Lafarge suffers loss on high tax payment

HARARE - Lafarge Cement Zimbabwe (Lafarge) suffered a loss of $1,774 million for the half year to June 30, 2018 from $1,775 million recorded during the same period prior year due to a significant tax settlement.

In 2017, the company disclosed a contingent liability of $7,9 million relating to a tax assessment for the period 2009 to 2013. The matter was heard in the courts in June this year and judgment is yet to be handed down.

Income tax payments rose $2,7 million from $26 260 during the period under review.

“The company reviewed its risk assessment of the matter and booked a tax provision towards this case. This resulted in the company posting an after tax loss of $1,8 million which was flat on prior year performance,” Kumbirai Katsande, the Lafarge chairperson, said.

Positive working capital changes resulted in cash generated from operations doubling to $8,8 million from $4,1 million in 2017 due to a reduction in repayment and inventories..

“The business closed the period under review with cash and cash equivalent of $6,2 million, a 163 percent increase from December 2017,” he said.

While this result should be celebrated under normal circumstances, this cash is an unhealthy accumulation of late payments to foreign suppliers which is posing a risk to the company’s operations.

Total equity declined marginally by 4,7 percent to $36,2 million due to a reduction in retained earnings. Current liabilities declined by two percent on prior year due to the exchange gains realised on translating related party balances and the repayment of the overdraft.

The company repaid the short-term overdraft $900 000 that was on its books as at December 31 2018 and did not have any new borrowings.

The business invested $1,6 million in a new plant and machinery upgrades compared to $700 000 on prior year.

Due to the increase in demand for cement, Lafarge said it achieved a sales growth of 41 percent. The increased volumes were sustained by the continued growth of the out of Harare markets.

“In an attempt to generate forex, we exported 20 000 tonnes of clinker at lower margins which had a negative impact on profitability.

Resultantly gross profit amounted to $10,3 million a 14 percent decline from $11,9 million on prior year,” Katsande said.

Going forward, Lafarge said post the landmark events that characterised the first half of the year, particularly the rundown towards the election, the business expects sales volumes to continue to grow as the economy begins to focus on infrastructure development.

“The business preoccupation for the remaining half of the year is to ensure that plant reliability improves with key maintenance works being  scheduled for the kiln and cement mills,” said Katsande. — The Financial Gazette

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