Lafarge downgrades short-term outlook for cement industry
Cement producer Lafarge expects to hike its cement prices as high input costs are hampering investment opportunities, Lafarge South Africa country CEO Thierry Legrand has said.
“Inexorable rises in fuel and energy costs, which are continually impacting margins, have not been fully recovered in previous price increases,” he added.
Fuel costs increased 21% and 16% in 2011 and 2012 respectively, with a further increase of 9% experienced in 2013. Electricity costs alone increased by more than 9% this year.
Despite a focus on cost reduction and optimisation opportunities, Lafarge needed to align cement prices to that of input costs and, therefore, maintain the necessary investment in resources to continue offering top-quality products and services, noted Legrand.
Meanwhile, the company believed South Africa and the construction industry would benefit from the acceleration of government’s infrastructure programme.
The short-term future prospects for growth in the South African cement industry over the next year remained bleak, but Legrand said the currently muted major infrastructure project ambitions of government would gain momentum in the longer term.
South Africa’s gross domestic product growth was expected to be 3% in 2014 and the cement market growth was anticipated to reach between 3% and 4%.
This followed cement volume growth of 3.5% in 2012 and an expected growth of no more than 2.5% in 2013, as strike action weighed on growth, Legrand commented.
“We are still positive about the long-term prospects for the cement market in South Africa. That’s why we have invested in a R1.2-billion project, completed in 2009 [and] bringing our overall cement capacity to 3.6-million tons a year.”
The expanded capacity would be “critically needed” as the infrastructure programme gained traction.
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