We have extracted below the Chairman’s Statement from the 2018 annual report of Lafarge Zambia Plc (LACZ.zm), listed on the Lusaka Securities Exchange:

Lafarge Zambia Plc 2018 Annual Report

I am pleased to report that 2018 was a year of further growth for Lafarge Zambia Plc, with improvements in sales and profits despite the challenging operating environment.

This has also been another significant year of development for Lafarge Zambia, with additional business focusing on the environment thereby developing innovative and tailored industrial and municipal waste management services for a wide range of customers.

Circumstances in our industry remain extremely challenging, with continued competition and inflationary cost pressures, which have necessitated a detailed review of strategic options available to the Company. I believe that this stance will put us in a position to maintain our leadership in the manufacturing sector.

I would like to express my sincere gratitude to Vincent Bouckaert, who served as Chief Executive Officer from September 2016 until December 2018, when he left Lafarge Zambia to pursue other opportunities. In the interim, the Board of Directors appointed Chief Financial Officer Raphael Chipoma to act in the capacity of Managing Director and Chief Executive Officer until February 2019. I wish Vincent well in his future endeavours and for his contribution to Lafarge Zambia during the period that he has served in the role of CEO. Likewise, I thank Raphael for the acting period and instilling confidence in our employees during the challenging time the company went through.

I am excited to welcome Jimmy Khan, formerly Managing Director of Lafarge Mauritius, who joins the Board with extensive experience in the cement manufacturing, financial and commercial fields spanning over 11 years. He took over as CEO on 12 February 2019. I have no doubt that Jimmy will propel Lafarge Zambia to greater heights of success as well as ensure that our market share and leadership in the cement industry is sustained.

The year 2018 was characterised by the expansion of Zambia’s cement industry, partly fuelled by expectations of an infrastructure boom. While the country has a cement demand of around 2.1 million tonnes and a population of 15.9m, the build-up of its 3.6 million tonnes cement production base resulted in a compromise in the cement pricing. Competition was stiff, with the arrival of a new cement plant.

Real GDP growth continued at an estimated 4.0% in 2018, compared with 4.1% in 2017. Agricultural output contracted by more than 35% due to a rain shortage in early 2018. Copper production continued to increase by an estimated 4% to 4.5% in 2018.

Construction also contributed to growth, thanks to public infrastructure projects and investment in commercial buildings and residential housing, towing cement production, which increased at an estimated 10% in 2018.

Inflation increased to an estimated 7.6% in 2018 from 6.6% in 2017. The relative price stability led the central bank to reduce the policy rate from 15.5% to 9.75% in February 2018. Average lending rates fell from 29.5% in 2016 to 23.7% in September 2018. Gross international reserves continued to fall from $2.4 billion in 2016 to $2.1 billion in 2017 and were estimated at $1.7 billion by the end of 2018, corresponding to 2.5 months of imports.

Regardless of the challenging operating environment, the directors believe that the Company has adequate capacities to continue operations for the foreseeable future, based on forecasts and available resources. In this vein, the Company recorded a profit after tax of K 195 million. Basic and Diluted earnings were K0.97 per share compared to 2017 at K0.09 per share.

The Directors therefore recommend that a dividend of K0.25 per share be declared for the year ending 31 December 2018.

We are proud of our contribution to the community and to the environment. We contributed over K798,000 in direct community investment in FY18. We provided support generated from the Lafarge Lusaka Marathon to charities such as Chilanga Mother of Mercy Hospice, Cheshire Home in Kabulonga, Cheshire Home in Chawama, Livingstone General Hospital and Arthur Davison Children’s Hospital.

Other corporate social responsibility initiatives pursued in 2018 include one-off materials and monetary donations to various organisations.

At Lafarge Zambia, we believe that our initiatives provide answers to challenges affecting the communities where we operate. Problems such as urbanisation, housing needs, health and safety, and human rights have been enshrined in our ambitious sustainability targets 2030 to help people live better lives through our inclusive business models and social investment programmes.

Our social investments are based on long-term strategies, implemented in collaboration with specialised local and international partners, and address clear needs in the communities where we operate. Areas of focus include health, education, shelter and infrastructure, environment, and local employment creation.

The Company’s focus in 2019 and beyond is to continue ensuring accelerating LafargeHolcim’s new Strategy 2022 – “Building for Growth”, which aims to drive profitable growth and simplify the business to deliver resilient returns and attractive value to stakeholders. This is a five-year strategy that will shift gears towards the growth of the top and bottom line.

I would like to express my appreciation to my non-executive colleagues on the Board for their input and time commitment in 2018. Finally, on behalf of the Board, I would like to thank the Lafarge management team for the progress and significant achievements made over the past year.

Further gratitude to our employees whose strong personal dedication and unconditional loyalty to our Company are major strengths of Lafarge Zambia.

To our esteemed customers, we remain grateful for your continued support of our business.

MUNA HANTUBA
MNon-Executive Chairman
11 March 2019