Lafarge Africa Plc Q2/H1 – Strong Profitability and Balance Sheet Resilience Amid Market Headwinds

Subject: Merger with UniCem and Atlas Cement

Thesis Summary: Lafarge Africa Plc has demonstrated robust financial performance and strategic agility in Q2 2025, positioning itself as a strong contender in the Nigerian cement industry. With substantial growth in revenue, profitability, and strategic expansion through mergers, Lafarge is set to unlock significant value for investors.

Strengths:

• Outstanding Financial Performance:
  • Revenue grew by 70% YoY in Q2 2025 to N268.63bn (Q2 2024: N157.8bn).
  • Operating Profit surged by 153% to N120.61bn, indicating improved operational efficiency.
  • PAT grew by 248% to N84.03bn, driven by solid execution and minimal FX losses.
• Operational Excellence:
  • Margin expansion reflects effective cost management, scale efficiencies, and improved logistics and distribution systems.
  • Management’s focus on innovative product offerings and operational strategies continues to enhance resilience and competitiveness.
• Merger Synergies:
  • The approved merger with UniCem and Atlas Cement will consolidate Lafarge’s position in the market, enhance distribution capabilities, and streamline operations.
  • This vertical integration is expected to lower logistics costs and strengthen supply chain reliability.
• Stable Currency Environment:
  • The relative stability of the naira during Q2 supported earnings growth by minimizing foreign exchange losses—previously a major cost driver.
• Sustainability Focus:
  • The company’s “Accelerating Green Growth” strategy positions it well for long-term ESG-conscious capital flows and compliance with future regulatory expectations.

Weaknesses / Risks:

• Macroeconomic Headwinds:
  • The company remains exposed to inflationary pressures and a still-volatile forex market, which may erode purchasing power and impact construction demand.
• Execution Risk on Merger:
  • While the merger is strategically sound, integration challenges may arise, potentially disrupting short-term operations if not efficiently managed.
• Dependence on Building Sector Growth:
  • Although the outlook remains positive, any sharp contraction in the building and construction industry could adversely affect revenue and capacity utilization.

Outlook & Valuation:

Given the exceptional growth trajectory, strong operational control, and potential upside from merger synergies and expanding market share, Lafarge Africa is well-positioned to sustain earnings momentum into H2 2025 and beyond.

At current earnings growth rate and improved balance sheet outlook, we expect EPS to significantly improve year-on-year, and the company may be positioned for enhanced dividend capacity in FY 2025.