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THERE has been high demand for cement, which is outstripping supply on the local market since the re-opening of the economy following the gradual lifting of the Covid-19 lockdown restrictions, cement producer, Lafarge, has said.

The business recorded solid gross profit margins exceeding targets on the back of cost containment measures.

Record sales were seen in the month of July, which according to the group was the best for the same month since 2003.

Resultantly sales volumes closed the quarter at seven percent above the same period last year driven by recovery in the individual home builder market. Demand for cement in the construction sector jumped 34 percent ahead of the previous quarter following the reopening of the economy after lockdown.

Chairman Kumbirai Katsande acknowledged the improvements in the general business environment, ushered in by among others, stability in foreign currency exchange rate following introduction of the auction system. As a result, the company was able to meet its foreign currency obligations.

“Demand for cement in the construction sector increased by 34 percent ahead of the second quarter following the re-opening of the economy after the Covid-19 induced national lockdown,” Katsande said.

“The operating environment showed improvement influenced by easing of the Covid-19 lockdown restrictions. This has since allowed the resumption of economic activity, although under some health and safety compliance requirements.

“As business activity progressively continued to gain momentum into the third quarter, the demand for cement consequently outstripped supply causing considerable supply backlog.”

Lafarge exceeded set gross profit targets.

“The business remains profitable,” said Mr Katsande, adding the improvement in foreign currency supply with the introduction of the auction system in July had led to price stability and also afforded the business to meet its foreign obligations.

The anticipation is that there will be a continued benefit from the current stability in the exchange rate assuming there is strict control of money supply,” he said.

In the last quarter of the year, associated with rainfall, demand will taper, he said. Management of a potential second wave of the Covid-19 is key as it could again impact on business activity, said Mr Katsande. During the quarter under review, Dry Mortar business grew 64 percent in volumes compared to the same prior year period due to increased demand for SupaGrow, the agricultural lime range during the winter land preparation.

“This was further compounded by the widespread application of the Pfumvudza agriculture model,” said Mr Katsande.

However, variable costs during the period rose markedly due to replacement costs for imported spare parts and the high electricity tariff implemented by ZESA. During the quarter under review, ongoing capital projects for the Dry Mortars resumed although at a slower pace due to Covid-19 related travel restrictions.

The commissioning of the new Dry Mortars plant is now scheduled for the last quarter of the year. While the favourable rainfall forecast will play well for the agriculture sector and the whole economy, the impact of Covid-19 on businesses is expected to continue in the foreseeable future. — New Ziana/Harare Bureau.