PPC banks on new African projects to boost product salesComment on this story
Johannesburg - The release of major infrastructural projects in South Africa, Botswana and Zimbabwe would provide a key driver for demand for cement products in the region, listed cement and lime producer PPC said yesterday.
In a trading update for the quarter to December last year, PPC chairman Bheki Sibiya said the South African trading environment would remain tough and highly competitive but PPC believed its various response strategies had positioned the company well.
Sibiya said PPC’s normalised earnings for the first half of its financial year were anticipated to reflect a year-on-year improvement.
He said the operating environment in South Africa remained tough with low single-digit cement volume growth achieved in the first quarter, along with price increases.
Sibiya added that both the inland and coastal regions recorded positive growth while growth in cement volumes was also achieved in Zimbabwe, with exports from that country showing “a pleasing trend”.
Volumes in Botswana and Mozambique continued to be under pressure due to weak demand and intense competitor activity but some increases in selling prices were still achieved in these territories.
Sibiya said the performance in the lime division was beginning to show a positive trend while the South African aggregates division had achieved pleasing volume growth due to increased off-take in road, retail and residential projects.
Sibiya added that PPC’s expansion strategy remained well on track and construction of its new operation in Rwanda was progressing well, with commissioning of the plant anticipated at the end of this year.
Construction work had now also commenced at PPC’s sites in Ethiopia and the Democratic Republic of Congo (DRC), and additional opportunities were currently being pursued.
PPC said last year that it aimed to have three new plants under construction by the end of the first quarter of this year in the DRC, Ethiopia and Zimbabwe, while its plant in Rwanda was scheduled to come on stream in September.
The company said it had also earmarked a fifth project in an as yet undisclosed country, with its capital expenditure budget for this financial year totalling about R2.7 billion.
PPC has expanded into the rest of Africa with the target of generating 40 percent of its revenue from outside South Africa by 2017.
The move has been prompted by increased competition in the South African cement market and lower margins at home.
The increased competition follows JSE-listed Sephaku Holdings associate company Sephaku Cement earlier this month commencing with cement production at its Delmas milling plant, where output is expected to be ramped up to 1.4 million tons a year by the middle of this year.
Sephaku Cement has another major project, Aganang, an integrated plant located in Lichtenburg in North West, where production is targeted to commence by the second quarter of this year.
About R3.3bn has been invested in establishing Sephaku Cement’s new cement plants, which once fully operational will have a total annual capacity of 2.2 million tons.
In December PPC acquired a 69.3 percent stake in Safika Cement Holdings for R377 million, which followed its acquisition in 2012 of an initial 25 percent shareholding in Gauteng readymix and fly-ash supplier Pronto Holdings, with the remaining shareholding bought on a phased basis over a two-year period.
PPC shares fell 2.70 percent to close at R29.51 yesterday. - Business Report