PPC, a producer and distributor of cement, further reduced debt and saw positive generation in the year to March 31, putting it in a strong position to weather the weakening local economic cycle, CEO Roland van Wijnen said in an operational update on Thursday.
PPC’s headline earnings per share (Heps), including discontinued operations, was expected to be a loss of between 8 cents per share and 10.5c, compared to the 13.0c a share loss the period before, being an improvement of between 38% and 19%, respectively, the group.
Van Wijnen said an enhanced infrastructure investment programme and a stronger economic climate was required to enable the group to more effectively use its production capacity.
“We remain hopeful the South African government will roll out its infrastructure development plans and protect the local cement market through the introduction of import tariffs to create a level playing field for domestic producers,” he said.
Increased cash dividends were received from Zimbabwe and Cimerwa (Rwanda) during the 12 months.
The South Africa coastal region continued to see better demand for cement compared to the inland region, and benefited from muted imports, given the weaker rand over the period.
Trading conditions in the inland region remained difficult, resulting in overall cement volumes falling 5.8% compared to the financial year before.
PPC was able to continue to increase selling prices on a bi-annually and achieved an average selling price increase of 8%.
PPC South Africa and Botswana cement revenue increased 1.7%. High input cost inflation remained a key feature requiring rigorous cost mitigation measures. Total costs increased by 4%.
The smaller materials business saw difficult trading conditions, including high fixed costs, while also being negatively impacted by load shedding, particularly in the second half.
Volumes fell across all business lines, readymix, fly ash and aggregates, resulting in a R65 million earnings before interest tax depreciation and amortisation (Ebitda) loss versus R41m profit the year before.
Measures were implemented before March 31 to restructure, in particular, the aggregates business to decrease fixed costs and convert certain fixed costs to variable costs.
Ebitda for the group’s South African operations, excluding dividends from Zimbabwe and Rwanda, fell 26% to R570m.
Net debt at the group’s South African unit reduced to R800m from R1.06 billion, while gross debt fell to R931m from R121bn, in line with debt repayment terms.
PPC Zimbabwe volumes fell 16% despite robust cement demand from concrete product manufacturers and government-funded infrastructure projects, due to the impact of a planned kiln shut down for maintenance.
In addition, plant stoppages due to power interruptions affected second half performance. PPC Zimbabwe had gradually recovered market share and was well positioned to deliver strong volume growth, he said.
Revenue decreased by 19%, but PPC Zimbabwe was able to implement US dollar price increases to cover input cost inflation and enhance margins. Ebitda declined by 7% to R365m.
Cimerwa’s volumes increased 1%, in line with expectations given a planned kiln shutdown for maintenance in the second half. Revenue increased 29%, assisted in part by the 9% depreciation of the rand, and price increases to offset cost inflation. Its Ebitda rose by 31% to R447m.
Cimerwa debt declined to R265m from R383m. Cash declined from R221m to R160m, due to the maiden dividend paid in March 2023 of R172m. The dividend received by the South African group, net of withholding taxes, came to R79m.
Earnings per share for the group, including discontinued operations, was expected to be a loss of between 21.5c and 22.5c per share, compared to the 5.0c per share profit for the period before.
“PPC will continue to focus resources on southern Africa, which includes Zimbabwe, while preserving its sound market position in Rwanda. Further operational efficiencies and cost containment measures have been identified,” he said.
“Without a significant increase in infrastructure spending and economic growth, South Africa’s cement demand is expected to remain subdued,” said Van Wijnen.
PPC Zimbabwe anticipated a continued recovery and the outlook for Cimerwa remains positive.
BUSINESS REPORT