp. (6.0) 0.0 (100.0) 0.0 0.0 n.a
NPBT 29.3 (22.8) (177.9) (30.2) 18.2 (160.2)
Key ratios (%)
Gross margin 30.9 18.5 14.1 28.7
EBITDA margin 25.2 11.7 9.8 23.6
Op. margin 19.1 4.5 2.7 16.7
Net int. cover (x) 5.8 0.8 0.6 2.6
*Includes interest income from short term securities and fixed bank deposits. †Includes profit/loss from disposed fixed assets, investments and associates
LAP’s cement volumes decreased by 16% in FY16 and
combined with the impact of pricing pressures in Nigeria
and South Africa, revenue fell by 18% to N219.7bn in
FY16, representing 63% of forecast. Fuel costs spiked to
N21.2bn in FY16 (FY15: N9.3bn) and absorbed 10% of
revenue compared with 4% in FY15. In addition, fixed
production costs6 more than trebled to N26.9bn in FY16
(and absorbed 12% of revenue from just 3% in FY15). As
a result, gross margin contracted to a review period low of
18.5% in FY16 (budget: 33.7%), from 30.9% in FY15
while gross profit halved to N40.7bn. Positively, there has
been increased stability in gas supply since September
2016, and most plants can operate on gas, coal and/or
Nigeria Corporate Analysis | Public Credit Rating Page 6
alternative fuels. A 16MW lignite-fired coal power plant is
being built at Ashaka, with commissioning expected for
2018. Combined, selling and administrative costs absorbed
14% of revenue (FY15:12%). The EBITDA margin
declined to an all-time low of 11.7% in FY16 (FY15:
25.2%; five-year average: 25.2%) stemming largely from
pressures from the gross margin line. Consequently,
operating profit plunged to cN10bn, representing less than
20% of initial expectation.
Cement demand was sluggish in Nigeria during 1H FY17
based on the challenging operating environment and delay
in passing the national budget. According to management,
national cement consumption contracted by 28% in 2Q
FY17 y/y, due to prevailing economic realities which
impacted negatively on end-user demand. Consequently,
LAP’s domestic cement sales volumes was 2.5mt in 1H
FY17, compared with 3.1mt in 1H FY16. This was offset
by price increases in Nigeria, which supported 44% y/y
growth in LAP’s revenue to N154.8bn in 1H FY17. Despite
the lower volumes, production costs rose by 20% y/y to
N110.bn in 1H FY17, mainly due to impact of currency
devaluation on maintenance costs, fixed and variable
production costs, as well the increase in the price of gas.
The strong turnover growth bolstered the gross margin to
28.7% (1H FY16: 14.1%), while a correction in the
EBITDA margin to 23.6% (1H FY16: 9.8%) saw a 246%
increase in EBITDA to N36.6bn. Although depreciation
costs increased by 40% y/y, the higher EBITDA margin
and overhead cost rigour supported a 12 percentage-point
correction in the operating margin to 16.7%, leading to a
considerable rise in operating profit to N25.9bn (1H FY16:
N2.9bn; 1H FY15: N32.6bn). Domestic earnings are
typically firmer in the last quarter of the year, due to
increased construction activities in the dry season, which
suggests that FY17 financial performance could supersede
FY15, barring exogenous shocks.
Gross interest costs rose by 45% to N15.5bn in FY16,
mainly due to the impact of cessation of interest
capitalisation on newly commissioned 2.5mtpa line at
UniCem and impact of devaluation in Naira value on USD-
denominated finance costs. Overall, net interest costs rose
by 35% to N11.8bn in FY16. Gross and net interest cover
reduced below 1x due to the depressed operating income,
reflecting marked deterioration in debt serviceability. Net
interest cover rose to 2.6x in 1H FY17 (1H FY16: 0.6x)
despite the 68% increase in net interest expenses, albeit
continuing to track below historical levels. UniCem
accounted for 49% and 53% of gross finance costs in FY16
and 1H FY17 respectively. With the project completed,
gross debt for Nigeria is anticipated to taper below N200bn
at FY17.
LAP reported a significant N22.7bn foreign exchange loss
in 2016, largely the impact of adverse currency movement7
realised on repaying a portion of UniCem’s USD
denominated loans. After accounting for other income, a
7 exacerbated by impact of the 45% devaluation in Naira value
pre-tax loss of N22.8bn was reported in FY16 compared
with a profit of N29.3bn in FY15. The Group reported a
post-tax profit of N16.9bn in FY16, supported by N39.7bn
deferred tax credits from UniCem. After accounting for a
much lower interim tax credit of N1.6bn, net income
increased by an annualised 134% to N19.7 in 1H FY17 (1H
FY16: net loss of N30.2bn), at a 13% net margin (FY16:
8%).
Cash flow Table 9: Working capital (N'bn) FY15 FY16 1H FY17
Inventories 33.0 44.5 57.2
Trade receivables 7.4 7.6 22.1
Trade payables (56.4) (60.4) (42.9)
Operating working capital (15.9) (8.2) 36.4
Other receivables 9.7 17.0 27.3
Prepayments 6.6 9.9 10.1
Other payables and accruals (24.2) (55.3) (82.8)
Current tax payable (0.4) (0.8) (1.0)
Non-operating working capital (8.2) (29.2) (46.4)
Net working capital asset/(liability) (24.1) (37.4) (10.0)
Net working capital movement 0.7 (2.3) (32.9)
Cash generation continues to trend with EBITDA, barring
deviations attributed to one-off restructuring costs, write-
offs and adjustments for fair value and unrealised foreign
currency movements. Cash generation fell sharply in FY16,
registering at N13.8bn (FY15: N54.1bn), which was starkly
at odds with a strong historical trend. Enhanced
profitability saw a correction to N30.7bn in 1H FY17 (1H
FY16: N14.8bn). Working capital requirements have
fluctuated widely over the five and a half years under
review, reflecting the increase in capacity, reorganisation,
and evolving market conditions. That said, pressures
particularly intensified during 1H FY17, with an
unprecedented increase in working capital of N32.9bn (1H
FY16: N2bn decrease). This was partly due to a ramp up of
inventories (both from production and consumables)
attributed to newly commissioned capacity. This was
further exacerbated by slow market uptake of cement
produced, with note also taken of the increased value of
inventories on hand due to the distortive effect of currency
movements. Further distortion came from the inclusion of
advance payments to suppliers related to the UniCem
expansion project. An untapped letter of credit (1H FY17:
N8bn; FY16: N5.6bn; FY15: N4.2bn) related to the Ashaka
project is included in other receivables. The project was
temporarily suspended due to security challenges in North-
Eastern Nigeria.
Historically, trade debtors have had little impact on
working capital movements, as 90% of LAP’s customers
pay before delivery while the other 10% have varying terms
of trade but are usually allowed a 30-day credit period.
However, due to effect of economic recession, customers
that used to pay months in advance, reduced payment
timelines. Trade receivables increased by N14.5bn in 1H
FY17, albeit that trade debtors turnover remained below 20
days. LAP settled around N6bn in outstanding technical
Nigeria Corporate Analysis | Public Credit Rating Page 7
fees during 1H FY17 and N17.3bn in trade creditors while
other payables also increased by N23bn. The net increase
of N5.4bn in creditors was completely offset by the
movement in inventory and debtors’ balances.
The moderate cash generated in FY16 was largely
consumed by the combined interest and tax outlay of
N12.3bn and a N2.3bn, inventory-driven increase in
working capital. Accordingly, LAP reported an operating
cash outflow of N725m in FY16, which was followed by a
much larger interim out flow of N8.4bn in IH FY18.
While no quantified guidance is given regarding LAP’s
dividend policy, management indicated that the dividend
cover is set after taking into account operational and
expansionary capital expenditure requirements as well as
planned investments. The Board proposed a dividend
payment of N1.05 per share on the 2016 results (2015
results: N3 per share), which represented 34.7% (2015:
50%) of net profits. As a result of foreign exchange
liquidity challenges, outstanding dividend balances due to
LafargeHolcim increased from N3.4bn in FY15 to N18.9bn
in 1H FY17 (FY16: N13.2bn). According to management,
around N15bn of the outstanding amount was settled during
3Q FY17.
Since FY14, capex spend has related largely to the
construction of the 2.5mtpa plant at Mfamosing while the
balance was spent on maintenance capex across other
operations. Total capex registered at N41.5bn in FY16
(FY15: 60bn) before tapering to N5.8bn in 1H FY17.
According to management, capex spend will be around
N27bn in FY17, and of this, N17.8bn pertains mainly to the
Ashaka coal fired power plant and UniCem (crusher, line 2
and evacuation road) while N9bn is maintenance and
development capex. The investment inflow of N9.9bn
reported in FY16 is a net movement in receivables due from
related companies (UniCem and NCH). A significant
N69.4bn net investment outflow was reported in 1H FY17
and relates mainly to movement in deferred tax assets and
intercompany receivables. As capex has been mainly
funded by debt, LAP’s net debt increased by a cumulative
N148.9bn in the 30-month period to 1H FY17.
Funding and gearing profile
Underpinned by business combination and capacity
expansion, LAP’s asset base increased fourfold from
N151.9bn at FYE12 to 604.8bn at 1H FY17 (FYE16:
N500.9bn). As is typical of the industry, the Group
evidences a capital-intensive balance sheet, with property,
plant and equipment (“PPE”) having averaged 77% of total
assets over the review period. PPE rose significantly from
N331.3bn in FY14 to N404.4bn in 1H FY17 following the
completion of new 2.5mtpa line. Inventories accounted for
10% of total assets in 1H FY17 (FY16: 9%; five-year
average: 8%). Debtors and prepayments have constituted
around 5% of the asset base since FY13, but increased to
10% of total assets at 1H FY17 (FY16: 7%). Cash balances
have accounted for a stable 4% of the asset base since FY15
and remained robust at N25bn at 1H FY17 (FY16:
N19.2bn). The remainder of the asset base comprised long
term intercompany receivables and deferred tax assets.
For most of the review period, equity has accounted for the
significant portion (over 40%), of funding. Net foreign
currency loans totalled USD595m at July 2016 (USD510m
shareholder loans and USD85m external loans). During 2H
FY16, LAP restructured USD493m (N139bn) of
shareholder loans into a quasi-equity instrument, repayable
at LAP’s discretion (and reported under ‘non-controlling’
interests in the AFS). The loans bear an average interest rate
of 6% p.a. Following the introduction of a dynamic
Nigerian Inter-Bank Foreign Exchange Fixing (“NIFEX”)
market in 2017, LAP saw a better option to repay the
shareholders loans and at the same time hedge its foreign
exchange exposure. It therefore reclassified the quasi-
equity to debt, more than doubling its borrowings to
N244.7bn in 1H FY17 (FY16: N127.5bn) to account for
40% of funding at 1H FY17 (FY16: 26%) while equity and
creditors accounted for 31% and 29% respectively (FY16:
49% and 25%).
Table 10: Bank/Credit
source Loan type FY16 (N'bn)
1H F17
(N'bn) Maturity
Nigeria 125.8 231.2
Intervention loans LT loan 6.3 5.7 2021 - 2023
Intervention loans current portion of
LT loan 2.8 0.0 2017
FirstBank Ltd. Promissory Notes 4.4 1.6 2017
Eight banks Overdrafts 23.0 38.2 2017-2018
Six banks ST and LT loans 2.5 12.7 2017-2018
Bonds LT 59.1 59.1 2019 - 2021
Shareholder loans
Caricement B.V USD0.65m 0.2 0.9 2018
Caricement B.V USD220m 0.0 80.6 2018
Holderfin B.V USD88.4m 27.5 32.4 2017
South Africa 1.8 13.5
Nedbank Pref. share loans 1.8 0.0 2016 - 2017
ABSA Pref. share loans 0.0 0.0 2016
Related party Interco. loans 0.0 13.5 2018 and 2024
Total 127.5 244.7
*ST is short term; LT is long term;
In December 2016, LAP obtained a USD88.4m short term
loan from Holderfin B.V, with maturity date of December
2017. Proceeds from the loan were used to refinance
UniCem’s USD-denominated loans (obtained from
Nigerian banks). In April 2017, LAP secured a USD220m
short term (general purpose) loan from Caricement B.V,
with maturity date of April 2018. Both loans are senior
unsecured obligations of LAP. LAP hedged its exposure on
both the USD88.4m loan and USD220m loan at
N274.5/USD and N375/USD respectively with non-
deliverable futures contract with FMDQ OTC Plc.
The remainder of debt at 1H FY17 comprises overdrafts
(drawn from facilities that are renewed annually) and the
outstanding balances on two intervention loans, obtained in
2011 and 2013 under the aegis of CBN’s Power & Aviation
Intervention Fund, through the Bank of Industry. Bank
overdrafts are unsecured while the term loan is secured by
mortgage debenture on LAP’s assets. For South African
operations, LSAH has had a mix of preference share loans
and overdrafts which were repaid in 2016. According to
Nigeria Corporate Analysis | Public Credit Rating Page 8
management, LSAH’s N13.5bn gross debt at 1H FY17
comprises related party loans (of R254.5m and R327.6m
respectively) which were obtained within the
LafargeHolcim group. Shareholder/intercompany loans
accounted for 52% of LAP’s gross debt at 1H FY17 (FY16:
22%). Nigeria accounts for over 90% of the Group’s
borrowings.
Combined with the impact of the new shareholder loans
and overdrafts, short term debt exposure was significant at
78% of total debt at 1H FY17 (FY16: 47%; FY15: 9%).
Cash coverage of short term debt was just 0.1x at 1H FY17
indicating significant liquidity strain. While GCR is
concerned about the short term debt exposure, the proposed
Rights Issue and debt restructuring should alleviate
liquidity and funding pressures.
Net gearing has increased from 58% at FY14 to peak at
117% at 1H FY17 (FY16: 44%) on the back of the
consolidation of UniCem and recent capex. Net debt to
EBITDA also rose materially to 420% at FY16 (budget:
142%), before improving to 300% in 1H FY17. From a
historical high of 16.6x in FY13, net interest cover declined
to a low of 0.8x in FY16 (FY15: 5.8x), before picking up
to 2.6x at 1H FY17. GCR expects net interest cover to
improve to 4x threshold to support stronger ratings in the
medium term (if achieved with the stabilisation of gearing
at the more conservative targeted levels). Operating cash
flow coverage of debt was negative at both FY16 and 1H
FY17, implying significant strain on LAP’s debt service.
Table 11: Funding profile (N’bn) FY15 FY16 1H FY17
ST debt 12.8 59.5 191.8
LT debt 135.5 68.0 52.9
Total debt 148.3 127.5 244.7
Cash (16.5) (19.3) (25.1)
Net Debt 131.8 108.3 219.5
Equity 174.6 247.4 187.3
Key ratios (%):
Total debt: equity 84.9 51.6 130.6
Net debt: equity 75.5 43.8 117.2
Total debt: EBITDA 220.4 494.2 334.2
Net debt: EBITDA 195.9 419.6 299.9
Cash: ST debt (x) 1.3 0.3 0.1
Review of the Series 1 and Series 2 Fixed Rate Bonds
The N26.4bn Series 1 Bonds and N33.6bn Series 2 Bonds
(“the Bonds”) have similar features, with the main
differences being the size and tenor. The method for
distribution for both Issues was by book building. (Please
see the GCR’s Lafarge Africa Bond Plc Rating Report
dated October 2016 for full details). Salient features of the
Bonds are as follows:
The Bonds are direct, unconditional, senior and unsecured
obligations, ranking pari passu with all other senior and
unsecured obligations of the Issuer.
Tenor of the Series 1 Bond will be 3 years, with legal
maturity in June 2019.
The Series 2 Bond has a 5 year tenor, with legal maturity
in June 2021.
Interest on the Bonds will accrue from issue date and will
be payable semi-annually in arrears.
The Series 1 and Series 2 Bonds bear fixed annual interest
rates of 14.25% and 14.75% respectively.
Net proceeds from the Series 1 and Series 2 Issues
amounted N25.9bn and N33bn respectively.
The transaction documents anticipate a bullet principal
repayment structure for both Issues.
Per Clause 10 of the Programme Trust Deed, the Bonds
bear a negative pledge; whereby as long as any of the
Bonds remain outstanding, the Issuer is restricted from
encumbering its property or assets to secure debt, without
the prior written consent of the Trustees. Where the
Trustee’s consent is obtained, the same security (as that
intended for the indebtedness) would be granted to the
Trustee for the bondholders’ benefit. However, this
restriction does not apply to Permitted Security.
The Bonds will be repaid from LAP’s operational cash
flows.
The Bonds are exempt from taxation in Nigeria.
The Bonds have been listed on NSE and FMDQ OTC Plc
trading boards.
GCR has reviewed the bond performance reports from the
joint Trustees (ARM Trustees Limited, FBN Trustees and
Zenith Trustees Limited) and notes that the first coupon
payments on the Series 1 and Series 2 Fixed Rate Bonds,
amounted to N1.9bn and N2.5bn and were paid on due date
of 15 June 2017. The next coupon payment is due on 15
December 2017. The Trustees did not report any breach of
negative pledge or covenants by the Issuer.
Outlook and rating rationale
In view of the challenging operating conditions, the five-
year forecasts provided to GCR in FY16 are no longer
deemed to be attainable, although management is yet to
provide revised projections.
LAP anticipates double digit revenue growth in 2017 which
will be underpinned by increased volumes from further
ramp up at UniCem’s new plant and higher demand from
the individual home builder segment. According to
management, earnings will be enhanced by benefits of
stable pricing, cheaper fuel mix and sustained operating
efficiencies. Overall, LAP’s EBITDA margin is expected
to improve to 29% in FY17 (1H FY17: 23.6%), in line with
historical trend (five-year average: 25.2%). While the
additional capacity will help to curtail the variability in
earnings seen in FY16 going forward, much stronger
capacity rollout will be needed to maintain the Group’s
strong position in its key markets when demand strengthens
in the medium term.
GCR noted that LAP’s operations remain susceptible to
exogenous pressures (including gas and foreign currency
shortages), vagaries of the economy and intense
competitive pressures. GCR has taken note of initiatives
taken by management to support a recovery in earnings,
and will continue to monitor progress going forward.
Cognisance is also taken of LAP’s medium term fuel
flexibility plan, which aims to achieve 50% reliance of
alternative fuels.
Nigeria Corporate Analysis | Public Credit Rating Page 9
According to management, total capex spend will be more
moderate at N27bn in FY17 (FY16: N41.5bn), with the
bulk of the investment relating to the construction of
Ashaka’s coal fired plant. Gearing metrics are anticipated
to have moderated by FY17 with net gearing expected to
trend below 50% and net debt to EBITDA meant to be
managed below 200%. Net interest cover for Nigeria
should rise above 6x in FY17. These targets are deemed to
be attainable if earnings continue to improve and the
planned capital raising activities are completed timeously.
In the interim, liquidity pressure and the significantly
distorted debt maturity profile present a ratings pressure
point. In the interim, GCR has considered LAP’s strong
banking relationships and sizeable credit facilities (over
N60bn limit) available at eight commercial banks,
indicating financial flexibility. The legacy parental support also lends LAP some headroom with respect to funding in
addition to the planned Rights Issue.
Rating considerations for Series 1 and Series 2 Bonds
GCR has considered those factors impacting the general
creditworthiness of Lafarge Africa Plc, in performing its
analysis. Being senior unsecured debt, the Bonds bear the
same probability of default as the Issuer and would reflect
similar recovery prospects to senior unsecured creditors in
the event of a default. As such, the Series 1 and Series 2
Bonds will garner the same long term rating as that
accorded to the Issuer. In light of the above, and given that
the Bonds constitute senior unsecured obligations of the
Issuer, GCR has accorded final national scale ratings of
A+(NG) to the Series 1 bonds and Series 2 bonds
respectively. Accordingly, any change in the Issuer rating
would impact the Bond ratings.
Meaning of the Rating of the Series 1 Bonds and Series 2 Bonds
The ratings accorded to the Series 1 Bonds and Series 2 Bonds
are final, public national scale ratings. National scale credit
ratings are an assessment of credit quality relative to the rating of
the lowest credit risk in a country. This lowest risk will normally,
although not always, be accorded to financial commitments
issued or guaranteed by the relevant sovereign state.
The final, public ratings accorded to the Bonds relate to ultimate
payment of interest and principal (as opposed to timely, akin to
an expected loss rating, which is a function of probability of
default and loss severity). The ratings exclude an assessment of
the Issuer’s ability to pay any (early repayment) penalties.
Being senior unsecured debt, the Bonds reflect similar recovery
prospects to senior unsecured creditors in the event of a default.
As such, the Series 1 and Series 2 Bonds reflect the same long
term rating as that accorded to the Issuer. Should the rating of the
Issuer change, the ratings of the Series 1 Bonds and Series 2
Bonds will also change, but not necessarily in the same quantum.
The suffix code identifies to which country the rating relates;
‘NG’ means Federal Republic of Nigeria. A Rating outlook
indicates the potential direction of a rating over the medium term,
typically a one or two year period.
Nigeria Corporate Analysis | Public Credit Rating Page 10
Lafarge Africa Plc
(Naira in millions except as noted)
Year end: 31 December Lafarge WAPCO Lafarge Africa Plc
Statement of comprehensive income 2012 2013 2014 2015 2016 1H 2017* Turnover 87,965.2 206,072.7 260,810.5 267,234.2 219,714.1 154,839.9 EBITDA 31,331.6 55,662.4 69,475.8 67,285.2 25,804.4 36,606.5 Depreciation (4,900.4) (10,119.1) (15,509.5) (16,148.8) (15,877.5) (10,732.6) Operating income 26,431.2 45,543.4 53,966.3 51,136.4 9,927.0 25,873.9 Net finance charge (5,119.1) (2,748.5) (7,931.9) (8,751.8) (11,828.9) (9,957.8) Forex and reserving - (85.1) (4,307.6) (8,428.8) (22,702.3) 0.0 Business combination expenses - - (1,585.4) (6,047.4) - - Other operating income/(expense) (47.6) 21,995.2 216.7 1,378.5 1,785.4 2,244.3 Net Profit Before Tax 21,264.4 64,705.0 40,358.1 29,286.8 (22,818.8) 18,160.4 Taxation paid (6,552.7) (3,308.3) (6,537.8) (2,123.9) 39,717.5 1,572.0 Net Profit After Tax 14,711.7 61,396.7 33,820.4 27,163.0 16,898.7 19,732.4
Statement of cash flows Cash generated by operations 30,192.2 54,659.8 72,535.6 54,096.2 13,809.9 30,668.6 Utilised to increase working capital (3,615.1) 1,811.0 (3,691.0) 658.6 (2,273.8) (32,949.7) Net interest paid (4,715.9) (2,529.1) (6,775.0) (7,687.2) (11,388.4) (5,055.0) Taxation paid (964.9) (7,519.6) (3,009.1) (3,132.1) (872.8) (1,040.0) Cash flow from operations 20,896.3 46,422.0 59,060.5 43,935.5 (725.1) (8,376.1) Maintenance capex‡ (4,900.4) (7,061.8) (15,509.5) (16,148.8) (15,877.5) (5,769.3) Discretionary cash flow from operations 15,995.9 39,360.2 43,551.1 27,786.7 (16,602.6) (14,145.4) Dividends paid (2,251.2) (40,846.4) (14,955.3) (13,168.3) (1,502.7) (1,624.5) Retained cash flow 13,744.7 (1,486.2) 28,595.8 14,618.4 (18,105.3) (15,769.8) Net expansionary capex (847.8) 0.0 (10,218.2) (43,745.9) (25,651.1) 0.0 Investments and other 0.0 27,347.3 (33,060.0) (4,370.7) 9,862.7 (69,396.7) Proceeds on sale of assets/investments 9.2 400.3 75.6 563.7 373.3 3,157.6
Shares issued 0.0 0.0 (293.9) (163.2) (304.3) 0.0 Cash movement: (increase)/decrease 2,527.5 (12,245.8) 25,672.2 13,814.6 976.8 (8,580.4) Borrowings: increase/(decrease) (15,433.6) (14,015.5) (10,771.5) 19,283.2 32,847.9 90,589.3 Net increase/(decrease) in debt (12,906.1) (26,261.3) 14,900.6 33,097.8 33,824.7 82,009.0
Statement of financial position Ordinary shareholders interest 68,353.4 149,143.8 98,178.5 115,799.5 55,987.8 74,332.9 Outside shareholders interest 0.0 19,520.4 75,204.5 58,803.3 191,401.3 112,965.4 Pref. shares and convertible debentures 0.0 0.0 0.0 0.0 0.0 0.0 Total shareholders' interest 68,353.4 168,664.2 173,383.0 174,602.8 247,389.0 187,298.3 Current debt 4,384.4 17,117.5 5,134.3 12,822.7 59,483.3 191,791.3 Non-current debt 32,921.5 11,160.3 116,001.6 135,465.2 68,046.9 52,858.8 Total interest-bearing debt 37,305.9 28,277.8 121,135.9 148,287.9 127,530.2 244,650.1 Interest-free liabilities 46,283.3 98,823.2 119,230.7 127,243.2 126,008.2 172,923.0 Total liabilities 151,942.7 295,765.2 413,749.6 450,133.9 500,927.4 604,871.4 Property, Plant and Equipment 128,094.9 213,276.4 331,257.2 364,397.3 390,488.5 404,381.5 Investments and other non-current assets 40.0 13,677.1 10,278.2 12,487.8 12,095.3 58,672.2 Cash and cash equivalent 8,892.3 33,896.1 20,330.1 16,493.2 19,265.1 25,110.8 Other current assets 14,915.5 34,915.6 51,884.0 56,755.6 79,078.5 116,706.9 Total assets 151,942.7 295,765.2 413,749.6 450,133.9 500,927.4 604,871.4
Ratios Cash flow: Operating cash flow : total debt (%) 56.0 164.2 48.8 29.6 neg neg Discretionary cash flow : net debt (%) 56.3 n.a 43.2 21.1 neg neg Profitability: Turnover growth (%) 40.7 134.3 26.6 2.5 (17.8) 40.9 Gross profit margin (%) 37.1 32.7 31.8 30.9 18.5 28.7 EBITDA : revenues (%) 35.6 27.0 26.6 25.2 11.7 23.6 Operating profit margin (%) 30.0 22.1 20.7 19.1 4.5 16.7 EBITDA : average total assets (%) 22.1 28.5 21.2 16.3 5.6 13.8 Return on equity (%) 23.6 55.5 27.1 25.4 19.7 60.6 Coverage: Operating income : gross interest (x) 4.8 9.9 4.8 4.8 0.6 2.4 Operating income : net interest (x) 5.2 16.6 6.8 5.8 0.8 2.6 Activity and liquidity: Trading assets turnover (x) (26.1) (189.2) (90.9) (22.8) (5.3) (8.2) Days receivable outstanding (days) 2.1 8.1 11.2 10.1 12.4 17.5 Current ratio (:1) 0.7 1.1 1.0 0.8 0.6 0.4 Capitalisation: Net debt : equity (%) 41.6 n.a 58.1 75.5 43.8 117.2 Total debt : equity (%) 54.6 16.8 69.9 84.9 51.6 130.6 Net debt : EBITDA (%) 90.7 n.a 145.1 195.9 419.6 299.9 Total debt : EBITDA (%) 119.1 50.8 174.4 220.4 494.2 334.2
‡Depreciation used as a proxy for maintenance capex expenditure
*Unaudited six months results to June 2017
Nigeria Corporate Analysis | Public Credit Rating Page 12
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