Johannesburg - Lafarge South Africa, the local subsidiary of international building materials group Lafarge, anticipates the South African cement market to grow by between 3 percent and 4 percent next year and warned of price hikes because of higher fuel and electricity costs.
Thierry Legrand, the country chief executive at Lafarge SA, said last week that relentless fuel and energy cost increases were continually having an impact on margins and had not been fully recovered in previous price increases.
Legrand said fuel costs increased by 21 percent in 2011, 16 percent last year and 9 percent so far this year, while electricity costs were increasing annually by more than 9 percent.
“Recent [cement] price increases did not fully recover input costs while 2012’s average price increase was low. To compensate for the impact of the high input costs, Lafarge SA has concentrated on cost reduction and optimisation opportunities,” he said.
But Legrand stressed that to maintain the necessary investment in resources and continue offering top quality products and services, Lafarge needed increases in current cement prices to be aligned with input costs.
Legrand said there were interesting times ahead for the cement industry in South Africa because short-term prospects for economic growth remained subdued and major infrastructure projects were slow in coming to fruition. However, he had no doubt Lafarge’s cement capacity of 3.6 million tons would be critically needed when the infrastructure programme was at full momentum.
“We are still positive about the long-term prospects for the cement market in South Africa. That’s why we have invested in a R1.2 billion project completed in 2009, bringing our overall cement capacity to 3.6 million tons a year,” Legrand said.
He said Lafarge’s cement volumes in South Africa grew by about 3.5 percent last year and it did not expect growth of more than 2.5 percent this year if the impact of strikes was less than last year. - Business Report