Lafarge engages Govt on CAPEX projects

June 23, 2022

BUSINESS REPORTER  

 

Lafarge Cement Zimbabwe is engaging the government as it seeks to raise more foreign currency to undertake capital expenditure projects with forex sales only covering part of the company’s operating requirements, CEO Geoffrey Ndugwa has said.

The company gets 15% of its sales in foreign currency and the remainder in local currency.  To cater for its foreign exchange needs, the company also gets foreign currency from the auction and the interbank, Ndugwa told a meeting  of shareholders in Harare yesterday.

The CAPEX projects require more substantial forex, he said.

“We are engaging government on the financing of these capital projects,” Ndugwa said.

In an update to shareholders, the Lafarge Zimbabwe CEO said the first half of 2021 was characterised by lockdown restrictions due to Covid-19, while the second half saw a phased reopening of the economy.

This impacted the company’s performance and additionally, the company suffered a significant disruption when the roof over the cement mills collapsed on October 10, he said.

“This combination of the Covid-19 induced interruptions and the roof collapse contributed to cement volumes declining by 21% versus the prior year. Inflation-adjusted turnover declined by 35.5% to ZWL$7.2bn while total expenses were tightly controlled,” Ndugwa said.

“Gross profit margins were squeezed due to the sale of the less profitable clinker to generate cash. The combined adverse impacts of volume and gross profit margin decline more than offset the cost-containment efforts to result in a loss before tax of ZWL$364m.”

In the outlook, the company is “cautiously optimistic” that the Covid-19 headwinds will soon be “behind us” which should support general market recovery.

However, rising commodity prices due to the Russia-Ukraine conflict and rising local inflation will continue to undermine the post-Covid-19 gains, Ndugwa said.

He said the company’s volumes are expected to recover to be comparable with the prior year following the restoration of the cement mill house roof.

“In addition, the commissioning of the new VCM [vertical cement mill] in the second quarter will double the company’s cement production capacity and also improve raw material availability for the Dry Mortars plant,” Ndugwa said.

Lafarge recently announced that Fossil Mines has entered into a binding agreement with the Holcim Group to take over the Zimbabwe cement maker.

Yesterday’s AGM reappointed Muchadeyi Masunda and Susan Mutangadura as directors of the company and approved the appointment of Ernst and Young as auditors for the ensuing as Deloitte & Touche retires having audited the company for the past 5 years.

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