PPC said yesterday that lower disposable incomes and no major increase in infrastructure spending had impacted its operations in the 12 months to March 31.
The share price fell sharply by 8.25% to R2.67 late yesterday.
The cementitious product producer said in an operational update yesterday that demand, however, continued to grow in its two other major markets, Zimbabwe and Rwanda, supported by infrastructure spending and retail demand in both countries.
The common factor across these markets was a significant increase in input costs due to rising energy costs.
Deleveraging remained a priority in South Africa and Botswana and net debt in the region was expected to fall to between R725 million and R775m at year-end, from R1.08 billion at March 31, 2022 and R935m at September 30, 2022. Debt was anticipated to reach targeted levels, and would allow for distributions, the directors said.
In Rwanda, Cimerwa’s debt continued to decrease. Both PPC Zimbabwe and Cimerwa expected to be in a net cash position at March 31, 2023, with sustained dividend payments a priority.
Cimerwadeclared its first dividend in the financial year, which was expected to be paid out before the March 2023 year-end.
Cement sales volumes in South Africa and Botswana were expected to fall 4% to 7% year-on-year. In the first six months, sales volumes fell 2.6% over the same period a year before, while the negative trend in demand continued in the second half.
“These numbers mask a relatively sound performance in the coastal region while trading in the inland region continues to be very challenging. In the Western Cape, PPC has been able to increase its market share as imports fell. Cement market share in the highly competitive inland areas came under pressure following price increases in June 2022 to offset rising costs.”
The group said rising input costs and maintaining its market share was causing margin pressure. Average selling prices for the full year were expected to increase between 5% and 7%. At the half-year stage, average selling prices increased 5% over the previous first half.
Bi-annual price increases would continue in the 2024 financial year to restore Ebitda margins.
Production cost inflation was contained to about 11% during 2023. Cost mitigation measures and better operational performance had reduced the impact of the external input cost inflation.
BUSINESS REPORT