Lafarge revenue soars despite adverse operating environment
LAFARGE’S results for the year ended December 31, 2020 paints a picture of a resilient business on a growth trajectory as the business recorded phenomenal revenue growth despite the COVID-19-induced operational challenges.
In the just-published full-year financial results, the company reported revenue growth of 68,5% to reach $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 a notice to shareholders, board chairperson 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.
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 agricultural 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 of a government-co-ordinated sustainable agricultural 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 was confident that the business would continue to leverage growth on dry mortars.
“We anticipate further growth in the dry mortars business as we have just installed 100 kilotonnes (kt) additional capacity to the 7kt that was initially in place. This means that we have more latitude to meet the demand 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 earnings before interest and taxes margin jump, Katsande 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 prioritised 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 everse 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 also commissioned a new 100 000 tonnes per annum dry mortars plant in April this year, following which it 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 long-lasting construction. This product was released to the market in the second week of April. 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 do-ityourself segment.
These innovations 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.
In June, the company launched a new range of superior tile adhesives and plastering mortars under the global brand Tector.
Said Nyika of this innovation: “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 product volumes have grown by 96% YTD 2021 versus the 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 be on ensuring continued adaptation of the strategic agenda to the prevailing conditions in order to maintain a thriving business.
The company has put in place a robust vaccination programme for its employees. This will go a long way in reducing the risk of COVID-19 infection and its impact on the business.
The year ahead will focus on the installation of the vertical cement mill targeted for commissioning within the first quarter of 2022 if no delays are experienced.