Cow to maintain margins in a construction market where all raw materials, from steel to wood, including glass and aluminum, are soaring by 40.50 to 60%? This is the small feat achieved by the TGCC group in the first half of the year which, overall, slightly increased its prices. But especially subdued its fixed charges.
A recipe with 4 ingredients
Mohammed Bouzoubaa, CEO of the company, confirms that at the start of the second half, materials remain at high levels. Except for steel, which corrects a little, the prices of aluminium, glass and wood are still stretched. Asmaa Abaragh, DGA support at TGCC, explains the strategy to mitigate the effect of inflation: “From the end of February, we mobilized to find concrete solutions. First, we have optimized the management of our supplies by improving the logistics circuit and without reducing production». The company had to avoid the speculative effects of the suppliers which can influence the availability of the material.
The second lever concerns the regularization of the markets. In other words, revise prices. On this aspect, Mohammed Bouzoubaa explains that some private clients have agreed to share the impact with TGCC although nothing obliged them to do so. For public customers, the revisions made do not really respond to fluctuations in raw material costs.
“The professional associations sent a letter to the head of government asking to review the price revision formula. The head of government responded favorably and studies were carried out. I think it will have a positive impact and do good for our sector,” he confides. Professionals denounce an obsolete price revision formula that does not take into account current construction methods. A third aspect concerns the control of fixed costs.
Optimization of transport costs, increase the rate of use of equipment, curb unnecessary recruitment or head office costs…In short, a real hunt for expenses is carried out internally to reduce structural costs. Finally, there is the management of working capital and cash flow by accentuating collection and rigorously planning disbursements. All this had the impact of posting an EBITDA of 217 MDH, up 35% compared to the same period in 2021, for an RNPG up 65%.
Triple the size of Africa in turnover within 2 years
The order book has increased by 4.5% compared to the end of 2021, to stand at 7.2 billion dirhams at the end of June 2022. Mohammed Bouzoubaa expects the order intake to exceed one billion dirhams. dirhams by the end of the year. And for this, the local market will be called upon as much as sub-Saharan Africa, where TGCC is showing strong growth. Indeed, the share of international subsidiaries in Group revenues at the end of the first half now stands at 10% compared to 7% in the first half of 2021.
Mounir Moustar, International Director, predicts that this share will triple in a maximum of 2 years. A goal confirmed by Bouzoubaa, for whom the company does not seek isolated opportunities in Africa. But adopts a strategy of implantation there to perpetuate the business. Currently, it is in Côte d’Ivoire, and in Senegal, where the Group is establishing an increasingly comfortable position, and other announcements will be made in the months to come. In the short and medium term, Mohammed Bouzoubaa says he is confident about the landing of the 2022 financial indicators and promises to announce more good surprises to the market which, moreover, welcomed the results the day after their publication.