Lafarge targeting revenue of $70 million

Lafarge upgraded its full year revenue to December 2012 to $70 million from the $62 million target which the company had initially set in May, MD Jonathan Shoniwa told a press briefing yesterday.
 
"We are way ahead of our budget and with the improvements in plant efficiencies and market share recovery we are now targeting $70 million in revenues by year end," he said.
 
"Cement demand is expected to remain strong mainly from new projects and residential developments in the short term. In the medium to long term infrastructure development will also drive our revenues mainly projects such as the Kunzvi and other dam projects as well as power stations," he added.
 
"There is also another potential revenue increase we are seeing coming through because of growing urbanisation."
 
Shoniwa said that the company will focus on diversifying revenue streams going forward mainly through nurturing allied products, that is, clinker and aggregates to improve revenue quality.
 
"We will also focus on cost improvement as this will impact positively on our margins. The recent rightsizing has seen us benchmarking our performance with other operations in the region," Shonhiwa said.
 
He also added that plant reliability would remain another key focus area as well as working capital management in light of the liquidity crisis.
 
"The GDP downgrade by the Ministry of Finance is a cause for concern as infrastructure development drives our business, we however see good demand coming from other sectors which are not in infrastructure development, hence a plus for us," Shoniwa told the meeting as he presented the operational review.
 
He also added that inflation remained a threat for the business from a cost perspective on a year on year basis.
 
Turning to the financial performance Shoniwa cited that overall volumes were 10% up to 429 000 tonnes whilst domestic sales volumes of cement increased by 44% to 174 000 tonnes.
 
"We managed to improve our market share by 9 percentage points to around 40.2% due to plant improvements after the break downs witnessed last year," Shoniwa noted.
 
The other reason for market share improvement was the strong brand equity relative to competitors as well as proximity to Harare, its main market, where 80% of the products are sold.
 
Revenue was 57% stronger at $34.4 million whilst EBITDA rose from $1.9 million to $6.3 million. "The improvement in EBITDA was attributable to growth in volumes, plant efficiencies and a price increase in the average retail price for our bag of cement from $10.50 last to the current $11.50."
 
"We have had to increase our prices gradually due to inflation, in the long term we will focus on efficiencies as there is a lot of headroom to improve," Shoniwa said.
 
Cement sales contributed $30.7 million to revenue whilst Clinker and Aggregates chipped in $2 million and $1.7 million respectively.
 
Shoniwa also noted that 50% of the sales were on a credit basis. "We thus approach our credit sales with caution in light of the liquidity crisis." He noted that debtors' performance was good and is fully provided for.
 
"We are happy with the $1.7 million rightsizing which the company embarked on last year as it impacted positively on EBITDA. The rightsizing was necessary to benchmark our operations with other Lafarge operations within the group." he added.
 
Profit after tax improved from a loss position of $0.4 million to a profit of $2.7 million. "Profit margins remain a big challenge as they remain low which is consistent with current developments," he added.
 
Turning to the balance sheet, Shoniwa noted that Capex was low at $1.6 million but he however told the briefing that they had budgeted $4 million to be utilized in the second half.
 
Borrowings stood at $2.6 million compared with $3.2 million in the comparable period. "We are happy with the financial and technical support that the group continues to give. The group recently guaranteed another offshore loan which was renewed recently," Shoniwa added.
 
The average costs of borrowings stood between 8-10% per annum for offshore loans and 14% for local loans.
 
Capacity utilisation stood at 80% with Shoniwa saying there was excess capacity in the country.
 
Shoniwa also said that dust emission remained a challenge and the group was working on the area through scouting for various strategies which include people training.
 
He added that they were also looking at alternative fuels as they were targeting the scenario of 20% in alternative fuels use whilst moving away from coal.

With regard to indigenisation the MD said, "...we are happy to inform you that the company submitted its plan and it's in line with the legal requirements. The issue remains a shareholder issue rather than a management issue."