SIMBA CEMENT CHAIRPERSON’S STATEMENT

Introduction 
Tanga Cement Company Limited (TCCL) posted a strong performance during the first six months of the 2014 financial year. Despite the challenges presented by the prevailing market conditions that have resulted in a small decline in sales volumes, the Group managed to increase overall profitability through significant cost optimisation over the past 12 months.
Macro-Economic Overview 
The overall macro-economic conditions continue to stimulate economic growth, with both the exchange rate and inflation remaining stable. This, together with the continuous socio-economic development of the country, has stimulated new entrants to the cement manufacturing industry as well as an increase in cement imports.
The increased competition has not only placed downward pressure on cement prices, but has also made achieving the budgeted sales volumes more challenging. The growth in the domestic and export cement markets and TCCL’s reputation as a leading supplier of superior quality cement has, however, enabled the Group to be well on track to achieve its budgeted sales volumes for the full year. Despite 2014 sales revenue being 6% below the results achieved by the end of June 2013, the reduction in cost of sales resulted in the gross margin increasing to 27.9% (2013: 25.2%), a 10.7% improvement over the previous year.
Operational Overview 
Following an extensive cost optimisation programme over the past 12 months, the company has seen this positively reflected in the financial performance, with cost of sales decreasing by 9% year-on-year. Similarly, selling and administration expenses have been well contained.
Due to its cost optimisation efforts, the Group has reduced the impact of increases in input costs such as the 40% rise in the cost of electricity, enabling it to maintain stable product prices to the benefit of its customers.
The establishment of a second kiln line at Tanga is progressing well. The construction phase of this project is currently underway and is well on track to be completed, as planned, in the last quarter of 2015.
During the year the Group increased its shareholding in its sales and distribution business, Cement Distributors East Africa Limited (CDEAL), which became a wholly-owned subsidiary. A decision was made to impair the goodwill in CDEAL following the integration of parts of its business into the Tanga Cement Company Limited. The write-off amounts to Tzs 6.87bn. Excluding this write-off, net profit from operations would have amounted to Tzs 22bn, a 37.7% improvement over the same period in 2013.
Dividends 
The board has recommended an interim dividend of Tzs 55 per share (2013: Tzs 50), amounting to a total interim dividend of Tzs 3.5 billion.
Closure of the Share Register 
The register of members will close 23 September 2014 . The last day of trading cum-dividend will be 18 September 2014 . The final dividend will be paid on or about 31 October 2014.
Conclusion 
Tanga Cement Company Limited remains optimistic about the future growth of the region and the implications thereof for the company. The competitive landscape will remain challenging, but we expect that the playing fields will be levelled somewhat following the Government’s removal of cement from the list of deemed capital goods for the purposes of assessing duties on imported cement. With its strong competitive advantage, leading brand and capable workforce, Tanga Cement Company Limited is well positioned to take advantage of the growth opportunities in the market.
 
Mr. Lawrence Masha 
Chairperson of the Board.