Johannesburg - PPC’s strategy to expand into the rest of Africa has gained significant momentum and the listed cement and lime producer is hopeful about announcing a fifth project on the continent in the first quarter of next year.
Ketso Gordhan, PPC’s chief executive, said yesterday that it would have three new plants under construction by the end of the first quarter next year in the Democratic Republic of Congo (DRC), Ethiopia and Zimbabwe, while its plant in Rwanda would come on stream in September next year. The country earmarked for the fifth project was not disclosed.
Gordhan said PPC’s capital expenditure budget for the current financial year was about R2.7 billion.
This included between R500 million and R600m maintenance capital expenditure to keep its South African plants in good shape; between R600m and R700m for its second payment to Cimerwa in Rwanda; the first significant payment in the DRC of R800m; and between R200m and R300m for the company’s projects in Zimbabwe and Mozambique.
“We will have a tough year on capex next year and slightly tougher year in 2015 but it then eases off when we pay the last 20 percent of projects in 2016,” he said.
Gordhan said PPC’s new plants in the DRC, Rwanda, Ethiopia and Zimbabwe would all be cold commissioned by 2016 and these would enable the company to achieve its target of generating 40 percent of its revenue from outside South Africa by 2017.
In the year to September, PPC reported a 15 percent increase in cost of sales to R5.5bn, a 27 percent rise in administration and other operating expenditure to R853m. PPC said its average selling price a ton of cement increased by 4 percent while costs a ton rose by 6 percent.
Looking ahead, there will shortly be a new entrant to the South African cement market in Sephaku Cement.
Gordhan said in this environment PPC was putting in a huge effort so that it retained its earnings before interest, tax, depreciation and amortisation margin above 30 percent and believed its cement volumes next year would be flat or higher despite the new entrant.
He said PPC was increasing capacity at its Slurry plant, improving efficiency and had rationalised some of its plants.
Gordhan said PPC had initiated a voluntary retirement process in the Western Cape and Zimbabwe, which by the end of this calendar year would have reduced its total headcount of about 3 000 in these regions by 150 people.
“We are doing all things you would expect a company in our position to manage our costs and improve efficiencies. I think this is something you will observe in PPC in other areas over the next 18 months. We will do more as it becomes more appropriate. But I’m reasonably confident PPC will be able to continue to deliver.”
He attributed half the steep increase in administration and other operating expenses to the cost of travel, drilling, consultants and advisers for the company’s expansion programme.
PPC yesterday reported a 13 percent increase in revenue to R8.3bn in the year to September from a year earlier.
Operating profit before broad-based black economic empowerment International Financial Reporting Standards charges and Zimbabwe indigenisation costs improved by 3 percent to R1.9bn. Headline earnings a share grew by 15 percent to R2.15.
Cash generated from operations increased by 26 percent year on year to R2.88bn. The annual dividend a share was 7 percent higher at R1.56.
The shares rose 1.54 percent to R32.39 yesterday. - Business Report