It gives us great pleasure to present our financial performance for the six months ended 30th June 2016 to all stakeholders.
Tanga Cement Plc. remains a leader in high quality cement supply in Tanzania. We are proud of our contribution towards the growth and development of Tanzania, but more importantly, of our sustained impact on the lives of the Tanzanian people which we continue to touch with our business activities.
Our brand positioning – ‘STRENGTH 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 will still achieve as a nation.
The first half of 2016 was characterised by the strengthening of macroeconomic fundamentals for Tanzania, a reverse of the headwinds faced in the last quarter of 2015. The country’s economy continues to perform strongly, growing at a higher rate than its Sub-Saharan counterparts. Inflation has been on a downward trend in the first half of 2016 with a slight increase in June 2016 to 5.5%. The period under review saw a rallying of the Tanzanian Shilling against the USD Dollar, after a downward spiral in the second half of 2015.
Tanzania GDP is projected to grow at 6.7% in 2016, with the leading sectors being construction and retail. Continued government investment in infrastructure development further boosts the prospected growth in construction as additional infrastructure projects are commissioned. As a result, the national demand for cement is expected to increase.
Tanzania’s positive growth story and projected development has attracted new entrants to the cement industry, keen to earn returns from the growth in demand, as well as an influx of cheap imports by middlemen. As a result, the cement sector is now witnessing fierce competition driven by new market entrants. This has a bearing on our revenue growth as it puts pressure on the pricing mechanisms, while increasing the cost of marketing to increase sales.
In addition, imports of cheap cement from companies that enjoy tax benefits in their home countries further erode the local market thus causing significant injury to local producers. To address this issue, cement companies in Tanzania through the Tanzania Chapter of East African Cement Producers Association (EACPA), engaged the Government to ensure a level playing field where imports would be charged higher tax duties.
Inspite of the challenges faced, we remain confident that the robust developments in the country will establish an atmosphere that allows us to thrive. Further, we view H.E. President of the United Republic of Tanzania Dr John Pombe Magufuli’s commitment to support local industries by creating a conducive infrastructural, financial and tax efficient system as a step in the right direction. This will ensure that our products are competitive and have an assured demand in Tanzania.
For the year 2016, the business is focusing on profitability driven by operational efficiency and overall business effectiveness. This will enable the company to absorb the increase in production related costs, as far as possible, in order to remain competitive in challenging market conditions. To this end, the company in January 2016, commissioned the second kiln at our Tanga plant, eliminating the need to purchase or import clinker. Consequently, our clinker production capacity has more than doubled from 0.45 to 1.25 million tons per annum. Despite the very competitive landscape the Company realised a 55% increase in Net Operating Profit for the six months ended 30 June 2016 compared to the same period in 2015. This reinforces our strategic focus, to demonstrate positive yields and quality margins through our cost optimisation efforts.
We continuously look at ways in which we can unlock value for our customers and business partners. One of our initiatives is the deal signed with Tanzania Railway Limited to transport cement to Kigoma and Mwanza. 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, such as the decline in production costs.
Based on the positive performance of the company, the board has recommended an interim dividend of TZS 55 per share. The total interim dividends amounts to TZS 3.5 billion. This dividend recommendation underpins management’s commitment to deliver increased value to shareholders across the board.
Closure of the Share Register
The register of members will close on 1 September, 2016. The last day of trading cum-dividend will be 29 August, 2016. The final dividend will be paid on or about 24 October, 2016.
Tanga Cement Plc remains optimistic about the future growth of the region and the implication thereof for the company. The competitive landscape will remain challenging, however, we expect that the playing fields will be levelled somewhat with the Government’s introduction of higher tax duties on imported cement. Cement demand in Tanzania is expected to remain robust over the short- to medium-term and with its strong competitive advantage, leading brand and capable workforce, Tanga Cement Plc. is well positioned to take advantage of the growth opportunities in the market.
For and on behalf of the Board
Advocate Lau Masha
Chairman of the Board