LAFARGE Cement Zimbabwe Limited says it remains upbeat about its business and the future prospects of the construction industry in Zimbabwe due to strong demand of cement in the country.
BY FIDELITY MHLANGA
The company said this in the abridged report for the half-year period ended June 2018.
The public-listed producer recorded a total comprehensive loss of $1,7 million during the review period, unchanged since the previous year.
The company achieved a profit before tax of $0,9 million against a loss of $1,8 million prior year.
“It has been an encouraging year for the construction industry and we remain confident about the future of this business,” chairman Kumbirai Katsande said.
“The business environment has been characterised by growth in demand for construction supplies and this has seen more than 30% YTD growth in cement demand versus prior year.
This increase has been rehabilitation of roads across the country.”
Katsande expects housing projects to continue to grow on the back of the increased access to mortgage financing and government supported initiatives such as command agriculture, which have improved individual access to disposable income.
He added that gradual improvement in the investment attractiveness of the country was also expected to enable the government to secure funding for new low-cost, affordable housing projects and infrastructure.
Due to the increase in demand for cement, the business achieved solid sales growth of 41% compared to prior year. The increased volumes were sustained by the continued growth of markets outside Harare.
“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 decline of 14% vis-a-vis $11,9 million in prior year,” Katsande said.
Apart from the anticipated boom in construction projects, the company said it also faced a number of challenges, which negatively impact productivity and overall profitability.
These include rising operating costs; limited access to foreign currency and prolonged delays in the procurement of materials and spare parts.
The production down times from delayed maintenance services also put plant efficiency at risk.
Lafarge said positive working capital changes during the period under review resulted in cash generated from operations more than doubling to $8,8 million from $4,1 million due to a reduction in prepayments and inventories.
The business closed the period with cash and cash equivalents of $6,2 million a 163% increase from December 2017.
Total assets were down at $78, 6 million from $82,2 million whereas liabilities were pegged at $37,3 million from $38,1 million.
Distribution costs grew by 67% on prior year on the back of premium and parallel market pricing has resulted in noticeable increases in input costs.
In 2017 the company disclosed a contingent lability of $7,9 million relating to a tax assessment for the period 2009 to 2013.
The matter was heard in the courts in June and the judgement is yet to be handed down.