LAGOS (Sundiata Post) – WAPCO reported loss after tax of N30.2 billion in H1’16 following another disappointing quarter. In line with the profit warning earlier released by management, Q2 performance of Nigeria operations was depressed by unrealized foreign exchange losses of c.N28 billion (on dollar denominated loans) amidst the 42% currency devaluation in June.
Following the slump in Q1 topline in Nigeria operations, it is anticipated that the 8% price increase effected in the final week of Q1, coupled as return to normalcy in South West and South East operations (following plant maintenance in Q1 and recovery from Q4 flood) to drive recovery in subsequent quarters.
While the price increase came to play as average cement prices in Nigeria rose 16% Quarter-on-Quarter (q/q) in Q2, volume recovery expectation was cut short by disruption to energy supply. Gas supply was down to 75% and 50% from 88% and 90% in South West operations and South East operations in Q1 respectively.
Amidst upgrade to coal mill, coal use in Ashaka Cement declined to the 60s percentile (Q1:80s). Overall, group Q2 revenue could only recover 5% q/q to N54.9 billion even with a 23% q/q growth in the South African operation.
SundiataPost gathered that there are ongoing plans to increase the use of alternative fuel in South West and South East operations in a bid to mitigate energy risks going forward.
Having raised N60 billion in the first tranche of its N100 billion bond programme (Interest rate of 14.6%), management explained that it is still weighing options on whether to explore the headroom to pay down more of its foreign currency loans.