By OLUSHOLA BELLO, Lagos
Lafarge Africa Plc has announced the sale of its South African subsidiary with consideration being all of its outstanding inter-group debts amounting to $316.289 million to Caricement B.V, a subsidiary of LafargeHolcim.
The firm said that LafargeHolcim agreed to purchase the shares for the consideration being a set-off of all the outstanding amounts due by the company to Caricement under the Inter-Group Loan Agreements at the closing date, which is July 31, 2019.
In the explanatory note to the Nigerian Stock Exchange (NSE), Lafarge listed benefits of the transaction, which is its only existing foreign currency loan, to include an enhancement of the value of its shareholders’ investments in the company, which is of utmost importance to the Board.
The deal, it continued, will free it of any foreign currency debt obligation, while protecting and preserving its net income and cash flows considering the resulting decrease sums to be applied towards debt service as on the overall the Company’s debt will be reduced by about N115 billion and an additional approximately N47 billion by the eventual deconsolidation of Lafarge South Africa Holdings.
Following the conclusion of the transaction, the company stressed that the only debt on its books will be the second tranche of the Corporate Bond (N33.8 billion) with maturity in June 2021, and the CBN Power Intervention funds through Bank of Industry (N19.9 billion).
The improvement in cash flow and net income, resulting from the reduction in debt service outflows, it continued, will enable Lafarge Africa to consider additional investments in cement production capacity to improve its market share in Nigeria.
Lafarge said that the sale is equally expected to boost the company’s profitability, through positive cash flow generation. According to the company’s audited results for the year ended December 31, 2018, loss after tax dropped to N8.801 billion from N34.801 billion in 2017, translating to a loss per share of N105 as against the previous N637.
Group operating profit for the year stood at N24.885 billion, despite the N38.602 billion from the Nigerian operations, which was impaired by the N13.717 billion loss by South Africa.
This was an improvement from the N7.885 billion recorded in 2017 with South Africa’s N22.27 billion loss dragging down Nigeria’s N30.155 billion profit.
The group explained that “The sale of the South African operating unit to its LafargeHolcim will also Lafarge Africa’s cash flow and net income, given the reduction in debt service outflows, besides cutting annual interest expense by about N9.1 billion on account of the full repayment of the foreign currency inter-company loan.
“It is expected to further enable Lafarge Africa to reinvest and expand operations in existing plants; just as its management can now devote attention to operations with higher profitability and prospects.”