Lafarge Cement Zimbabwe reports 55pc loss

By Leafius Mazviro

Lafarge Cement Zimbabwe, a prominent player in the construction industry, recently released its 2022 interim results for the third quarter.

The company, listed on the Zimbabwe Stock Exchange under the Building & Associated sector, revealed a significant setback in its Dry Mortars sector, reporting a staggering 55 percent loss.

This unexpected decline in performance has raised concerns and sparked interest among investors and industry analysts.

The company attributes this decline to a roof collapse incident that occurred in October 2021, leading to a constrained availability of cement and subsequently impacting the volumes of Lafarge Cement Zimbabwe’s Dry Mortars.

In their official statement accompanying the interim results, the company expressed confidence in the recovery and growth of volumes once cement availability stabilises with increased capacity.

This development poses challenges for Lafarge Cement Zimbabwe and highlights the need for careful evaluation of market conditions and strategic adjustments to regain momentum in a highly competitive industry.

The firm has decommissioned one of the existing cement ball malls to pave the way for the installation of the new Vertical Cement Mill (VCM).

Consequently, the volume of cement sold declined by 23 percent versus the same period last year.
The new VCM is commissioned and in the ramp-up phase with full potential to be realised in Q4 2022 where it will effectively double the Company’s capacity.

“Inflation-adjusted revenue for the quarter was 43 percent below the same period last year due to suppressed volume for both cement and dry mortar products.

“Although it is expected that 2022 full-year volumes will be lower than those achieved in the prior year, significant volume recovery is anticipated in 2023 after the VCM is fully operational by the end of Q4 2022.”

“As noted in our H1 interim performance report, the Company faced significant liquidity challenges that hindered it from fully meeting its financial obligations.

“This was driven by the reduced cement production during the ramping-up period of the VCM and actions taken by the Government to reduce excess local currency liquidity in the economy.

“It is pleasing to note that cement production is now back to normal and continues to improve as the new VCM ramps up to be fully operational in Q4 2022.”

The power supply challenges continue to affect the country in general, there was a noticeable improvement in supply to the operations.

However, unscheduled power outages were still experienced on some occasions.

As of the 27th of June 2022, the Firm had advised all shareholders and members of the investing public that Associated International Cement Limited, a member of the Holcim Group, had entered into a binding agreement for the sale of its 76,45 percent stake in Lafarge Cement Zimbabwe Limited to Fossil Mines (Private) Limited.

As advised on the 28th of October 2022, the parties are still working towards the consummation of the Sale and Purchase Agreement.

Accordingly, shareholders and members of the investing public are advised to exercise caution when dealing in the Company securities until further notice.

Interest rates were increased to more than 200 percent with effect from 1 July 2022.

This resulted in a substantial increase in borrowing costs, liquidity pressures across the entire supply chain, and reduced disposable income for individuals with loans which hurt the Company’s performance.

The overall market demand continues to grow driven by the individual home builders’ segment as well as the ongoing major Government infrastructure development projects and the Company is well positioned to take advantage of this growth with the increase in installed capacity.

The ongoing actions by the Government mainly around the tightening of monetary policies have positively impacted the economy.

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