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  • Business - Companies
  • Updated: May 18, 2020

Q1 2020 Result: Five Takeaways Lafarge Shareholders Must Not Ignore

Q1 2020 Result: Five Takeaways Lafarge Shareholders Must Not

Cement producer, Lafarge Africa Plc, has released its Q1 2020 financial results, and there are five things that Lafarge shareholders must not ignore in order to make better decisions in the coming days, weeks or months. While the result disclosed that Lafarge had an impressive Q1 2020 performance, it also revealed that Q2 2020 performance will be poor when compared to Q1 2020.

In the financial statement of the subsidiary of Lafarge Holcim Ltd, AllNews noticed four takeaways that shareholders must note going forward.

Lafarge outperformed in Q1 2020 Amidst COVID-19

The first quarter of 2020 has been a disappointment for several sectors, with the exemption of a few ones, due to the coronavirus outbreak and lockdown. The restriction on business activities had affected several companies including the manufacturing sector, but Lafarge Africa managed to grind out an impressive result during a tough period.

Lafarge Africa posted revenue growth in the first quarter of 2020 after its Net Sales climbed to N63,6 billion, outperforming the N58.6 billion recorded in Q1 2019. The increase represents a 9.8% growth when the two-period under review are compared.

Lafarge Africa's EBIT and Net Income from CO jump

Just like its Net sales, Lafarge Africa's Earning Before Interest and Tax experienced a sharp increase, overcoming the pressure of COVID-19 which dragged down many company's revenues. The EBIT increased by 3% from the N11.4 billion generated in the first three months of 2019 to N11.8 billion recorded in Q1 2020.

This reflects how strong the company's performance for the first quarter period is, as its Net income from continued operations also increased, hitting N8 billion in the first three months of 2020. This is a 28% growth when compared to the N6.3 billion generated in Q1 2019.

Lafarge Africa's CEO Believes company has a strong balance sheet

The Co-Chief Executive Officer of Lafarge Africa Plc, Khaled El Dokani, assured that the company has a strong balance sheet after factoring its latest performance in Q1 2020. He stated that the turnaround initiative of Lafarge is effective, "I am proud of the plan Lafarge Africa has implemented to protect the health of our people while supporting our partners and communities.

He added that "The first-quarter results confirm that our turnaround initiatives are effective and our strong balance sheet is mitigating the risks borne by the pandemic that has started hitting our country in March."

Q2 2020 result will not escape COVID-19 pummeling

Despite being able to mitigate the risk posed against the company by the coronavirus outbreak in the first quarter of this year, Lafarge Africa Plc stated that the company would be unable to withstand the pressure in the second quarter of 2020. Although Lafarge Africa said COVID-19 impact on the 2020 results cannot be reasonably estimated at the time of releasing the Q1 2020 result, the Q2 2020 result will be adversely impacted by the COVID-19 pandemic.

"The company expects that the public safety measures issued by the federal and state authorities in Nigeria and around the world will adversely affect the company’s results in Q2, 2020. Despite short-term disruptions, Lafarge Africa Plc is however confident in the underlying resilience of its businesses and operating model as the company has developed robust cost and cash optimization initiatives.

"Lafarge Africa’s strong balance sheet and reduced cost base will also help minimize the negative effects of the COVID-19 pandemic." The company said in a statement seen by AllNews.

Lafarge Africa's shares have been unstable

In addition to the four takeaways from the Q1 2020 result, Lafarge Africa's stock performance has been unstable, rising and falling at will. Investors' confidence seems to be fluctuating, as the share price has been going up and down since the beginning of May.

In May 4, when business activities began gradually following the easing of lockdown in Nigeria, Lafarge Africa's stock price dropped to N10.30 kobo per share from N11.80 kobo per share of April 30. On May 5, the price moved upward to N10.70 kobo, then climbed further to N11.15 kobo per share on May 6.

But it dropped again the next day to N10.90 kobo per share. However, the stock price increased on May 8, hitting N11 per share, then remained flat until May 14, when the stock price dropped to N10.80 per share. It dropped further on Friday, May 15, to N10.70 per share.

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