HomeBusiness DigestWeak demand, falling volumes hit Lafarge

Weak demand, falling volumes hit Lafarge

LAFARGE Cement Zimbabwe Ltd’s after-tax profit plunged to US$80 950 from US$3,4 million in the full year to December 2013 owing to a reduction in sales volumes and weak demand.

Chris Muronzi

Finance costs also ate into the company’s bottom line with a charge of US$934 350, up from US$692 677 in the prior period.

Management said this was largely due to increased borrowings.

The company borrowed US$4,8 million for capital expenditure programmes the company undertook in FY14. According to the company, a total US$7,2 million went into capital expenditure.

Last year the company said it would spend over US$10 million in plant upgrade to increase product output to 500 000 tonnes per year.

Of the US$7,2 million, a total US$4,9 million went into limestone quarry development while other funds went into maintenance of machinery, management said.

The company produced 317 000 tonnes.

Turnover fell by 11% to US$60,5 million from US$67 million in the prior comparative period.

Lafarge CEO Amal Tantawi told analysts and journalists at an analysts media briefing held in the capital this week that the decline in revenues was largely because of a decline in local sales volumes which tumbled 7% and weak demand in the aggregate market owing to a general economic decline.

She also said the market wanted a high strength product which the company did not offer at the time, prompting the company to launch Superset cement.

Tantawi said selling prices had also been affected, forcing the company to reduce prices by 3%.

“The price reduction was in response to the market. You cannot work in isolation,” she said.

Pretoria Portland Cement and Sino Zim are the firm’s other competitors.

“We are optimistic about the medium to long term despite the economic challenges,” she added.

Tantawi said there is potential investment Lafarge Zimbabwe is pursuing, but said the local unit has not yet got the nod from its holding company.

Operating profit before other income, finance costs and taxation stood at US$1 million from US$5,6 million.

The group last year put in place incentives to encourage cash and early payments to embolden a cash payment culture.

Tantawi said the credit facility is accessible to clients who have a good credit rating and the facility runs for 30 days.

She said the company’s credit facility is backed by collateral. “We are very strict post the 30 day period,” she said.

Tantawi said Lafarge has around 30% market share and sold 99% of its products in the local market.

Lafarge Cement Zimbabwe, formerly Circle Cement, is a subsidiary of the Lafarge Group. The Lafarge Group is a world leader in cement and other building materials. Lafarge appointed Tantawi as CEO last year, succeeding Jonathan Shoniwa who was elevated to the position of executive chairman following Muchadeyi Masunda’s departure.

Prior to her appointment, Tantawi was at Lafarge Pakistan Cement Ltd.

The Lafarge group operates in over 64 countries, generating annual sales of around €16 billion.

It owns 76% of the Zimbabwean unit, while 21% is held by locals.
The remaining 3% is also foreign-owned.

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