BUSINESS REPORTER
Cement maker, Lafarge Cement Zimbabwe, is feeling the heat of the influx of cheap imported cement threatening the viability of both the company and the local cement industry.
In a statement accompanying the full year results to December 2022, Lafarge board chairman Kumbirayi Katsande said buyers are opting for cheap imports.
“The influx of cheap imported cement posed a serious threat to the domestic industry which has enough capacity to meet national demand. Constructive engagement continued with the regulatory authorities in an endeavour to obtain the required support,” Katsande said.
“The need to regulate cement imports is likely to be the dominant factor in the company’s performance for the year 2023.”
Revenue for Lafarge in the year to December 31, 2022 was almost flat at ZWL$24.4bn compared to ZWL$24.6bn achieved in 2021.
Cement production volumes decreased by 15% as a result following the cement mill roof collapse incident, production ramp up after the commissioning of the Vertical Cement Mill (VCM) was also slow as tests had to be conducted before the mill could perform at optimal levels.
Sales volumes decreased by 19% in line with the trend in production volumes.
The company also witnessed increased costs as a result of increased third party and plant maintenance costs.
Consequently, margins dropped to 32.5% compared to 49.6% in the prior year.
The company suffered a loss of ZWL$ 17.2bn in 2022 from a profit of ZWL$1.6bn due to reduction in cement production volumes.
Lafarge managed to maintain a tight control over its operating expenditure as total expenses fell by 7.6%.
Distribution expenses declined by 77.1% whilst administrative costs remained fairly constant over the comparative period.
Exchange rate losses increased by 490% and were the major driver of the decline in profitability.
The dry mortars business performance was adversely affected by raw material shortages, including key imported materials, owing to foreign currency shortages. The company had net long term borrowings of ZWL$9.2bn for the year under review from ZWL$2.3bn in 2021.
The business concluded the implementation of the previously announced US$25m capital expansion programme.
The final phase of this three-pronged investment plan was the commissioning of the VCM in 2022, following the successful installation of alternative power infrastructure in 2020 and the completion of the automated dry mortars plant in 2021.
The company resumed production of cement at both mills in mid-February 2022 following the October 2021 incident which resulted in the roof over both cement mills collapsing.
During the second half of the year, the company successfully commissioned the VCM and subsequently decommissioned Mill 1 which had the least capacity.
The VCM doubled the company’s milling capacity to one million tonnes per annum and bolstered its ability to supply high strength cement of improved quality and, at the same time, reduced the production costs.
Katsande said the company will also continue to adapt its business strategy so as to thrive in the ever-changing environment.
