Earnings Report /
Bangladesh

LafargeHolcim: 2Q CY22 - 10% profit growth driven by one-off tax adjustment

  • The sale of grey cement logged 6.5% growth while the revenue aggregates unit recorded 76.3% YoY growth

  • 2Q 22 GPM stood at 35.3%, up by 134bps YoY as cement makers raised retail prices to pass on the increased costs

  • LHBL had one-off tax adjustment, improving bottom-line by 10%. The effective tax rate was negative in Q2 CY22

Shopnil Paul
Shopnil Paul

Research Associate

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IDLC Securities
24 July 2022
Published byIDLC Securities

LHBL BD reported 2Q CY22 NPAT of BDT 1,229mn (EPS: BDT1.06), implying c10% YoY growth against NPAT of BDT 1,117mn (EPS: BDT0.96) in 2Q CY 21. The growth in bottom-line earnings is attributable to 6% growth in top-line revenue, 134bps improvement in gross margin and lower effective tax (due to deferred tax adjustment). In 6M CY22, the net profit remained flat at BDT 2,173mn (EPS: BDT 1.87).

Revenue stood at BDT 5,014mn, growing by c6% YoY in Q2 22. The sale of grey cement logged 6.5% growth while the revenue aggregates unit - the newly added segment recorded 76.3% YoY growth. The aggregates unit accounted for 13% of the top-line revenue of the cement manufacturer in the latest quarter. Please note that, the aggregate unit is more profitable than the cement and clinker wing. In 6M CY22, the aggregate unit’s operating margin was 54% vs 21% operating margin of cement & clinker segment.

2Q 22 GPM stood at 35.3%, up by 134bps YoY. The price of clinker in the international market continued to spiral from Q3 20. After a short-lived price slump, cement makers raised retail prices to pass on the increased costs to customers and to recover quickly from the COVID brunt. This came as a boon for LHBL as it has its own source of raw materials, improving the gross margin of the company.

The increased net finance cost flattened the before tax profit. In 6M CY22, LHBL incurred exchange loss of BDT 97.7mn against an exchange gain of BDT 11.5mn in the first half of the previous year. This is due to the BDT depreciation of 7.8% against USD in Q2 CY22.

LHBL had one-off tax adjustment, improving bottom-line by 10%. The effective tax rate was negative in Q2 CY22. Resultantly, the NPAT margin increased by 93bps in the quarter.

LHBL declared BDT 1.5/share interim dividend based on 6M CY22 earnings. The pay-out ratio stands at 80%.