BY TATIRA ZWINOIRA
THE LafargeHolcim Group has availed US$25 million to its Zimbabwe subsidiary to increase its capacity utilisation, but the expansion programme hinges on the availability of electricity and government’s ability to resolve the currency crisis.
The US$25 million capital injection was revealed during a two-day working visit by regional head of the Middle East and Africa and member of the group executive committee of LafargeHolcim, Miljan Gutovic.
“During the visit, Miljan Gutovic paid a courtesy call on HE (His Excellency) the President of the Republic of Zimbabwe, ED (Emmerson Dambudzo) Mnangagwa.
“In this meeting, strategic commitments were made by the LafargeHolcim Group including a commitment to continue support for the growth of the Zimbabwean economy.
“This is in-line with an initial US$25 million, three-pronged expansion project at Lafarge Cement Zimbabwe that has been approved by the group,” LCZL said in a statement.
“Initiatives under the expansion project will include: additional cement capacity, additional capacity for agricultural lime and automation of the dry mortar plant.
“The government of Zimbabwe has accorded national project status to the expansion project earmarked for 2019-2020.”
However, LCZL said the holding group wanted government to stabilise electricity availability and resolve foreign currency issues as these were key determinants to its expansion drive.
The announcement of the US$25 million capital injection comes as Lafarge Zimbabwe is “implementing measures to improve plant reliability, creating and developing new business avenues through product development and growing the franchise channel, building stronger and more agile teams and restoring value through interventions such as asset protection”.
This is in response to LCZL experiencing shortages in supplying cement last year due to an “unprecedented spike” in demand attributed to a rise in disposable incomes following the 2017/18 bumper agricultural season.
Shortages in supply were due to a period of unplanned plant downtime as major breakdowns occurred at LCZL’s cement plants, eventually affecting supply.
The capital injection from LafargeHolcim follows a loan facility of US$30 million to settle outstanding foreign obligations in 2018, with the local subsidiary utilising US$24 million.
This was part of LCZL securing external and local facilities of US$38,4 million last year.
LCZL said the purpose of Gutovic’s visit “was to re-affirm the commitment of the LafargeHolcim Group to invest in Zimbabwe given the macro-economic outlook under the Transitional Stabilisation Programme”.
In 2018, LCZL reduced its capital expenditure by 35,13% to US$2,4 million from the 2017 comparative of US$3,7 million.
LCZL expects measures it has implemented to improve its growth following overturning its loss-making position to register a profit after tax of US$1,33 million last year from a loss of US$609 589 in the comparative 2017.
This gave LCZL a net profit margin of 27,3% entering into the 2019 financial year. The performance left LCZL with a current ratio of 2,15 indicating they could cover their liabilities should they come due.
Last year, cement demand was driven by individual home builders, road rehabilitation projects from government and housing developments from government and the private sector.
For 2019, Treasury expects demand to be driven by “road rehabilitation and construction, power generation expansion projects, dam construction, border posts redevelopment, expansion and rehabilitation of various water and sanitation projects and expansion, as well as modernisation of State universities”.
LafargeHolcim Group is present in 80 countries across the world and employs 75 000 people and is a global leader in the building materials supply and solutions.