GCR Affirms Lafarge Africa’s AA+, A1+ Credit Ratings, Outlook Stable
GCR Ratings (GCR) has affirmed Lafarge Africa Plc’s national scale long-term and short-term issuer ratings of AA+(NG) and A1+(NG), respectively. The African focused ratings agency also stated that the outlook on the rating is accorded as stable.
The ratings affirmation is supported by Lafarge Africa Plc’s strong financial profile underpinned by robust cash generation that has resulted in sustained sizable cash holdings, GCR said.
It also reflects the group’s net ungeared position over the review period. Ratings analysts note the improvements to capacity utilisation rate, but intense competitive pressures have seen the group ceded some market share.
During 2024, Lafarge Holcim Group sold controlling stake to Huaxin Cement Ltd. The transaction did not have a financial impact on Lafarge Africa Plc (LAP) and operations have not been impacted by the change in ownership.
Ratings analysts said they would expect Huaxin to outline a strategy for the company in the coming year and GCR will thus track if this will influence performance and financial profile over the outlook horizon.
Lafarge Africa’s business profile is underpinned by sizable installed production capacity, high utilization rates relative to peers, a broad customer base and strong footprint in Southwestern Nigeria, according to GCR.
Nevertheless, while Lafarge has continued to increase production volumes, its competitive position has been somewhat challenged by substantial investments in new capacity by key competitors resulting in a decline in the company’s market share by capacity to 14%, compared to the historical average of 18%.
GCR stated that Lafarge’s strategic emphasis on unlocking capacity through debottlenecking its plants and upgrading infrastructure, which are expected to increase operating efficiency and boost market share.
The group’s sustainability assessment remains neutral. We acknowledge the legal dispute between the minority shareholders and the Lafarge Holcim regarding the Huaxin transaction and would negatively consider any outcomes or actions that undermine minority shareholders rights.
Earnings remain positive to the ratings, reflecting consistent growth over the cycle. Lafarge Africa’s revenue increased 71.5% to a high of NGN696 billion in 2024, following slower growth in 2023.
GCR said the strong performance was driven by higher industry-wide cement prices and an uptick in traded volumes.
The company earnings before interest tax depreciation and amortisation (EBITDA) also improved to 40% in H1 2025, compared to the five-year average of 30%, supported by cost-saving initiatives including enhanced logistics, energy efficiencies and an improved ability to pass through cost increases.
With annualized revenue increasing 49% in H1 2025 on the back of sustained strong public sector demand and elevated prices, GCR Ratings analysts said they expect the seasonally stronger second half to support full year revenue above NGN1 trillion.
Lafarge Africa’s strong net cash position supports GCR’s leverage considerations. The group’s gross debt amounted to NGN2.2 billion in 2024 and NGN1.7 billion at H1 2025 from NGN26.2 billion in 2023, comprising largely of lease liabilities.
“This compared to cash holdings of over NGN200 billion. Free cash flow has been driven by robust cash generation, with operating cash flow coverage of gross debt consistently exceeding 200%, despite increased working capital absorption”, GCR wrote.
Lafarge Africa’s net interest coverage narrowed to 13x in 2024 from 452x in 2023 due to high bank charges on open letters of credit (LCs) but is expected to rebound for full year 2025 as the LCs have been settled.
Ratings analysts at GCR said they expect the strong leverage metrics to be sustained over the outlook period, adding that Lafarge Africa’s liquidity profile remains a key rating strength, supported by a substantial cash balance of NGN210 billion as of 30 June 2025 and expected robust operating cash flows over the next 18 months.
GCR revealed that the company’s scheduled debt repayment is minimal at about NGN500 million, while projected capital spend is modest. Overall, liquidity sources are projected to cover uses by 3.5x over the 18-month period to 31 December 2026, GCR said.
However, ratings analysts highlighted that a strategic shift by the new majority shareholders towards aggressive capital expansion or cash stripping could introduce uncertainties regarding the group’s liquidity position.
“The stable outlook reflects our expectation that LAP will sustain a robust financial profile over the next 18 months, supported by substantial cash reserves, sustained sound cash flows and an ungeared balance sheet.
“While there is some uncertainty around the strategic approach of the new majority shareholders, we take comfort in LAP’s solid financial fundamentals and sizeable liquidity buffers, which we believe position the group to absorb potential shocks and maintain stability over the outlook horizon,” GCR stated. Fidelity Bank Drops by 11% amidst Lingering Earnings Delay