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Lafarge to comply with indigenisation law

LAFARGE Cement Zimbabwe has said it is still considering a payment plan for implementing the indigenisation policy in compliance with the country’s laws.

REPORT BY KUDZAI CHIMHANGWA

Earlier this year, it was reported that the company would soon comply with the country’s indigenisation laws in a plan which would see the group taking on three new shareholding entities comprising the community, employees and the National Indigenisation and Economic Empowerment Fund (Nieef).

Company chairman, Mucha-deyi Masunda said the process of implementing indigenisation was currently underway.

“Part of this process involves the establishment of a community share ownership trust with a seed capital of US$3 million, whose disbursement plan is still under consideration,” he said.

Under the plan, the community, employees and the Nieef will each get 10% while 21% is presently in the hands of local shareholders.

The Indigenisation and Economic Empowerment Act, which requires foreign-owned companies to sell a 51% stake to indigenous people, has caused great concern over security of investments among international investors seeking to explore new opportunities in the country.

Lafarge is headquartered in Paris, France and has a presence in 64 countries.

Turning to the company’s results for the half year ended June 30 2013, Masunda said profitability was expected to improve in the second half of the year.
“Profit after tax of US$2,6 million was achieved. This was US$0,1 million lower than the prior period due to lower sales volumes and payment of retrenchment costs,” he said.

The company’s net profit margin stood at 8,06, which is a measure of profit relative to sales, during the period under review.

Net profit margin measures how much of each dollar earned by the company is translated into profits. A low profit margin indicates a low margin of security reflecting higher risk that a decrease in sales will erode profits and result in a net loss.

The company’s current ratio, which measures its ability to pay short-term obligations, stood at 1,71.

A ratio of less than one is often considered a cause for concern.

“The statement of financial position reflects a relatively favourable current asset position, mainly because of an increase in stock of raw materials, as the company increased its production capacity,” said Masunda.

Total assets turnover ratio, which evaluates how well a company is utilising its assets to produce revenue stood at 0,51.

According to accounting standards, the lower the total asset turnover ratio compared to historical data for the firm and industry data, the more sluggish the firm’s sales.

This may indicate a problem with one or more of the asset categories composing total assets particularly inventory, fixed assets or receivables.

Significantly, the volumes of sales in the domestic market were down at 160 kilotons (kt) compared to 174kt for the comparable period during the prior year.

This was due to depressed domestic demand and prevailing liquidity challenges.

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