Impairments push Lafarge Africa to 2017 loss, shares sink

A 33 billion naira ($105 million) write down on Lafarge Africa’s (WAPCO.LG) operations in South Africa and Nigeria pushed the cement firm to a wider loss in 2017 than the previous year, sending its shares sharply lower.

The one-off impairment charge left the African division of Franco-Swiss group Lafarge Holcim (LHN.S) with a pretax loss of 34.03 billion naira, it said on Monday, just months after making its first capital increase in a decade. That figure missed market forecasts and was down from a loss of 22.82 billion naira in 2016, and the division’s Lagos-listed stock fell more than 7% after earlier touching a one-year low.

Its CFO, Bruno Bayet, said that, after a year of restructuring, he expected 2018 to bring growth. “The operations in Nigeria are still very robust and we have maintained strong performance,” he told Reuters. Lafarge Africa’s sales rose 36% last year, he said.

Nigeria’s cement industry has been hit by slow demand arising from weak economic growth in Africa’s most populous nation, which recently emerged from a recession and a currency crisis that made dollar loans more expensive. In South Africa, many construction firms are struggling, partly due to a slow roll-out of a government infrastructure investment package, fuelling competition.

To cut debt, Lafarge Africa raised 132 billion naira ($420 mln) through a rights issue in November. Analysts had forecast profit before tax of 13.6 billion naira for 2017, according to a consensus forecast. “This is a negative earnings surprise. The real challenge is, are these impairments completely done or will there be more to come,” one said.

Bayet said 12.5 billion naira of the impairment was for a road project leading to its cement plant in the southeastern Nigerian city of Calabar which had taken too long to construct. The rest covered restructuring costs associated with merging its Nigerian operations, and its loss-making assets in South Africa, where the firm had changed its management team.

He said core profit doubled to 58 billion naira in 2017.