Zambia’s largest cement producer, Chilanga Cement Plc – formerly Lafarge – (ISIN:ZM0000000011) continues to take a negative cue from an ebb in construction pulse both domestically and regionally. This follows a cocktail of drivers ranging from the states suspension of an earlier aggressive infrastructure spend to dampened economic activity on account of a COVID19 pandemic.
According to half year unaudited financials published in the press, the cement giant’s top line sagged 16% to K803million weighed by dampened real estate demand adding onto already existing pressure in the international market on the back of pricing uncompetitiveness as the Kwacha extends its bullish streak.
Preservation of margin was sustained through spend containment supported by a decline in financing costs, stabler energy costs and softer capital expenditure. This manifested in an after tax earnings rally of 42% to K83million year on year. This translated to a 7% sag in price earnings ratio to 15.92 as price to book value ratio widened 28% to 1.67.
“Chilanga cement is struggling with the export markets which have slowed from a strong kwacha making pricing uncompetitive while domestic demand suffers suppressed diaspora building project appetite adding onto and a sharp decline in public works projects,” Zatu Financial Services Managing Partner Munyumba Mutwale said.
The cements stock outlook is marred by rising coal prices, suppressed demand both in the domestic and regional markets. On the upside, the cement producer could take a cue from rising investment in the mining faculty which could spur appetite for cement, lower mortgage rates that could spark demand for households while political posture given a pro trade skewed government could pose opportunity that could address unattractiveness of cement exports.
Chilanga stocks are trading 3.4% softer on a year to date basis at K13.38 a share on the Lusaka Securities Exchange.
The Kwacha Arbitrageur
