Lafarge Africa closes application offer to raise ₦132 billion via rights issue

Lafarge Africa Plc at the weekend closed application list for its ₦131.65 billion rights issue, rounding off the subscription to its major capital raising aimed at deleveraging its balance sheet and rebuilding a more supportive capital base.

Lafarge Africa had on November 24, 2017 launched an offer to raise ₦131.65 billion through a rights issue of about 3.1 billion ordinary shares of 50 kobo each at ₦42.50 per share. The new shares were pre-allotted to shareholders on the basis of five new ordinary shares for every nine ordinary shares held as at the close of business on November 1, 2017. The acceptance list opened on Friday November 24, 2017 and ran till the close of business on Friday, December 15, 2017.

LafargeHolcim, which holds the majority equity stake of 72.59 per cent in Lafarge Africa, had earlier indicated it would subscribe fully to its rights. LafargeHolcim had proposed to pick up its rights under a debt-for-equities deal that will see conversion of LafargeHolcim’s dollar-based loan to equities.

Chairman, Lafarge Africa Plc, Mr. Mobolaji Balogun, said the recapitalisation would help to reduce the group’s exposure to adverse foreign currency translation losses as experienced in 2016 following a 40 per cent depreciation of the Naira against the Dollar.

In the third quarter ended September 30, 2017, Lafarge Africa’s net finance expense jumped from ₦7.4 billion in third quarter 2016 to ₦17.31 billion in 2017.

Balogun noted that the decision of LafargeHolcim to convert existing loans into equity demonstrates the core investor’s continued belief in the Nigeria story, pointing out that the rights issue is the largest so far in the Nigerian capital market and the largest investment in a listed company by an investor.

According to him, the rights issue will help to reduce the group’s foreign currency exposure by 50 per cent while the remaining portion of the debt, with the support from LafargeHolcim, has been refinanced and hedged for 12 months.

Lafarge Africa ended the third quarter with a marginal recovery in profitability as significant increase in net interest expense constrained the bottom-line. Despite about 39 per cent growth in sales, Lafarge Africa ended the third quarter with a pre-tax profit of ₦1.08 billion.

Key extracts of the interim report and accounts of Lafarge Africa Plc for the period ended September 30, 2017 showed that sales rose by 38.9 percent to ₦223.67 billion in 2017 as against ₦161.04 billion recorded in comparable period of 2016. Gross profit also surged from ₦18.11 billion in 2016 to ₦57.31 billion in 2017. The cement manufacturer pooled operating income of ₦18.40 billion in 2017 compared with operating loss of ₦32.97 billion in comparable period of 2016.

However, net finance expense jumped from ₦7.4 billion to ₦17.31 billion. Profit before tax thus depressed to ₦1.08 billion, albeit a considerable recovery when compared with pre-tax loss of ₦40.37 billion in 2016. After taxes, net profit stood at ₦937.91 million by September 2017 compared with net loss of ₦37.4 billion in 2017. Earnings per share was modest at 10 kobo in 2017 compared with net loss per share of ₦8.27 in corresponding period of 2016.

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