Lafarge debt balloons to $4,8m

HARARE - Lafarge Cement Zimbabwe Limited (Lafarge)’s short-term borrowings ballooned by 380 percent to $4,8 million in the year to December 2014 from $1 million in prior comparable period as the company battled to meet working capital requirements.

As a result, the listed cement manufacturer incurred an additional $200 000 in finance costs during the period under review.

Amal Tantawi, Lafarge’s managing director, told analysts on Wednesday that the increase in debt was a result of low sales volumes coupled with late payments from customers due to the prevailing liquidity crisis.

In the period under review, profit after tax slumped by 97,8 percent to $80 950 from $3,5 million recorded in 2013 due to low sales revenue and high operating costs.

This comes as industry experts say cement demand in the country has generally been subdued due to depressed construction activity with most sales being driven by residential construction projects.

Tantawi noted that Lafarge recorded a modest operating profit before other income, finance costs and tax of $1,1 million which was $4,6 million adverse to that achieved in 2013.

“Despite total income declining by 11 percent to $60,4 million following a seven percent reduction in sales volume and a three percent drop in cement selling prices, Lafarge managed to invest $7,2 million in capital expenditure, of which $4,9 million went towards limestone quarry development,” she said.

Tantawi added that the Zimbabwe Stock Exchange-listed cement maker plans to spend an additional $1 million on enhancing operational efficiencies.

“This year we are planning to improve on operational performance. We are also purchasing additional mobile equipment needed to improve levels of production, reduce the dependency on sub-contractors and expect to see significant cost savings as a result of these initiatives,” she said.

Tantawi noted that the company had been working closely with sub-contractors and had seen a reduction on their limestone costs by 25 percent.

In the period under review, Lafarge managed to produce a total volume of 312 000 tonnes compared to 337 000 tonnes in 2013 as aggregate demand remained lower than anticipated.

Basic earnings per share declined to 0,1 cents per share from 4,4 cents in 2013.

Going forward, Tantawi said the company was looking to its high strength product Supaset to spur revenue streams in the current financial year.

“There has been a shift of demand to high strength cement so we will be focusing on the Concrete Product Manufactures (CPM) with our new product Supaset,” she said.

Lafarge enjoys a 30 percent market share in the cement business and faces stiff competition from PPC and Chinese-owned Sino Zimbabwe.

 

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