Lafarge pins stability hopes on dialogue, says new plant to double cement output

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By Alois Vinga

LISTED cement manufacturer, Lafarge has pinned hopes for continued economic stability on government business dialogue amid revelations that the company’s new plant will double cement output going forward.

The remarks come against a background where authorities have committed to deal with the country’s economic challenges through engagement and dialogue with the business community.

To this end, despite differing opinions on the economic path to traverse, the Finance Ministry, Reserve Bank of Zimbabwe, and in some instances, top government officials have engaged business at different intervals on the back of various challenges bedevilling the economy.

Presenting performance for the half year ended June 30, 2022, Lafarge Chairman, Kumbirai Katsande pinned hopes on the continuation of such engagements.

“The company is hopeful that continued collaborative dialogue between government and industry will continue in order to safeguard business confidence, preserve value and macro-economic stability,” he said.

In terms of productivity, Katsande said the commissioning process of the new Vertical Cement Mill (VCM), which started in the second quarter of 2022 will essentially double its cement production capacity and improve raw material availability to the new Dry Mortars (DMO) plant.

The VCM is also expected to reposition the company on a growth path into the future and spur a positive effect on the company’s revenue generation and profitability.

“The business continues with the implementation of the previously announced US$25 million capital expansion programme. Following the successful installation of alternative power infrastructure in 2020 and the successful completion of the automated Dry Mortars (DMO) Plant in 2021, the new Vertical Cement Mill (VCM) commissioning started in Q2 2022.

“Additionally, there is the refurbishment of silos which will help to increase the storage capacity of cement and to solve the dispatch bottle necks. These investments are expected to double the Company’s cement production capacity and improve raw material availability to the new DMO plant,” said Katsande.

During the period, the decommissioning of cement mill 1 to make way for the VCM, the mill house roof collapse in Q4 2021 and the commissioning phase of the VCM adversely affected cement volumes resulting in the company’s revenue reducing by 23% to ZW$ 6,6 billion.

The gross profit margin fell by 21% as the company resorted to selling clinker, an intermediary product for sustenance.

For the period under review, the combination of the reduction in sales revenue, squeezed gross margins, increased operating costs and an increase in foreign exchange losses resulted in the Company posting an operating loss of ZW$ 7,8 billion compared to a profit of ZW$ 1,4 billion for the same period in 2021.