Tanga Cement
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Managing Director's Report

It gives me great pleasure to address our esteemed shareholders once again as we review the performance of Tanga Cement Public Limited Company in for the full year ended 31 December, 2015.

The year presented operational dynamics that offered vital lessons to our progress going forward. 2015 saw the entry of new competitive products in the market which resulted in downward pressure on our sales prices and volumes. Sales were further compressed by external factors such as increased electricity supply interruptions and frequent power dips which caused significant operational challenges such as premature kiln refractory lining failure. As a result the Company saw sales revenue for the 12 month period ended 31 December 2015 decrease by nine point nine (9.9%) per cent compared to the same period in 2014.

To address the instability owing to power failures, the company resolved to purchasing more expensive clinker from abroad. The purchased clinker while initially increasing the cost of production, ensured uninterrupted cement supply to the market which supports the long term return on investment. In spite of a seemingly challenging environment, we were able to revamp operations and successfully started final commissioning tests of the new kiln line (TK2) project within the committed deadlines to date. The Tanga team lit the flame on the new kiln on the 4 December 2015 as promised to shareholders and are currently in the final commissioning handover stages of the line as planned and agreed. It is important to note that not only have we started the kiln within the agreed time, but we are also well below the budgeted project cost. The new kiln more than doubles Tanga Cement PLC ’s production capacity through this capital investment in the United Republic of Tanzania. The new installed clinker production capacity has increased to one point two five (1.25m) million tonnes per annum.

Tanga Cement PLC was able to record an operating profit of nineteen point nine billion (Tzs 19.9bn) Tanzania shillings compared to thirty nine point eight billion (Tzs 39.8bn) Tanzania shillings in the previous year and net profit after tax of Tanzania shillings eight point two billion (Tzs 8.2bn), outperforming the forecasts of a full year loss, based on the trading results of the first half of 2015. This was achieved by the extraordinary efforts of Tanga Cement PLC ’s management team implementing various measures which resulted in a positive Tanzania shillings nineteen point nine billion (Tzs19.9bn) operating profit reported for Financial year 2015.

Furthermore, Tanga Cement PLC was able to pay out an interim dividend of Tanzania shillings fifty five (Tzs 55) per share or Tanzania shillings three point five zero (Tzs 3.50 bn) billion, and has declared a final dividend of Tanzania shillings twenty five (Tzs 25) per share. This brings the full year dividend to Tanzania shillings eighty (Tzs 80) per share or Tanzania shillings five point one (Tzs 5.1bn) billion for the financial year under review. The dividend pay-out is a reinforcement of management’s belief in the operational fundamentals and financial position of the company, while recognising the value invested in it by our shareholders to create a sustainable business. It is this value that we as the management of Tanga Cement PLC will seek to grow and enhance in delivering our improved service proposition in 2016.

Implementation of our world class Corporate Social Responsibility Mission allows us to unconditionally support communities throughout the country. While our main focus areas include education and health by developing social infrastructures we are also reaching out to flood victims and children in need.

During the period under review, Tanga Cement PLC won the 2015/2016 Super Brand title in the construction industry category of Super Brand East Africa, within the East African Community. This accolade is a recognition of work done by the management and employees of Tanga Cement PLC in their consistency to ensure superior performance to our customers as well as the provision of superior quality products.

Strategic Priorities going forward
The local cement market is anticipated to grow at eight percent (8%) with a large number of projects being undertaken by the Tanzanian Government. With the new Tanga Kiln two (TK2) coming on line in 2016, Tanga Cement PLC will be well positioned to address the growth in demand as well as the challenges brought by new competitors in the market. With a significantly lower cost base, the Tanga Kiln two (TK2) allows us to sell our premium products at market friendly rates without infringing on our financial outlook.

Drawing lessons from 2015, the management of Tanga Cement PLC has also adopted new go to market strategies which will help us to restore our market share in the coming years and regain the top line growth we have enjoyed in the past.

The company brought on board Mr Pieter de Jager as the new CFO after the departure of Mr David Lee, whose contract came to an end. Mr de Jager has extensive experience in various listed and unlisted junior mining companies throughout the African continent. He was previously the CFO of a JSE listed mining and manufacturing company and has significant experience in corporate finance and mergers & acquisitions. We intend to leverage off his expertise and experience for sound financial controls and decision making towards delivery of Tanga Cement PLC promise of sustainable business practices to maximise returns for our shareholders. The addition of Mr. de Jager to Tanga Cement PLC ’s management team contributed significantly to the company’s improved results from the latter half of 2015 going forward.

Reinhardt Swart
Managing Director

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