Lafarge downbeat on volumes

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Enacy Mapakame

Cement producer, Lafarge Cement Zimbabwe Limited is downbeat about its second quarter of 2020 performance with sales volumes expected to fall 30 percent due to the effects of the COVID 19 induced lockdown.

For the 2019 financial year, the group maintained sales volumes at prior year levels of 323 000 tons although the construction industry suffered a 14 percent decline during the same year, according to the Reserve Bank of Zimbabwe (RBZ).

Indications from the cement maker are that the Covid-19 induced lockdown has had an inevitable impact on previously forecast 2020 volumes due to complete lockdown of the company’s distribution channels.

Government declared a national lockdown effective March 30, 2020 in response to the World Health Organisation (WHO) declaration of the Covid-19 outbreak as a global pandemic.

The pandemic has caused damage to economies across the globe with production significantly reduced as businesses observed the lockdown regulations coupled with reduced demand and supply chain disruptions.

For Lafarge, the cement maker anticipated seeing the negative impact of the pandemic in the second quarter of 2020, effects that can spill over into the second half of the year.

“It is projected that Q2 2020 volumes will decline by 30 percent with the possibility of spill over risks impacting the second half of the year,” said Lafarge in a statement accompanying the group’s financials for the year to December 31, 2019.

“The ripple effects of the lockdown and border closures are still to be quantified but the company expects to continue to feel the effects of Covid- 19 outbreak well in the second half of the year.

“The net effect will be a slowdown in aggregate demand in the core individual home builder market with foreign funded projects becoming more and more essential in sustaining operations,” said Lafarge.

In 2019, Lafarge’s profit surged 2000 percent to $178 million although volumes remained flat.

The business achieved improved margins as gross profit rose 251 percent to $496 million from $141 million recorded in 2018.

Chairman, Kumbirai Katsande said the improved margins were realised as a result of focus on agile pricing and disciplined cost management across the business.

The company achieved a revenue growth of 104 percent to $919 million compared to $449 million achieved in the comparable year as Individual Home Builder (IHB) catalyst continued to contribute significantly to the business’ top line.

The business revalued it’s property, plant and equipment and this resulted in a net after tax revaluation gain of $310 million subsequently leading to a full year comprehensive income of $488 million.