Zimbabwe Stock Exchange listed leading cement producer, Khayah Cement Limited, formerly Lafarge Cement Zimbabwe, has voluntarily placed itself under corporate rescue due to crippling government policies and unforeseen operational challenges.
The decision, announced by the company’s Board of Directors, aims to facilitate the rehabilitation of the financially distressed company.
The Zimbabwe Stock Exchange listed company has faced significant challenges in meeting its obligations to creditors, largely due to competing demands for cash. Unanticipated equipment breakdowns, including the Vertical Cement Mill and the Kiln, resulted in substantial production losses and costly repairs.
The mothballing of the kiln in 2023 forced the company to adopt a grinding station model, which required purchasing expensive clinkers to maintain a market presence.
However, the influx of lower-priced imported cement, following a government policy change in August 2024, made it difficult for the company to compete.
“From August 2024 Government of Zimbabwe changed policy resulting in an influx of lower priced imported cement. The Company could not compete with these prices on account of relatively higher production costs from the grinding station model.
“The result was reduction, and ultimately a stagnation of sales volumes, revenue and operating capacity to below short- economic levels curtailing the Company’s recovery and growth momentum.
“Accordingly, the viability of cement operations was compromised,” Arnold Chikazhe, the Company Secretary and Legal Advisor stated.
The company has already undertaken a staff rationalisation exercise, resulting in reductions in monthly operating costs.
Negotiations for financing the kiln refurbishment are underway, with recommissioning expected in the first half of 2025.
“Cost containment measures to improve margins and cash generating capacity have been showing promise and are ongoing.
“Equally and in the course of the year the Company has shown good underlying un performance with double digit month on month growth in volumes and revenue culminating in increased capacity to service its obligations.
“Ongoing product quality improvements in the course of the year have been embraced and well accepted by the market and have led to higher product enquiries and demand for the company’s products. This has driven a rise in volumes and revenue for the greater part of the year.
“Though working capital constraints alluded to continue to dampen the Company’s ability to meet demand. Resolution of these constraints will firmly place the business on a strong financial footing
“Significantly, negotiations for financing of the kiln refurbishment are in progress with some work already having started. Subject to successful conclusion of the negotiations, recommissioning of the kiln will likely be in the first half of 2025
“In addition, the Company has valuable assets in the form of land plant equipment, human capital and industry know-how that can be productively leveraged and exploited to bring about a worthwhile turnaround of the business,” the company stated.
Grant Thornton (Zimbabwe) Chartered Accountants’ Mr. Bulisa Mbano has been designated as the corporate rescue practitioner, following the company’s decision to initiate corporate rescue proceedings under the Insolvency Act.
This development comes after the company passed a resolution on December 20, paving the way for the corporate rescue process.
