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PPC’s South Africa sales volumes lower but revenue up on higher prices

PPC cement factory situated at Germiston, Johannesburg. File: ANA

PPC cement factory situated at Germiston, Johannesburg. File: ANA

Published Sep 21, 2023


PPC, the cementitious products group, said revenue from operations in Zimbabwe and Rwanda increased “materially” by 58% and 19% in rands, respectively, for the five months to August 31 compared with the same period a year before.

However, revenue excluding its businesses in Zimbabwe and Rwanda increased 5% for the five months, with this uplift driven mainly by an increase of average selling prices, despite weaker cement sales volumes.

The operational update released by the group resulted in the share price rising 3.15% to R2.95 yesterday afternoon, a three-month high.

Group cement sales volumes (including Zimbabwe and Rwanda) for the five months were 3% higher due to “exceptionally strong growth in Zimbabwe” and, to a lesser extent, Rwanda, while cement volumes continued to decline in South Africa (SA).

The materials business continued to see a decline in volumes, but cost reductions and price increases resulted in earnings before interest tax depreciation and amortisation (Ebitda) turning to neutral from negative in the comparable period.

Ebitda margins for SA and Botswana cement were flat at 11% - price increases and cost initiatives enabled the margin to be maintained.

Cash generation in the SA and Botswana group was positive due to the stabilised cement Ebitda, improvement in the materials business Ebitda and lower than anticipated capital expenditure.

Cash generation included a dividend from Zimbabwe in July 2023 of R76 million compared to R68m in the comparable period.

Cement sales volumes in South Africa and Botswana fell by 6% period-on-period.

Cement sales volumes in the inland region continued to decline, albeit at a lower rate, while the coastal region saw a downturn in volumes following higher than usual rainfall and weak retail demand.

The average selling price increased 10% during the period as bi-annual increases were implemented in January and July. This resulted in revenue growth of 5%. Ebitda also increased by 5% as margins stabilised.

“PPC will continue efforts to counter input price inflation through price adjustments, operational efficiencies and improved industrial performance.”

SA and Botswana group’s gross debt remains unchanged from March 31, but cash increased to R283m from R131m, leaving net debt at R648m at August 31 from R800m at March 31, 2023.

The materials business was now contributing marginally to the Ebitda of the SA and Botswana group following improvement actions.

Price increases across ash, aggregates and ready mix together with an improved cost structure resulted in marginally positive Ebitda compared to a negative in the comparable period.

In Zimbabwe, the market continued to show growth as a result of both residential construction and government funded infrastructure projects.

Cement sales volumes increased 42% period on period.

PPC Zimbabwe’s average US dollar selling price increased by 12%. The improved volumes and pricing allowed for a meaningful improvement in Ebitda margins to 27%, a significant improvement from 14% in the comparable period, when there was a planned shutdown.

Once-off costs incurred by PPC in connection with the unwinding of its Zimbabwe indigenisation transaction amounted to R42m.

There strong demand for cement in all Rwanda’s markets, with cement sales volumes increasing 13% period-on-period, as demand from infrastructure projects was robust.

Cement exports were impacted by increased competition due to new competitors.

“PPC’s outlook remains unchanged and it will continue to focus its resources on improving profitability and cash generation in South Africa while preserving its sound market positions in Zimbabwe and Rwanda,” directors said.

“There continues to be a need for operational efficiencies and cost containment measures to mitigate rising input costs as the economic climate in PPC’s key South African market remains muted,” they added.

The directors said PPC South Africa was well positioned to benefit from an increase in cement demand, PPC Zimbabwe anticipated a continued recovery while the outlook for Cimerwa in Rwanda remained positive.