BY BUSINESS REPORTER
LAFARGE Cement Zimbabwe recorded a net profit after tax of $247 million in its half year results versus a net loss of $57 million in the prior year, a performance which was due to a combination of revenue growth and reduced costs.
In a statement accompanying the half year results, Lafarge chairman Kumbirayi Katsande attributed the performance in the current not-so-predictable operating environment to a strong focus on delivering the strategic agenda priorities.
Other reasons include agile responsiveness to external factors and consistency in cost rationalisation, innovation as well as efficiency in initiatives.
“The company recorded a net profit after tax of $247 million versus a net loss of $57 million prior year, same period,” Katsande said.
It closed the period under review with a 27% revenue growth and a 9% improvement in gross profit margin while operating costs were down 10% due to cost rationalisation.
“The company reported a fair start to the year, recording a marginal 1,4% growth in volumes in the first quarter against prior year in spite of a prolonged plant maintenance shut down which encroached the month of January 2020 from December 2019,” Katsande said.
“The business, however, posted a sharp volume decline of 71% in April when the country went into the COVID-19-induced total lockdown, but closed the second quarter with a strong 58% narrowing of this volume gap as the lockdown restrictions were progressively relaxed and economic activity resumed.”
The company, therefore, closed the half year at 14,1% volume decline against prior year, largely in line with market trends.
A further narrowing of this performance gap was recorded in the month of July, post the reporting period, to 6% against prior year in the same period.
Operations were weighed down by foreign currency shortages which drove up foreign exchange losses to $335 million compared to a gain of $5 million in the same period last year.
“These foreign exchange losses were mainly owing to the huge foreign obligations accumulated by the company over the last few years,” Katsande said.
“However, the recent monetary policy changes which allowed businesses to trade in foreign currency have improved foreign currency inflows for the company and the company has made significant strides in settling its foreign obligations.”
Meanwhile, Lafarge reported key progress milestones in its three-pronged capital expansion project comprising alternative power supply aimed at improving kiln efficiencies, the automation of the Dry Mortar Mix Plant and doubling of cement capacity through the installation of a Vertical Cement Mill.
“The alternative power project was concluded in 2019 with the investment in a 3-megawatt generator. In the first quarter of 2020, a ground breaking ceremony was held for the installation works for the Dry Mortar Mix plant procured from Turkey,” Lafarge said.
“The project is currently on course albeit delays incurred during COVID-19 lock-down period. Installation is expected to be concluded in the last quarter of the year. In August 2020, the company signed a supply contract for the Vertical Cement Mill with CBMI of China. Actual installation of the plant is set to commence in the first quarter of 2021.”
This expansion project which was granted national project status by the Government of Zimbabwe, is set to improve efficiencies in the business and will grow the capacity for dry mortar products by over 700% while doubling the capacity for cement production.
“The company is confident that with a robust and ambitious strategic agenda in place and the capital investment to support it, the business is poised to mitigate the negative effects of the difficult economic environment and to grow shareholder value,” Lafarge said.