Operating efficiency Buoys Lafarge WAPCO Earnings
Lafarge Africa Plc has announced a 60% year on year surge in profits from continuing operations in its unaudited Q2’20 results.
Equity research analyst at Cardinalstone expressed that the impressive performance reflected improvements in cost efficiency.
The key highlights of the result shows that revenue declined by 5.1% to ₦56.8 billion in Q2’19.
On this revenue miss, analysts attributed the decline as a reflection of a slowdown in volumes occasioned by COVID restrictions.
Compared to Q1’20 numbers, Q2’20 revenue was 10.8% lower.
Analysts said WAPCO took operating efficiency up a notch in Q2’20, demonstrated by the 5.8 percentage points increase in gross margin to 42.4%.
The firm recorded significant cost savings in the period.
For example, raw materials and consumables cost sloped down 51.2%, cost of fuel & power dropped 7.8% and other production costs went down 44.7% year on year.
This pushed margin up despite a tough operating environment that underscore the second quarter of 2020.
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Operating margin expanded by 9.97 percentage points to 37.2% in Q2’20 as a sharp contraction in office and general expenses bolstered the impact of cost-efficiency.
Then, ability of the management to deleveraged balance of the group paid off, after the sales of margin dilutive subsidiary in South Africa.
Specifically, WAPCO’s finance expense declined by 68.6% to ₦1.95 billion as the business continued to benefit from previous deleveraging efforts
In line with the improvement in operating performance, net cash balance rose by N18.9 billion quarter on quarter to ₦38.5 billion at the end of the review period.
Free Cash flow to equity (FCFE) per share stood at a healthy ₦1.3 per share compare with negative ₦3.67 per share in the comparable period in 2019.
Operating efficiency Buoys Lafarge WAPCO Earnings
