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SIMBA CEMENT CHAIRPERSON’S STATEMENT ON SIX MONTHS RESULTS (JUNE, 2015)

CHAIRPERSON’S STATEMENT
Introduction
Tanga Cement Public Limited Company (Tanga Cement Plc) remains amongst the leading suppliers of cement in Tanzania and we are proud of our contribution towards the development of Tanzania, but more importantly the lives of the Tanzanian people we are able to touch and enhance due to our business activities.
Our new brand positioning – ‘strength from within’ – is not only a commitment to our customers of superior performance within every bag of Simba cement, but our way of honouring the strength within our people for what we have and still will achieve as a nation. 

Macro-Economic
OverviewTanzania’s economy continues to perform strongly, driven by solid growth in most sectors and bolstered by public investment in infrastructure. This has resulted in robust growth in cement demand attracting new entrants in the cement industry as well as a significant increase in imported cement from the Middle East and Asia.

On a national basis, cement capacity currently exceeds cement demand, owever certain regions within Tanzania still present attractive growth opportunities. Margins of local producers were further eroded by the influx of cheap imported cement from foreign companies that utilise export tax benefits from their home countries. This provides for an extremely competitive operating environment placing significant downward pressure on cement prices.

In response to the increased competition in the market, Tanga Cement Plc implemented a price reduction in January 2015 in order to sustain the sales volumes. Although sales volumes have been achieved and customers retained, the price reduction resulted in a 2.5% decline in revenue compared to the same period in 2014.

An unplanned production stoppage necessitating the import of more expensive clinker together with the reduction of selling prices were the main drivers for the 38% decrease in operating profit compared to results for the six months ended 30 June 2014. In addressing these drivers, from July 2015, the company has implemented price increases to recover the lost margin and a special task team has put plans in place to improve operational efficiency and avoid unplanned breakdowns. Also negatively impacting on the company’s financial performance was the higher energy and labour expenses. 

The devaluation of the Tanzanian Shilling (TZS) resulted in a TZS 7.9 billion unrealised foreign exchange loss and TZS 8.2 billion realised foreign exchange loss. The Tanzanian shilling devaluation made the Tanga Kiln two loan balance of $84 million as at June 30, 2015 more expensive to repay when compared to when the liability was incurred.

Operational Overview
Tanga Cement Plc remains focused on achieving operational efficiency and overall business effectiveness, enabling the company to limit the increase in production-related costs as far as possible in order to remain competitive in challenging market conditions.

The devaluation of the TZS has further impacted on production related costs as clinker is still being imported. With stringent cost management activities, Tanga Cement was able to curtail this increase to
only 7.8% compared to June 2014.

The construction of the second kiln line is well on track for commissioning before the end of 2015. The successful completion of this expansion project will boost profits further by eliminating the use of
more expensive imported clinker while significantly increasing our production capacity and reducing production costs.

Tanga Cement Plc is also proud of its significant safety record on both the current operations and the expansion project where we did not have any serious incidents.

The Group’s sales and distribution business, CDEAL, has also been successfully integrated into the operational activities of the company and is delivering positive results. We continuously strive to unlock
value for our customers, business partners and shareholders.

Dividend
The board has recommended an interim dividend of TZS 55 per share (2014: TZS 55), amounting to a total interim dividend of TZS 3.5 billion.

Closure of the Share Register
The register of members will close on 8 October 2015. The last day of trading cum-dividend will be 5 October, 2015. The final dividend will be paid on or about 31 October 2015.

Conclusion
Tanga Cement Plc remains optimistic about the future growth of the region and the company. The competitive landscape will remain challenging, however, we expect that the playing field will be levelled somewhat with the Government’s introduction of higher duties on imported cement. Cement demand in Tanzania is expected to remain robust over the short- to medium-term. With our strong competitive
advantage, leading brand and capable workforce, we are well positioned to take advantage of the growth opportunities in the market and the commissioning of the second kiln which is expected to further increase profitability.

Lau Masha
Chairperson

Further details on the report can be obtained through the following link
http://dse.co.tz/sites/default/files/dsefiles/Statement%20august%20final...