Lafarge seeks strategic partner

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Kudzanai Sharara
Zimbabwe Stock Exchange listed entity Lafarge Cement is looking for a strategic business partner for its special products segment where it seeks to grow existing brands as well as introduce new product lines.

Lafarge has been producing cement and lime-based products as part of its diversification strategy to boost revenue from non-core activities for more than 20 years and is now seeking to expand the special products business segment as well as “tap aggressively into new business growth opportunities”.

This, according to Lafarge, will be done with the help of a strategic partner.

The new partner is expected to grow existing brands, introduce new product line innovations and introduce new products under licensing or franchising arrangements.

Earlier this week Lafarge released an expression of interest (EOI) notice calling for a potential partner in the special products business segment which it says has the capacity to generate an annual revenue in excess of $800 000 but has the potential to grow further through new innovations and foreign products franchising.

According to Lafarge, the new investor must have a seasoned and demonstrated record of manufacturing and must share a similar vision to grow existing brands as well as introduce new ones.

“Such a partner must be willing to invest in the joint venture business in order to realise untapped potential of the specials business,” said Lafarge.

Chief finance officer Host Mapondera said a separate financial briefing document will be availed to the shortlisted bidder(s) based on their expression of interest.

However, in its results for the year ended March 31, 2017, Lafarge said the special products business segment had registered significant sales growth.

“The special products business segment, which comprises by-products that include agricultural lime, impermo and tile coat, performed exceptionally well in 2017, registering a sales growth of 382 percent,” Lafarge said.

Mapondera said the total specials revenue in 2017 amounted to $2,07 million.

“This was driven mainly by the Command Agriculture purchases and joint product marketing partnerships.”

The cement maker said plans are underway to increase the output of these by-products by enhancing automation.

In its outlook, Lafarge says it anticipates that there will be growth in non-cement categories such as aggregates and special products.

“The company is poised to take advantage of increased by-product output capacity to step up sales in this sector.”

It is therefore projected that profitability in 2018 will be much improved.

The “strategic shift and brand repositioning” that the company intends to undertake in 2018 comes at a time the company’s main product, cement, is facing stiff competition from other players.

The Harare market in particular experienced increasing competitive pressure among the main cement producers, which focused their respective efforts to capture market share in the emerging housing projects.

Major competitor PPC Zimbabwe, recently set base in Harare, a market that Lafarge dominated in the past.

As a result, Lafarge became one of the few ZSE listed companies that reported declining revenues for the year ended December 31, 2017.

While most companies recorded double digit topline growth rates in 2017, the cement maker saw its revenues decline by 4 percent to $58,48 million from $61 million in the prior year.

Management attributed the sales decline, which could have been worse but was partially offset by the marginal price increase, to a reduction in volumes.

The company recorded a profit before interest and tax of $0,86 million, down from $4,47 million in 2016.

Ultimately, the Company registered a total loss after taxes of $0,61 million from a profit of $3,13 million in the prior year, a decline of 119 percent.

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