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Lafarge Cement plans to double output

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ZIMBABWE Stock Exchange (ZSE) listed Lafarge Cement Zimbabwe is upbeat about its ability to double its production volumes next year when its vertical cement mill (VCM) becomes operational in the fourth quarter of this current financial year.

Chairman Kumbirai Katsande said this will position the group on its growth path while it further consolidates its market share.

“The commissioning process of the new VCM started in Q2 2022. The Company will essentially double its cement production capacity and improve raw material availability to the new DMO plant (Dry Mortar Operations).

“The launch of the new VCM will reposition the company on a growth path into the future. This will have a positive effect on the company’s revenue generation and profitability,” he said in a performance update for the half-year to June 30, 2022.

Despite start-up challenges associated with the newly commissioned VCM, the company has already noted an improvement in cement availability since the end of June 2022 and is confident that volumes will continue to grow in the second half of the year in line with strategic objectives.

During the half-year period, Lafarge recorded volume of cement sold declined by 56 percent versus the same period last year.

Mr Katsande said this was necessary, as per the first half budget, to decommission one of the existing cement ball mills to make way for the installation of the new VCM, effectively doubling group capacity.

“The new VCM is anticipated to be fully operational by Q4 2022,” he said.

As cement productivity is the main contributor to Dry Mortar Operations (DMO), the volumes from the dry mortar units were reduced by 26 percent versus the prior year.

The decommissioning of Cement Mill 1, to make way for the VCM, the mill house roof collapse in the fourth quarter of 2021 and the commissioning phase of the VCM adversely affected cement volumes. This resulted in the company’s recording a 23 percent decline in revenue to $6,6 billion from $8,5 billion.

Gross profit margin fell by 21 percent to 37,1 percent 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 $7,8 billion compared to a profit of $1,4 billion for the same period in 2021,” said Mr Katsande.

However, the EBITDA performance for the half-year period of $0,47 billion remains above the half-year budget for 2022. In light of the local currency depreciation over the six months period, there has been a significant increase in other gains and losses to $6,8 billion driven by exchange losses due to the company’s net foreign currency exposure.

According to the group, this is mainly linked to the Holcim Group loan to Lafarge Cement Zimbabwe representing 72 percent of the exchange losses. The operating loss was offset by a net monetary gain of $4,7 billion from $323 million which diluted the loss before tax to $3,6 billion.

Basic loss per share of 48,29 cents was recorded compared to basic earnings per share of 13,9 cents during the same period last year. Total assets improved to $28,6 billion from $25,8 billion during the same period last year.

Lafarge did not declare an interim dividend to preserve capital.