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Lafarge revenue soars despite adverse operating environment

Lafarge’s full year results for the year ending December 31st 2020 paints the picture of a resilient business on a growth trajectory as the business recorded phenomenal revenue growth in spite of the COVID-19-induced operational challenges.

In the just published full year Financial Results, the company reported revenue growth of 68.5% to reach Z$6.9 billion inflation adjusted compared to prior year performance. The growth in revenue was attributed to sales growth, price growth and strategic product mix changes.

In addition such an impressive growth in the context of a relatively challenging operating environment is attributed to the business’s adaptive and agile strategy, backed by a strong and resilient management framework. The business thus closed the year with a gross profit of 60.6% against a 53.9% gross profit achieved in 2019.

In his notice to shareholders, the Board Chairperson, Mr. Kumbirayi Katsande, attributed this jump in revenue to significant volume growth in the Dry Mortars business which grew remarkably by 115%.

This was coupled with a market shift towards high strength cement which influenced a significant change in the cement product mix in favour of a more profitable ratio. Indeed, the story of Lafarge’s revenue growth and remarkable performance cannot be complete without reference to its product innovation anchored on digital transformation over the period.

The growth in the dry mortars business was spurred by increased uptake in the tile adhesives and agriculture lime range. This was also propelled by the rebranding of the tile adhesives range to Supafix and agricultural lime to Supagrow which earned the products positive market repositioning.

Further to this, the company was one of the main suppliers for the government coordinated sustainable agriculture programme, Pfumvudza, and this enabled the improved uptake of the Supagrow product range.

Reflecting on the 2020 performance, Lafarge Chief Executive Officer Precious Nyika indicated that she is confident that the business will continue to leverage growth in Dry Mortars.

“We anticipate further growth in the Dry Mortars business as we have just installed 100kt additional capacity to the 7kt that was initially in place. This means that we have more latitude to meet the demands for dry mortar products in the local market, as well as enough to explore export markets,” she said.

Commenting on the 13.8% growth in EBIT margin jump, the company’s Chairman attributed this to relentless cost containment, innovation and efficiency initiatives tied to the business’s digital transformation agenda. In its half year results released in September last year, the company announced an action plan in response to the COVID-19 Pandemic dubbed Health, Cash and Costs. Under this plan the company prioritized the health of its employees and its stakeholders, innovated initiatives to ensure consistent cash generation, and engaged in strict cost containment across the board.

Under this bold action plan, the company progressively grew its e-commerce footprint by launching its e-verse property, a tripartite digital service package which includes a customer service Chat-bot called Muvaki, a digital customer purchasing application called Lead retail, and an e-commerce website under the company’s franchise brand Binastore. Through these platforms, the company managed to enhance convenience and provide the necessary customer services without in-person interactions.

Lafarge Commissioned a new 100000t per annum Dry Mortars plant in April this year .Following which they launched the water proofing cement, Watershield, a first of its kind in Zimbabwe. A product that uses modern hydrodefence technology to keep moisture out for dampfree and longlasting construction. This product was released to the market in the second week of April 2021. Hot on the heels of this product, is the 25kg pack size for cement. This is designed to meet the small home repair type projects in the DIY segment.

This innovation in products and packs are among the key tactics laid out under the company’s future-ready strategy that will continue to spur business performance higher.

In the month of June the company launched a new range of superior tile adhesives and plastering mortars under the Global brand Tector . Lafarge CEO Precious Nyika commented on this Innovation drive saying “ The market is demanding more superior finishes in Construction and we need to stay ahead of these trends to remain relevant for our customers. We have a state of the art Dry Mortars plant that allows us to meet these demands”.

All this innovation and new product development has seen the company growing 2021 YTD cement volumes by 20% vs prior year same period while Dry Mortar products volumes have grown by 96% ytd 2021 vs same period last year.

Looking ahead, the company envisions that the impact of the COVID-19 pandemic will continue into the greater part of 2021. As such the focus will remain to ensure continued adaptation of the strategic agenda to the prevailing conditions in order to maintain a thriving business.

The company has developed a robust vaccination programme for its employees. This will go a long way in reducing the risk of COVID-19 infections and its impact on the business.

Lastly, the year ahead will be focused on the installation of the Vertical Cement Mill targeted for commissioning within the first quarter of 2022 if no delays are experienced. ■

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