Larfarge pens US$15m expansion funding facility

LARFARGE Cement Zimbabwe says it has concluded a US$15 million financing facility to fund the expansion of its operations.

In a trading update for the third quarter ended September 30, 2019, company secretary, Ms Flora Chinhaire, said the firm was optimistic of opportunities in the growth of the construction sector beyond 2020.

“In this vein, management has successfully concluded financing arrangement for a US$15 million facility to fund expansion cement milling capacity and the Dry Mortar Mix (DMX) plant.

“In addition, in order to mitigate the effect of erratic power supply, the business has embarked on alternative power supply to supplement Zesa generation as part of our expansion efforts,” she said.

Ms Chinhaire said their capital expenditure expansion programme has been rolled out with the power generating unit now on site while the DMX plant was being manufactured.

“Work on the cement milling expansion project will commence in January 2020. The company is effectively engaging the Reserve Bank of Zimbabwe to conclude registration of our external shareholder loan of US$28,5 million and expect to conclude the matter before end of the 2019 financial year,” she said.

Ms Chinhaire said the company remains focused on implementing its 2019 strategic agenda with key focus on building financial strength and mitigating against the negative effects of the prevailing trading environment. Despite the challenges of production, output has recorded a marginal one percent decline against prior year owing to plant reliability, which encountered unplanned stoppages and power supply constraints.

“Above this, significant cost reduction actions have been taken in the quarter to keep the business competitive. Volumes for DMX products excluding agricultural lime have recorded marked growth compared to prior year. “The late kickoff of the financing arrangements for the Government-assisted ‘Smart Agriculture’ programme has affected agricultural lime, which is one of the main DMX products and its demand peaks during the agricultural preparation season,” she said.

Ms Chinhaire said management was actively driving production and logistics to ensure that volumes committed to the programme were fulfilled before the full onset of the rains. On outlook, she said the onset of the rainy season usually frustrates cement demand hence their expectation that the fourth quarter will remain relatively flat compared to last year with demand sustained by inflows from the diaspora during the festive season.

During the annual shutdown this quarter, Lafarge Cement is expected to carry out critical maintenance work on its manufacturing platform ahead of the 2020 financial year.

“We expect a continuation of constrained macro conditions in the short term with improvements in the broader operating environment anticipated thereafter.

“Our focus will therefore, remain on driving for operational improvements, seeking to improve cash generation and managing our costs,” she said.

“We believe our current portfolio provides us with a strong platform and foundation from where growth and value extraction can be derived in future, particularly when the trading environment improves.” —

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