It is with pleasure that the audited trading results of Tanga Cement Public
Limited Company for the year ended 31st December 2016 are presented.
We are proud of the significant role Tanga Cement PLC continues to play
in Tanzania to ensure sustainable economic growth and development
through the pillars enshrined in our strategic narrative of “STRENGTH
WITHIN”. Our commitment to our stakeholders through its premier
Simba Cement brand continues to be clear as we uphold and honour
the strength within our people for what we have and will still achieve.
Our growth in business continues to be anchored on the economic
progress of Tanzania. The Tanzanian Shilling maintained its stability
against the dollar throughout 2016, due to improved performance
recorded in the export values of travel, manufactured goods and gold
whilst traditional exports declined. Tanzania also experienced a year of
political stability following the election of President Magafuli. The annual
headline inflation rate decreased to five point zero percent (5.0%) in
2016 from six point eight percent (6.8%) recorded in 2015, as a result of
strict fiscal and monetary policies.
In the year under review, Tanzania’s GDP grew by an estimated six point
eight percent (6.8%) compared to seven percent (7%) in 2015. This
was supported by growth in various economic sectors mainly: Mining,
Construction, Telecommunications and Agriculture.
The construction sector is estimated to have expanded by seven point
three percent (7.3%) in 2016, at a slower rate compared to 2015 due to
stalled public infrastructure projects rollout and rapid policy changes
which precipitated uncertainty for businesses. Nonetheless, projected
infrastructure development and anticipated sector growth attracted
new entrants into the cement industry keen to earn returns from
increased demand, as well as the influx of cheap imported cement by
middlemen during 2015 and early 2016. To address the issue of cheap
imports, cement companies in Tanzania through the Tanzania Chapter
of East African Cement Producers Association (EACPA), engaged the
Government which imposed an additional ten percent (10%) excise duty
up to thirty five percent (35%) on imported cement for a year
We remain optimistic of the ambitious infrastructure development
plans under the Government’s Development Vision 2025 programme
and expect the projects to pick up momentum in the second quarter
of 2017. Tanga Cement PLC has capacity to meet a large share of the
cement demand in the country and remains committed to production
of superior cement products.
Financial and Operational Overview
In the year 2016, our business focus was on profitability driven by
operational efficiency and overall business effectiveness in order to
remain competitive in challenging market conditions.
During the year, the company commissioned the second integrated
cement production line with a new kiln at its Tanga plant, eliminating the
need to purchase clinker and delivering additional revenue from the sale
of excess clinker. As a result, our clinker production capacity increased
to One million two hundred fifty thousand tonnes per annum (1.25 mio
tons/yr) in 2016. The company made its first clinker sales in the year
under review, following the commissioning of the second kiln.
Market headwinds during the year under review negatively impacted
Tanga Cement’s sales revenue by twenty percent (20%) year-on-year
from Tanzania Shillings two hundred and nine billion (TZS 209 bn) in
2015 to Tanzania Shillings one hundred sixty seven billion (Tzs167 bn)
for the year under review due to continued competitive market pressure
and lower infrastructure project spending from Government.
The company’s focus to improve operational efficiencies and cost
management initiatives, was one of the main drivers of the sixteen
percent (16%) growth in Gross Profit to Tanzania Shillings fifty four billion
(Tzs54 bn) year-on-year. We managed to keep operating costs low and
will continue to monitor and control costs to identify areas of saving
without compromising on product quality.
The reduced manufacturing cost base positively impacted Operating
EBITDA by thirty one percent (31%) to Tanzania Shillings thirty eight
billion (Tzs38 bn) over Tanzania Shillings twenty nine billion (Tzs29 bn)
achieved in 2015.
Operating Profit is down zero point five percent (0.5%) to Tanzania
Shillings nineteen point eight billion (Tzs19.8 bn) compared to Tanzania
Shillings nineteen point nine billion (Tzs19.9 bn) in 2015 mostly due to
the anticipated One hundred ninenty eight percent (198%) increase in
depreciation resulting from the extensive capital expansion of the new
integrated production line that was commissioned in early 2016.
Profit before tax declined to Tanzania Shillings five point seven billion
(Tzs5.7 bn) from Tanzania Shillings eight point seven billion (Tzs8.7 bn) in
the prior year as a result of the increased financing cost of the senior debt
which financed the expansion of our production capacity.
The Group recorded a net profit after tax of Tanzania Shillings four point
three billion (Tzs4.3 bn) which is down from the Tanzania Shillings eight
point two billion (8.2 bn) of 2015 impacted by the tax charge for the year
Cash flows from normal trading activities improved by fifteen percent (15%) to Tanzania Shillings thirty five point nine billion (Tzs35.9 bn) in
2016 underlining the positive performance of the Group in a very
competitive cement market.
The company utilised a significant portion of available free cash to settle
capital expansion costs instead of utilising the full available loan facilities.
This initiative will significantly benefit the company’s financing costs
expenditure in the long term. Accordingly cash on hand at 31 December
2016 decreased to Tanzania Shillings two point five billion (Tzs2.5 bn)
from Tanzania Shillings eighteen point three billion (Tzs18.3 bn) in the
Tanga Cement PLC remains committed to its sales and cost optimisation
initiatives as it continually seeks to enhance value for its stakeholders.
The company remains positive about 2017 despite the competitive
landscape. Government initiatives to spur economic growth through
infrastructure development and promotion of local industries, will boost
local cement output and consumption while reducing the influx of
cheap cement imports.
Subsequent to year-end, the Board proposed a final dividend for 2016
totalling Tanzania shillings one point five nine two billion (Tzs1.592 bn)
(2015: Tzs1.592 bn) being Tzs25 per share (2015: Tzs25 per share). The
total dividend proposed for the year amounts to Tanzania shillings five
point zero nine four billion (Tzs5.094 bn) (Tzs80 per share) [2015: Tanzania
shillings five point zero nine four billion (Tzs 5.094 bn) (TZS 80 per share)]
which will be recommended to shareholders at the upcoming annual
general meeting in May 2017.
Tanga Cement PLC remains grateful to its staff for their passion and
dedication to the company and to its customers for their belief in the
Simba Cement brand, as the company works to achieve its short-term
and long-term goals.
With Tanzania being the second-largest construction market in East
Africa, cement output is anticipated to increase and Tanga Cement is
well positioned to take advantage of the growth opportunities in the
market. We look forward to reaching greater heights together in 2017 in
co-operation with all our stakeholders.
Advocate Lau Masha
Chairperson of the Board