Lafarge finalise $15 million capacity expansion funding

HARARE- Lafarge has reported that it has finalised a funding facility for the expansion of its 450 thousand tonne plant.

Earlier in the year the board of Lafarge Holcim, the parent company to Lafarge Zimbabwe had approved a $25 million capital injection into the Zim operation

The expansion program will be done in 3 phases and these include, increasing the cement milling capacity, additional capacity for agriculture and lime as well as automation of the dry mortar plant.

At present capacity, Lafarge is the second largest cement producer in Zimbabwe after PPC, which has more than double Lafarge’s capacity at 1.4 million tonnes. Livetouch produces slightly below Lafarge while Sino Zimbabwe, a Gweru based and Chinese owned company has a capacity to produce 200 thousand tonnes of cement per annum.

Zimbabwe has a reported annual cement demand of 1.5 million tonnes which means the market is presently operating at excess capacity given that supply from PPC alone could satiate the demand.

 There has however been fears that the present capacity could be overrun by demand in the mid term, hence the call for additional capacity to be installed.

 It typically takes up to 5 years to construct a fully integrated cement plant as well as a grinding station which means if capacity is not upgraded now, there could be shortages in the mid to long term.

Lafarge has faced challenges with plant breakdowns in the past and in 2018 suffered significant downtime which impacted on production performance. into the 2019 the challenges have recurred but at a subdued level. Challenges in securing forex for importation of spare parts has been a major factor dampening production.

In a trading update for the third quarter period to September 2019, the company reported a 1% decline in sales volumes on last year which was largely due to plant outages. The company has also grappled with power challenges, which has become a sector-wide phenomena.

In terms of financial performance, Lafarge has largely struggled in recent years, losing market share to PPC, which has since gained ground since installing the Harare plant. The Harare plant has brought PPC close to the market in Harare, an area where Lafarge previously exerted dominance.

EQUITY AXIS NEWS

Respect Gwenzi

Respect is the Lead Analyst and Managing Director at Equity Axis. He has 8 years experience in respective fields of finance and media. Particular areas of expertise include Asset Management, Stockbroking and Financial Media. Respect is on a mission to change the course of Financial Media in Africa through digitalization

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