Lafarge Africa poised for further growth

By Folakemi Emem-Akpan

Introduction

Lafarge Africa Plc (HBM Plc) delivered a strong financial performance in 2025, supported by higher revenue, improved profitability and stronger returns on assets and equity. Despite persistent pressure on consumers’ purchasing power, the construction industry continued to benefit from Nigeria’s infrastructure and development needs.

Lafarge’s turnover rose significantly, while its cost profile improved, allowing profit to grow at a much faster pace than revenue. The company also strengthened shareholder returns through higher earnings and dividends.

It is important to note that the company changed its name to HBM Nigeria Plc on July 13, 2026. The company was previously part of the Holcim Group (formerly LafargeHolcim), one of the world’s largest cement manufacturers. In 2025, Holcim sold its controlling stake in Lafarge Africa to Huaxin Cement Co. Ltd., a major Chinese cement producer. The name change is to reflect the company’s new ownership and long-term strategy. However, for the purpose of this analysis, we will use the name with which it closed its 2025 financial year, which is Lafarge.

Core Operations

Lafarge had a relatively good year in 2025, operationally.

As has been the case for a while, the company generated higher revenue, with turnover improving by 53 per cent to a three-year high of N1.07 trillion. While Nigerian consumers generally experienced reduced purchasing power in 2025, companies operating in the construction industry recorded good returns, as Nigeria remains a developing economy with significant infrastructure and construction needs.

It is important to note that Lafarge’s increase in revenue was achieved alongside a slower rate of growth in its cost of sales and operating expenses. For instance, its operating cost margin, which measures how much of a company’s revenue is consumed by its operating expenses, was 21.5 per cent, down from, and therefore better than, 23.0 per cent in the preceding year.

The company then declared a pre-tax profit of N411.3 billion and an after-tax profit of N273.1 billion for the 2025 financial year. These indices represent improvements of 170 per cent and 172.8 per cent over the N152.3 billion and N100.1 billion recorded in 2024, respectively.

Earnings per share was predictably higher than in the preceding year, as was dividend per share. EPS for the year was N16.96, compared with N6.22 in the previous year. The company also paid shareholders a dividend of N6.00 per share for the year, compared with a DPS of N1.20 in the prior year.

Profitability Ratios

Not only did the company’s ability to generate revenue improve in 2025, so did its ability to retain the revenue it earned. For the year, it recorded a profit margin of 38.6 per cent, its best performance in years. Analysis shows that for every N100 earned by the company during the year, it recorded a profit of N38.60, compared with profits of N21.90 and N19.40 in the preceding years.

Assets deployed also generated significantly higher profits, with return on assets for the year standing at 34.0 per cent in 2025, compared with 15.4 per cent in 2024.

Equity employed also paid off handsomely, with ROE rising to 39.4 per cent in 2025, up from 19.8 per cent in 2024.

Our analysis shows that each N100 worth of assets deployed earned the company N34.00 in profit, while each N100 worth of equity employed earned it N39.40 in profit. These are some of the highest ratios in the Nigerian operating environment.

During the course of the year, the company employed a higher number of staff, and its earnings per employee jumped to an average of N721.4 million per employee, compared with N478.9 million in the prior year. This represents another positive result.

Other Ratios

A common feature of the manufacturing industry during the 2025 financial year was that most companies had high current ratios, indicating an ability to meet short-term liabilities with short-term assets. Lafarge was not an exception, recording a more than adequate current ratio of 1.34 times.

A debt-to-equity ratio of 0.7 shows that the company is using 70 kobo of liabilities for every N1.00 of shareholders’ equity. This performance ratio measures financial leverage, indicating how much debt finances the company relative to shareholders’ investment. Higher ratios generally suggest greater financial risk, so it is important to note that Lafarge is currently in a relatively favourable position.

Sustainable Growth

For the review year, the company’s retention ratio was 0.65 times, down from 0.81 times in 2024. This means that the proportion of earnings retained in the business instead of being distributed as dividends was lower. While a higher ratio generally indicates that more earnings are being reinvested for future growth, the portion Lafarge retained is still high enough to support its future growth.

With a higher profit margin for the year, a lower retention ratio, higher asset turnover (0.88 times in 2025 compared with 0.70 times in the prior year), and a lower assets-to-equity ratio (1.74 times in 2025 versus 1.96 times in 2024), the sustainable growth rate for the year was 38.3 per cent.

At 38.3 per cent, compared with 24.4 per cent in the prior year, the company increased the rate at which it could grow using internally generated profits without raising additional external equity or significantly increasing leverage.

Meanwhile, the company’s actual growth achieved over the period was 53 per cent. When compared with the sustainable growth rate of 38.3 per cent, this suggests that the company may need additional borrowing or equity financing to support its growth if it continues to grow faster than its sustainable rate.

Stock Value

On August 18, 2026, the market price of Lafarge was N334.00, making it one of the more expensive stocks on the Nigerian Exchange (NGX). Net assets per share stood at N43.08, which is about one-seventh of the current market price.

The company is also worth much less on a book-value basis than its current market valuation suggests, as shown by its significantly higher market capitalisation compared with its book value. While its book value is N693.9 billion, its current market capitalisation is a much higher N5.338 trillion.

Our analysis shows that the stock is overvalued. Investors are paying a premium to own the stock, possibly because they expect strong future growth and profitability.

The stock is also relatively expensive and may not be an easy buy for prospective investors because of the large capital outlay involved. For investors who have the financial capacity, however, we recommend a buy despite the overvaluation.

The share price has exceeded N334.00 in the past, and we expect that it could do so again in the future. It is also an attractive option for investors seeking steady dividend income.

Unaudited Results

The 2026 financial year appears to be shaping up to be a strong one for Lafarge and its shareholders. The company recorded higher turnover in its first-quarter results compared with the corresponding period in 2025, while profit for the period stood at N97.9 billion, representing a 100 per cent improvement over the N48.6 billion profit recorded in the corresponding period of 2025.

Earnings per share for the period was N6.08, also 100 per cent higher than the N3.02 EPS recorded in the corresponding period of 2025.

Unique Strategies

Lafarge’s profitability and relevance strategy combines cost optimisation, energy efficiency, product innovation and market expansion. It reduces costs by using alternative fuels and waste in production, while developing lower-carbon building solutions to meet changing customer and environmental needs.

The company also strengthens distribution, expands retail channels, improves plant efficiency and increases production capacity. By combining sustainability with operational efficiency, innovation and customer-focused solutions, Lafarge seeks to reduce costs, grow market share and remain competitive.

Conclusion

Overall, Lafarge Africa delivered an impressive 2025 performance, with stronger revenue, profitability, shareholder returns and operational efficiency. Its 2026 first-quarter results also suggest that this momentum may continue. Although the stock appears overvalued relative to its book value and requires significant capital, its profitability, dividend prospects and growth outlook make it attractive for investors with a long-term perspective. Continued cost control, innovation and expansion will remain important to sustaining performance.

Sources:

* Lafarge’s 2025 Financial Report

* Lafarge’s 2026 First-Quarter Unaudited Results

* Nigerian Stock Exchange