The performance of Lafarge Africa Plc (WAPCO) is a typical example of what manufacturing companies face doing business in an environment with poor infrastructure, high costs and insecurity as presented by Nigeria in recent years.
While one of the leading cement manufacturers in the sub-Sahara Africa has taken proactive steps to assuage the difficult times through a first of its kind and largest ever bond issuance by a corporate body in Nigeria’s debt capital markets, the high level of indebtedness as at the first half (H1) of 2016 will remain a major source of concern to shareholders and investors.
Lafarge Africa’s total current liabilities as at June 2016 stood at N128.2 billion against total current assets of N82.9 billion while non-current liabilities stood at N224.2 billion in contrast to total non-current assets of N409.6 billion. Also net assets dropped by 20.6 billion to N140 billion from N176.2 billion in December 2015.
Lafarge Africa earlier issued a profit warning based on the impact of the naira devaluation, stating an expected N28 billion unrealized exchange loss arising from US Dollars borrowings, which at the time of devaluation consisted of $310 million shareholders loans and $85 million external loans.
The company recently concluded its Series I and II N60 billion bond issuance, comprising N26,386,000,000 three-year bond at 14.25%, which is due in 2019, and a N33,614,000,000 five-year bond 14.75% due in 2021, of which the proceeds would be used to part refinance the debt of its Unicem.
In a sign of light at the end of the tunnel following the bond issuance, the company witnessed a fundamental appreciation in its stock price by 13.36 percent above the one year low of N49.40 on August 4th 2016 to N56 as on Friday 19th August.