Lafarge Africa saw earnings for 2023 drop to N51.4 billion for the first time in half a dozen years, during which not even waves of pandemic lockdowns battering other businesses were unable to slow the progress of its profitability.
Details of its unaudited financials for the year showed that a jump in its accrued tax liabilities for the year weighed on the bottom line.
An accumulation of obligations to tax authorities over the previous years hit N23.6 billion in 2023, translating to an 86.9 per cent surge.
Higher income from the sales of aggregate & concrete and cement, its primary product which has risen astronomically in price in recent days and has been a pain point for individual users and construction companies, were the main drivers of revenue.
The surge in cement price even propelled President Bola Tinubu to call an intervention meeting with big producers like Dangote Cement and BUA Cement after the issue became a national emergency and complicated the country’s current cost of living crisis.
The revenue of the Nigerian unit of France’s Holcim Group, the world’s biggest cement manufacturer, went up 8.6 per cent to N405.5 billion.
“In the face of very material FX devaluation losses and higher effective tax rate, Profit After Tax declined YoY by 4.7 per cent,” said Lolu Alade-Akinyemi, the CEO, in a statement.
“Our performance was largely impacted by spiralling inflation and unprecedented Naira devaluation, with the attendant pressure on energy and supply chain costs,” he added.
His spotlight was on the vulnerability of Lafarge Africa’s operations to foreign exchange pressure throughout the year, forcing the company to incur over N21 billion in FX loss, compared to N16 billion a year earlier.
The company recorded a double-digit cut in selling & distribution costs to N78.1 billion in a mark of effective cost management, notably by scaling down distribution variable costs by 11.8 per cent. Profit before tax for the year grew by 15.3 per cent.
Independent auditor Ernst & Young (E&Y) raised an eyebrow at the management of Lafarge Africa making an outrageous provision of N5.5 billion ( N4.9 billion for the group and N620 million) for deterioration of significant volume of ‘off-spec’ clinker “arising from power fluctuations and other factors in the production process.”
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Clinker is one of the key raw materials in cement-making.
“This is considered a key audit matter due to the significance of the amount and judgement exercised by management in the determination of the allowance,” E&Y said.
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