eBusiness Weekly
Enacy Mapakame
Cement producer, Lafarge Cement Zimbabwe Limited’s profit for the year to December 31, 2019 surged 2000 percent to $178 million although volumes remained flat.
The group maintained sales volumes at prior year levels of 323 000 tonnes although the construction industry suffered a 14 percent decline during the same year, according to the Reserve Bank of Zimbabwe (RBZ).
The business achieved improved margins as gross profit rose 251 percent to $496 million from $141 million recorded in 2018.
Chairman, Kumbirai Katsande, said the improved margins were realised as a result of focus on agile pricing and disciplined cost management across the business.
The period under review was a challenging operating environment with high inflation and businesses struggling to access foreign currency. Government also implemented fiscal and monetary reforms that had an impact on the economic environment, key among them being the discontinuation of multi- currency trading environment as well as the return of the local currency, which experienced a 571 percent depreciation by close of the year.
In order to address the foreign currency shortages, Government introduced the interbank market in February although it did not achieve the desired results.
“ . . . Businesses continued to be plagued with shortages of foreign currency refused for operations,” said Katsande.
During the year under review, the company achieved a revenue growth of 104 percent to $919 million compared to $449 million achieved in the comparable year. According to the group the Individual Home Builder (IHB) catalyst continued to contribute significantly to the business’ top line.
The business revalued it’s property, plant and equipment and this resulted in a net after tax revaluation gain of $310 million subsequently leading to a full year comprehensive income of $488 million.
Lafarge began to implement its US$25 million capital expansion programme. The major projects the group will invest in are many to enhance cement milling capacity, automate the Dry Mortar Mix (DMX) plant and improve production of agricultural like and other key projects to improve power supply and cement storage.
Manufacturing of the US$2 million DMX equipment was completed and installation is set to be completed in the second half of the current financial year.
Katsande said the investments will increase the business’ manufacturing platform and boost its productive capacity.
While the obtaining economic challenges are expected to continue in the short to medium coupled with Covid-19 induced problems, management believes it’s not all doom and gloom as new opportunities will arise.
“Demand will inevitably decline in response to the new fundamentals that comes with the impact of Covid-19.
“However, new opportunities are likely to be present in the coming year as the economy continues to evolve.
“With a dynamic strategic agenda in place and the capital investment to support it, this should go a long way to mitigate the negative effects of a difficult schooling environment,” said Katsande.
Lafarge did not declare a dividend.
