ZIMBABWE: Lafarge to invest more on plant upgrades

Zimbabwe Stock Exchange-listed cement manufacturer Lafarge Cement Zimbabwe has secured approval from its France-based parent company, Lafarge Group, to invest an additional $5 million on plant upgrades this year. 

The cement maker last year announced plans to invest about $10 million-$15 million on upgrading its milling plant to increase production by nearly a third of current capacity and bring approved investment threshold to $20 million. According to the company, the plant upgrades will push its volumes to 500 000 tonnes of cement per annum from 390 000 tonnes. 

Speaking on the sidelines of the company’s annual general meeting, Lafarge Zimbabwe chief executive Ms Amal Tantawi told The Herald Business that the company has managed to secure an additional funding for the upgrade of the plant. “We are continuing the investment. We secured an approval for an additional $5 million and all the investments will go towards rehabilitation of the plant, refurbishing inlets to the kiln and other small things that will reduce costs. 

“In terms of our outlook for 2015, we are slightly above budget when it comes to EBITDA. Preparatory work done at the plant has started bearing fruits and we hope this new investment approved will go a long way in enhancing our cost-cutting initiatives based on plant efficiencies,” said Ms Tantawi.

She said despite the difficult economic environment, Lafarge invested $7,2 million in capital programmes, with $5 million going to limestone quarry development. Ms Tantawi said the company has found it difficult to export citing lack of competitiveness as the biggest challenge for the leading local cement manufacturer. 

“As Lafarge we cannot compete on the export market at the moment because our business environment at the moment is expensive to operate on and it’s difficult to compete with cement from the east coast, Pakistan and China. 

Demand has been flat and recently we have seen the entry of new players in the local market where disposable incomes remains subdued coupled with lack of huge infrastructural projects,” said Ms Tantawi. The Lafarge CEO said as demand remains subdued, they have implemented differentiation strategy. 

She said new players coming into the market were imitating their brands and Lafarge is working towards strengthening its brand equity. She said the coming of new players on the domestic market has seen Lafarge Zimbabwe’s market share declining to 27 percent from 31 percent last year. “At the moment we stand at 27 percent in terms of market share down from 31 percent,” she said. 

The company’s revenue for the year to December 2014 was down 11 percent at $60 million from $67 million in the previous comparative period as a result of a reduction in local sales volumes and cement selling prices. The liquidity constrains and the low average manufacturing capacity utilisation continues to have an adverse impact on the company’s business activities. 

Last year the company incurred high maintenance costs in the first half of the year, following major plant maintenance works undertaken to improve performance. Despite the difficult operating environment the company recorded a modest operating profit before income, finance costs and tax of $1,1 million last year.