PPC, a leading provider of building materials and solutions in sub-Saharan Africa, has robust financial metrics and the right focus to weather the current weak economic cycle, chief executive Roland van Wijnen said yesterday.
Speaking on the release of results for the six months to September 30, he said their balance sheet and cash generation was strong and the group might consider rewarding shareholders with a dividend or share buybacks, advising "lets see how the second half goes”.
He said in a telephone interview that Cimerwa’s outlook in Rwanda remained favourable, which should – with PPC Zimbabwe’s expected recovery in sales volumes – contribute positively to the second half-year performance.
Some of the infrastructure being undertaken in Zimbabwe that was helping to stoke cement demand included a large road interchange in Harare, construction of Hwange power station, and facilities at Beit Bridge.
“There is a lot happening on the ground in Zimbabwe,” he said.
They were encouraged by recent announcements by Sanral to award large construction projects in South Africa, as well as the comments on increased infrastructure spending made in the recent mid-term budget speech of the South African finance minister.
“With additional capacity available to capture an upswing in demand without additional capital expenditure required, PPC is well positioned to support the much-needed construction work across South Africa,” said Van Wijnen.
The interim results were distorted by hyperinflation accounting for PPC Zimbabwe, but were boosted by stronger distribution centre and residential estate construction activity in South Africa, as well as a robust performance from Cimerwa in Rwanda.
South Africa and Botswana cement revenue increased 4% to R2.9 billion. To retain volumes, sales price increases were limited to 5%, while changes in the product mix had a positive impact.
Higher sales volumes in the coastal region due to stronger demand, and a decrease in imports were offset by difficult trading conditions in the inland region, leaving cement sales volumes slightly down overall by 2.6%.
Group headline earnings per share fell to 4 cents compared to 10c in the prior comparable period after margins were eroded in South Africa and Botswana, due mainly to fuel and other energy costs. Excluding PPC Zimbabwe, pretax profit increased 4% to R259 million. Revenue increased 9% to R4.2bn supported by price increases and steady volumes.
Group debt fell to R677m from R1bn on March 31, 2022. Cash inflow before financing activities remained positive at R319m. Finance costs fell 43% to R84m due to de-gearing and lower interest costs after the implementation of improved debt facility arrangements in South Africa in December 2021.
“Our strategic actions have enabled PPC to continue to reduce debt and maintain its leading market position, despite challenging and competitive trading conditions in our core market,” said Van Wijnen.
He said the coastal region in South Africa continues to experience an upswing in cement demand due to a recovery in industrial construction activity and the resumption of postponed government projects.
The inland region experienced above-average seasonal rainfall at the start of the period and was impacted by the subdued economy, which resulted in lower cement sales to both the retail and construction segments.
The construction of distribution centres and housing estates supported cement sales to the industrial segment in the inland region.
He said some cost reduction actions took time to implement, and for the interim period were not able to fully offset high inflationary cost increases in South Africa and Botswana.
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