Lafarge Africa plans to cut debt by 2020

Lafarge Africa Plc, the continent’s second-biggest producer of cement, plans to cut debt in the next two years as it seeks to boost profit before resuming expansion, the company’s Chairman, Mr. Mobolaji Balogun, said.

The cement maker expects its leverage ratio, which measures the level of debt incurred by a business against its assets, to drop to between 60 per cent and 70 per cent “over the next 18 months,” from more than 100 per cent, Balogun said in an interview in Lagos, according to Bloomberg.

The company sees earnings before interest, taxes, depreciation and amortization more tolerable at about $200m this year.

“As soon as the debt becomes more comfortable, we don’t sit there, we will put the foot down on the next round of expansion,” he said.

The African unit of Switzerland-based LafargeHolcim wants to take advantage of improvements in the Nigerian economy and a recovery in South Africa to expand and boost profit.

According to Balogun, its total debt dropped to about $600m from more than $1bn after using funds, including the proceeds of a N131bn ($361.7m) rights offer, to curb liabilities.

The company’s Chief Financial Officer, Bruno Bayet, said in April that the company planned to raise an additional N100bn when necessary.

Lafarge incurred debt to expand capacity at its cement plant in Calabar, southeast Nigeria, and plans to add more production to plants in the southwest and the north, according to Balogun.

Lafarge’s main rival, Dangote Cement, said in April that it was investing heavily on expansion, with $350m earmarked for capital projects this year. Africa’s biggest producer of the building material, owned by the continent’s richest man Aliko Dangote, also said it will consider a London share sale over the next two years.

The Nigerian economy expanded 1.95 per cent in the three months through March from a year earlier, after contracting in 2016. It is forecast to grow 2.1 per cent this year by the International Monetary Fund. South Africa’s central bank expects the economy to expand by 1.7 per cent this year from an earlier forecast of 1.4 per cent.

Nigeria is a more than a 50-million-tonnes market for cement and will in 10 years be one of the top eight producers globally, according to Balogun.

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