Listed cement producer Lafarge yesterday held its annual general meeting in Harare. Like many other companies, Lafarge requires foreign currency to import raw materials and fund its US$25m expansion initiative aimed at doubling production capacity. The US$25million
capex is being considered by LafargeHolcim Group, subject to availability of foreign currency. This is a three pronged expansion project which will include initiatives in doubling cement capacity, capacity for Agricultural lime production and automation of the dry
mortar plant. However, foreign currency shortages are a real stumbling block and inflation is posing pricing problems for business.
Business Times senior reporter Taurai Mangudhla (T M) interviewed Lafarge CEO Kaziwe Siame Kaulule (KK) on the expansion drive and business performance. Below are excerpts of the interview:
TM: Can you briefly give an update of performance, particularly looking at demand for your product since January?
KK: As I said in my speech, the year has been strong; the first half of the year has been strong, precisely because people are using buildings as a store of value. So we see a huge demand for our products.
TM: How has that demand translated in actual volumes sold?
KK: The actual volumes, I would love to share with you in a written statement
TM: If you can’t share the actual figures sold, can you at least paint a comparison with same period prior year?
KK: Well, compared to the same time last year we are about 7 percent above.
TM: What are your projections in terms of volumes for the year?
KK: I don’t want to make very bold projections in the environment we are in, but we see the year to remain firm and I think we will finish better than last year.
TM: Foreign currency shortages have seen business going on the black market and causing prices to skyrocket. What has been your experience?
KK: For us we import between 25 and 35 percent. It depends month on month but speaking about forex, I think the interbank market is just becoming liquid, not yet as liquid as we would like which remains a bit of a challenge, but hopefully that will be resolved. In our case, we are an international company which means that we have to trade through formal platform to meet our forex demands. Fortunately in the first half of the year we have had no major shutdowns. In the second half of the year we probably need a bit more
forex and we hope by then the interbank market will be more liquid.
TM: Can you speak specifically on inflation due to foreign currency issues on your pricing?
KK: So for us… look, our pricing is really based on the cost of inputs that come in. What we are seeing is that we have got pressure on costs from a logistics point of view; raw materials have gone up so for us we have to respond appropriately to make sure we can be above those costs to tighten cost controls and also where that’s not possible then we make a reasonable adjustment to our price.
TM: A bag of cement prior to the price increases and all used to be around $9 to $11, what is the cost of a bag of cement now?
KK: Where from our plant?
TM: Yes from the plant
KK: Well, from our plant we sell in RTGS and its going for RTGS$48
TM: you spoke about the volumes, what has been the impact on the revenue side of the things and possibly profitability?
KK: I gave you the numbers. That is, 10 percent is on actual volumes, but I can’t give you a number on the revenue growth right now because the real determinant for us is to see that our volumes are growing right now then we have all of these external factors.
TM: You spoke about new investment, how much are we talking about?
KK: Look, I will share. We are still discussing with different parties to make sure we can get the forex, it’s all a question of us being able to get the forex but there are substantial investments that will change the business significantly.
TM: How much are we talking about?
KK: Our total investment is a matter of public knowledge because it was in the papers a few weeks ago. We are looking at a total investment of about US$25m to double the
capacity of the plant, to recover our dry mortar business and then to deal with a lot of these integrity issues.
TM: What is the split in terms of the investment; how much goes where?
KK: They are all industrial investments all of them are industrial. So if we can have the forex to do it we will do it
TM: Lastly, can you update us on the progress you have made accessing the foreign currency given that there is a huge backlog and corporates are failing to get as little as US$100 000 on the interbank market and you are talking about US$25 million in the same environment. What gives you such confidence?
KK: It tells you that in cement we are long term investors and we see potential. If we can get the support from relevant authorities we are going to see twice the capacity in a very short space of time.
