Lafarge Africa Plc has announced its financial results for the first half of 2023, revealing a second consecutive quarterly decline in profits.
The cement-producing company reported an after-tax profit decrease of 5 percent to N35.5 billion for the half-year period.
While the company managed to improve its operational performance in the second quarter (Q2), the doubling of income tax expenses to N19.8 billion prevented a significant increase in pre-tax profits.
Q2 performance surges
Lafarge’s unaudited financial report for the first half of 2023 showed a much-improved Q2 performance, which accounted for 53.6 percent of turnover and 57.7 percent of profit for the period.
The company’s sales revenue saw a notable acceleration, rising from a slight 1.3 percent improvement in the first quarter (Q1) to a substantial 10.3 percent increase, reaching almost N106 billion in Q2.
Lafarge managed to counter operating pressures that had impacted its bottom line in Q1 by implementing cost-saving measures alongside revenue improvements.
Despite the Q2 profit showing a moderate improvement of 3.2 percent to N20.5 billion, it was insufficient to compensate for a 15 percent drop to N14.9 billion in Q1.
This marks the second consecutive year of profit weakness for the company, following a significant slowdown from a 65.4 percent surge in 2021 to a modest 5 percent improvement, amounting to N53.6 billion in 2022.
While revenue improved in Q2, Lafarge reported that cement sales remained sluggish due to price increases and a weakening real estate industry, which dampened demand.
This demand slowdown had persisted since the second half of the previous year.
The company concluded its half-year operations with sales revenue of N197.7 billion, reflecting a moderate year-on-year increase of 4.3 percent.
Production costs grew by a similar margin, rising by 4.2 percent to N94.3 billion, while gross profit improved by 7.6 percent to N103.4 billion at the mid-year mark.
Lafarge effectively controlled selling and distribution expenses, limiting their increase to 7 percent, reaching N40.3 billion.
However, administrative costs rose by 11.2 percent to N11.2 billion. Other income more than doubled to N425 million during the period, helping to offset cost increases and resulting in an operating profit increase of 7.7 percent, reaching N52.3 billion by the end of June.
The company experienced a significant boost in finance income, driven by a foreign exchange gain of N2.2 billion, resulting in finance income of N4.4 billion for the half-year.
This figure marked a substantial increase from the less than N192 million in finance income reported during the same period the previous year.
The increase in income was further supported by a reduction in finance expenses, dropping from nearly N1.9 billion to N1.4 billion over the review period.
As a result, net finance income exceeded N3 billion for the half-year, replacing the net finance cost of N1.7 billion reported last year.
While the favorable financial developments led to an 18 percent increase in pre-tax profit, reaching N55.3 billion at the mid-year point, the substantial increase in income tax expenses, which more than doubled from N9.5 billion to N19.8 billion, consumed most of the profit increase, resulting in a drop in after-tax profit for the period.
The tax expense for the first half of the year exceeded the N14.7 billion income tax paid by the company for the entire 2022 financial year.