eBusiness Weekly
Business Writer
Khaya Cement Limited formerly Lafarge Cement’s production volumes for the half year to June 30, 2023 bulked 117 percent on the back of enhanced production efficiencies on the new plant.
This followed the restoration of the collapsed cement mill roof and commissioning of the new Vertical Cement Mill (VCM), according Kumbirai Katsande, the chairman of the cement company.
During the period, aggregates and Dry Motor (DMO) volumes increased 213 percent and 211 percent respectively versus the same period last year.
The period under review remained challenging characterised by inflationary pressures and exchange rate volatility.
The country, though, experienced a significant depreciation of the foreign currency exchange rate between April 2023 and June 2023 primarily driven by both demand and supply factors which resulted in considerable inflationary pressures.
Consequently, month-on-month inflation increased from 2,4 percent at the start of the second quarter to 74,5 percent in June 2023 with annual inflation increasing from 75,2 percent at the start of the quarter to 175,8 percent in June 2023 mainly driven by a weak foreign currency exchange rate as well as the spillover effect of the global supply chains disruptions and rising commodity prices emanating from the Russia – Ukraine conflict.
However, despite the negative effect of the foreign currency exchange rate instability and high inflation levels experienced during the second quarter of 2023, Khaya benefitted from the measures implemented by the monetary authorities during the first half of the year such as increase in the foreign currency retention rate from 75 percent to 85 percent which effectively resulted in an increase in cash generation.
The company also benefited from a decrease in the bank lending rate to individuals from 100 percent per annum to 75 percent per annum which resulted in increased purchasing power for individual home builders.
In terms of financial performance, revenues increased by 210 percent to close at $99,8 billion from $32,2 billion over the comparative period.
According to Katsande, the company earned 89 percent of its revenue in foreign currency, an increase of 100 percent from the previous year’s comparative period.
Gross profit margin decreased slightly from 37,1 percent recorded in the prior year comparative period to 35,3 percent recorded in the period under review.
The proportion of sales, general and administration expenses to revenue improved from 54 percent recorded in the prior year’s comparative period to 41 percent during the period under review as management focused on cost containment as well as operational efficiencies.
Khaya incurred an operating Loss of $378,4 billion up from the $38,7 billion registered in the prior period. The increase in the Operating Loss position was primarily driven by the foreign currency exchange losses arising from the revaluation of the foreign currency denominated long term borrowing.
This was, in turn, a result of the depreciation of the local currency against the US$ which moved from US$1: $671,45 at the end of December 2022 to US$1: $5,739.80 at the end of June 2023.
Loss for the period also widened to $265,2 billion, up from $48,8 billion recorded in the prior year’s comparative period.
Despite the losses, Khaya still has a positive outlook supported by various infrastructure projects around the country that are expected to drive sales volumes and bring the company back to profitability.
“We maintain a positive view of the outlook in the medium to long-term, with sustainable growth expected to be anchored on growth in agriculture, the individual household sector and Government-funded infrastructure projects.
“The medium to long-term outlook remains positive,” said Katsande.
The various Government initiatives to stabilise the macro-economic environment and maintain the viability of the cement industry are also expected to benefit the company and industry.
