Tanga Cement
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Managing Director's Report

It is with great pleasure that we present the financial performance for the year ended 31 December 2016. Against this backdrop of various challenges and opportunities faced during the year under review, we made good progress. The implementation of our strategic actions is well advanced and our business model proved resilient and viable.

Our performance reflected results of enhanced competition in the market, due to planned government infrastructure projects that continues to attract new market entrants. However, industry’s engagement with Government yielded a sharp decrease in imported cement as the Government increased duties on cement and cement products.

Quality remains central in our business as proven by the recognition of Simba Cement as a Super Brand and the company’s ISO certifications. This extends to all areas of our business including financial reporting where Tanga Cement was once again recognised for excellence in financial reporting by the National Board of Auditors and Accountants.

Performance Our top line experienced a twenty percent (20%) percent year on year drop, with sales revenues of Tanzania shillings One hundred sixty seven billion (Tzs 167bn) in FY2016 compared to Tanzania shillings Two hundred and nine billion (Tzs 209bn) in FY2015. Nevertheless, the company demonstrated its resilience and ability to remain operative and profitable despite the competition, by way of adoption of sustainable go to market strategies. The result was growth in profitability margins and increased operational efficiency while retaining our superior performance.

The commissioning of the second integrated kiln and manufacturing line, Tanga Kiln Two (TK2) was among our key achievements. TK2 was a two-year construction project at an investment of One hundred fifty million USD ($150 million), in line with the budget and within the scheduled timeframe. The new production line more than doubled our clinker and cement capacity to one million two hundred fifty tons per annum (1.25million t/yr) making Tanga Cement self-sufficient in clinker in the long term and providing an avenue for additional revenue from sale of excess clinker. TK2 will position Tanga Cement to meet the anticipated increase in future cement demand and improve the production efficiencies through this new modern production systems.

The operational efficiencies introduced by the new integrated production line, contributed to the decrease in our cost of sales to One hundred twelve point five billion Tanzania shillings Tzs112.5bn, a thirty point nine percent (30.9%) decrease from One hundred sixty two billion Tanzania shillings Tzs162bn in the previous year. We optimised our logistics by decreasing third party road transportation and increasing use of rail transport to major towns, taking advantage of our direct access to the rail line into our packing and loading bay. Our agreement with Tanzania Railway Ltd (TRL) also allowed us to utilise more of their wagons dedicated to Tanga Cement PLC as well as rail depots as central distribution points, reducing our storage and transportation costs further and consequently boosting rail transport and distribution in Tanzania.

Ensuring Sustainable Growth
We recognise that market dynamics keep changing; we are adopting our strategies to suit market dynamics while remaining cognisant of our core business and our responsibility to all our stakeholders. We will continue with the implementation of our cost optimisation programme as well as enforcing additional efficiency measures in production and operations while retaining our brand reputation of being the highest quality product. In line with our strategic growth plans we will be increasing our cement production capacity with a grinding plant in the Northern region to take advantage of the growing cement demand along the northern corridor of Tanzania.

Outlook We continue to seek out new opportunities and innovate on our production efficiency, product offering and distribution solutions to supply our products to upcoming infrastructure projects. 2017 is poised to provide exciting opportunities from geopolitical developments and increased competition.
Despite the initial delay by government in the roll-out of these projects, we remain optimistic that they will pick up in the near future as indicated by government.
The anticipated large infrastructure projects such as the oil export pipeline from Uganda through Tanga in Tanzania, the Standard Gauge Railway (SGR), Dar es Salaam and Tanga port upgrades, and an ultramodern sports stadium in Dodoma, are anticipated to shore up the demand for cement in Tanzania over the next five years.

Reinhardt Swart
Managing Director

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