PPC ends capital restructure with sharply higher interim profit
Share this article:
PPC lifted profit from continuing operations to R969 million in the six months to September 30 compared with R396m previously, after a restructuring and good demand in its major markets drove up performance.
Revenue grew 20 percent to R5.1 billion following a 12 percent increase in cement sales volumes, and the positive impact of hyperinflation accounting on PPC Zimbabwe’s financials.
Chief executive Roland van Wijnen said in a telephone interview yesterday that he was feeling good about the results, as the market had developed in line with expectations and overall cement volumes were five percent above those of 2019.
He said the group had faced some unexpected cost pressures, but even though price increases did not match cost increases, good management had seen the group nevertheless improve profit margins.
In addition, the capital restructuring was essentially complete, the business was now in a resilient position, and the need for a capital raise had been averted, he said.
“Team PPC delivered a solid performance supported by the significant progress made against our strategic objectives which saw us capture volume growth, improve cost competitiveness and generate strong cash flows.”
Excluding PPC Zimbabwe, revenue grew 12 percent and, relative to the same period in 2019, there was a 7 percent improvement.
Cost of sales increased 24 percent to R4bn taking Zimbabwe-related hyperinflation into account. Excluding this, cost of sales increased in line with cement volumes, demonstrating good control of costs which have generally grown significantly due to high input cost inflation of 9.2 percent.
Earnings before interest tax depreciation and amortisation (Ebitda) ended 13 percent higher at R945m, while operating profit increased 10 percent to R633m. Excluding PPC Zimbabwe, Ebitda was 28 percent higher and, relative to 2019, it increased 23 percent.
Taking fair value adjustments, profits on disposals and hyperinflation into account, basic headline earnings per share rose 83 percent to 55 cents.
Cash generation was strong and PPC continued to de-gear, settling a further R309m in debt. As part of the capital restructuring, a net profit of R189m was realised on the disposal of PPC Lime and PPC Botswana Aggregates.
South Africa and Botswana Cement experienced continued strong retail demand, which saw cement sales volumes increase by 12 to 15 percent, and by 3 to 6 percent relative to 2019.
Sales to the retail and rural segments continued to outpace other segments of the market. Selling prices were raised to partially offset input cost inflation, by 4 to 8 percent.
Van Wijnen said that, from his discussions with retailers, it was possible that retail sales may be peaking, but PPC expected to benefit from improved cement demand from construction companies, many of which had full order books.
PPC estimated that cement and clinker imports increased by 30 percent year-on-year for the nine months ended September 2021 and it believed imports would account for 10 percent of total industry volumes by the end of the year.
PPC together with Cement & Concrete SA and other industry players are awaiting a decision from authorities regarding an application that seeks relief against unfair competition in the form of import tariffs.
The recent designation of locally produced cement for all government-funded projects would have a positive impact on the industry once the infrastructure roll-out gathers momentum.
The materials division benefited from a recovery in construction activity which drove sales volumes for readymix and aggregates. Fly ash sales volumes declined off a high base. Revenue increased 30 percent to R600m and Ebitda improved to R37m.
PPC Zimbabwe traded ahead of expectations and was expected to continue to do so in the short term, said Van Wijnen.
Cement sales volumes in that country increased by 19 percent due to retail demand, additional sales to concrete manufacturers and support from government-funded projects while selling prices were adjusted in local currency to reflect input cost inflation. Revenue rose by 55 percent to R1.2bn and Ebitda, which was negatively impacted by additional transport costs to import clinker during kiln shutdowns, higher maintenance costs and the stronger rand, declined by 12 percent to R287m.
Van Wijnen said, looking ahead, the focus was on optimising operational efficiencies, reducing the group’s environmental footprint while further enhancing financial resilience.
The company plans to publish its first Task Force on Climate-Related Financial Disclosure report on November 29.
BUSINESS REPORT ONLINE