Lafarge achieves 40% use of alternative fuels

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WITH a record level of fuel flexibility at its Ewekoro I and Sagamu plants, the turnaround plan of Lafarge Africa Plc is yielding results.

The cement manufacturer and building solutions provider announced in statement yesterday that its plants not only operate optimally but the company recorded a significant leap in profit after tax in the last quarter of 2016

On power supply, the statement said from 100 per cent dependence on gas and Low Pour Fuel Oil (LPFO), the company has achieved about 40 per cent use of alternative fuels.

“Consequently, all plants are operating at optimal levels, with Capital Expenditure (CAPEX) provisions for 2017 aimed to consolidate energy optimisation at Ashaka, Ewekoro 2 and Mfamosing”, the company said in its financial report for last year.

According to it, the Mfamosing 2 line, which came on stream on time and below budget, contributed to group cement production in Q4 2016, with cost-saving prospects in the future.

Lafarge Africa said the record level fuel flexibility was attained at its Ewekoro I and Sagamu cement plants amid country-wide gas shortages.

The report also described the company’s financial performance as sterling, saying that last year’s results of the company showed all its plants operating at optimal levels, recording profit increase after tax in Q4 2016.

“Net sales and operating Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) also increased respectively by 12 per cent and by 288 per cent in Q4 2016,” the statement said.

The company said that within the quarter, third-party syndicated loan of $88.4 million 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 debt was restructured, which removed the FX impact on Lafarge Africa’s results,” the financial report made available to The Nation, said.

It also added that net debt was reduced to N108.3 billion, below the N120 billion announced, notably supported by CAPEX control and solid cash flows.

Operating EBITDA for last year’s financial hit N29.0 billion from N67.3 billion in 2015 and profit after tax for 2016 financial year came to N16.9 billion.

Commenting on the company’s 2016 performance, Lafarge Africa Chief Executive Officer, Michel Puchercos, 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 optimisation plan has proved successful with increased use of Alternative Fuel (AF) to offset gas shortages.”

Speaking further, Puchercos 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, he remarked that the company’s immediate objective was to deliver fully on its turnaround plan by optimising its processes, developing its alternative fuel strategy, reducing operational costs to deliver strong EBITDA margins returning to historic levels.

“In the quarter, a tax credit of N39.7 billion 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,” Puchercos said.

The Company proposed a dividend of 105 kobo for approval at the Annual General Meeting scheduled for June 7.

Lafarge Africa Plc’s performance comes on the heels of 2017 outlook, an indication that local cement demand would grow between 0 and +2 per cent on account of the macroeconomic environment.

In addition, business turnaround actions will be further consolidated in 2017 through energy optimisation plan, local sourcing of production inputs, and logistics as well as commercial excellence initiatives to deliver tangible results going forward.

“We expect cement demand in South Africa to be stagnant, with 0 to -2 per cent 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,” Puchercos said.

He added that for 2017, Lafarge Africa specifically expects to return operating EBITDA margin back to historical levels, capital expenditure of N31 billion for Nigeria and South Africa operations.