Africa-Press – Zimbabwe. Zimbabwe’s second-largest cement producer, Khayah Cement Limited, is facing a severe crisis and has opted for voluntary business rescue.
Despite the cement market remaining strong, the company attributes its failures to internal inefficiencies and significant losses due to frequent breakdowns. In a notice, Khayah stated:
The Company is financially distressed as it is struggling to meet some of its obligations to creditors as and when they fall due for payment.”
When Fossil acquired Lafarge Cement (now Khayah Cement) for US$29.7 million in 2022, the company was already deep in debt and grappling with a poorly performing plant and various operational issues, according to newZWire.
Fossil inherited a debt of US$11 million from Lafarge and has been unable to repay it due to continuous plant breakdowns and operational inefficiencies.
Furthermore, US sanctions imposed on Fossil in 2022 have made it more challenging for Khayah to secure trade loans. Khayah said:
Trade restrictions which were imposed by the US Government on one of the members of the consortium that purchased a controlling stake in the Company resulted in the withdrawal of service provision by financial institutions such as loans and also offshore payments.
A number of key suppliers also withdrew their services making the purchase of goods and services very expensive.
The company says there’s “agitation” among creditors who want their longstanding debts paid. To prevent a run on its assets and legal action, Khayah has to seek protection through business rescue.
Khayah was also hurt by the government’s decision to temporarily allow cheaper cement imports to plug shortages. The company said:
The Company could not fully match these prices on account of relatively higher production costs from the current operating model.
The result was a reduction, and ultimately a stagnation of sales volumes, revenue and operating capacity below short-term economic levels – curtailing the Company’s recovery and growth momentum.
With this came liquidity challenges given payment commitments to legacy debt which is unrelated to and does not promote viability nor continuity of the current grinding station operating model.
Bulisa Phillimon Mbano has been appointed as the Corporate Rescue Practitioner for Khayah Cement Limited.
Sources reported by newZWire indicate that mismanagement was a key factor in the frequent equipment failures.
Late in 2022, the company had planned a 56-day kiln shutdown to refurbish the plant at a cost of US$7 million.
However, this process was disrupted by the management changes following the change in ownership.
The sources also claimed the board and management committees lack engineering skills, further contributing to the operational challenges.
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