Lafarge Africa Plc, the cement-producing and marketing company, bowed to operating pressure from cost and income in the first quarter, and its profit slowdown in 2022 extended to a drop in the first quarter.
The group profit dropped by 15 per cent to N14.9 billion at the end of the first quarter of 2023, down from N17.6 billion in the same period last year. This reflects further weakness after a sharp slowdown in 2022 when profit dived from a 65.4 per cent leap in 2021 to a 5 per cent improvement to N53.6 billion.
The company’s interim financial report for the first quarter ended March 2023 shows that the pressure is from the top to the bottom line.
Sales revenue only inched up at 1.3 per cent quarter-on-quarter to close at N91.8 billion for the quarter. This is an equally sharp slowdown from an increase of 27.3 per cent in turnover to over N373 billion at the end of 2022.
Cement sales is the dominant revenue source of the company and the inability to improve revenue despite the price increase of the product points to a fundamental constraint in volume. The company said demand for cement has slowed down since the second half of last year.
Management’s cost controls reined in input costs and saved a lot of costs that helped to dilute the impact of the constraint on sales revenue.
Cost of production dropped by 6.4 per cent quarter-on-quarter to N45 billion against the marginal increase in sales revenue. The decline represents the saving of as much as over N3 billion, which helped to prop up gross profit.
The cost saving enabled an increase of N4.3 billion in gross profit – which amounted to N46.5 billion at the end of the first quarter.
Selling and distribution costs however could not be contained, which consumed more than all the cost saving from the drop in production expenses.