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May 07, 2008

Double-digit cement price hike on the cards

PPC CEO John Gomersall discusses cement inflation in South Africa (07-05-2008)
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Cement producer PPC, which diversified conglomerate Barloworld unbundled last year, in July could increase its prices by “several percentage points” more than March’s producer price inflation figure of 11,8%, CEO John Gomersall said on Wednesday.

This was after surging energy costs and commodity prices pushed up Africa’s biggest cement producer’s costs.

“We are assessing the options at the moment,” he stated.

Gomersall told Engineering News Online that PPC had seen a 28% rise in its diesel costs so far this year, and that the company used between 120-million litres and 130-million litres of the fuel yearly.

If the diesel price was to rise by a further 78c/l as some commentators had predicted, this would add R84-million a year to PPC’s costs.

“Around the world, cement prices are rising,” he said.

The company had already lifted its prices by an average of 8,5% in January, which Gomersall conceded “as it turns out, was not nearly enough”.

PPC reviews its prices twice a year, with changes becoming effective on January 1 and July 1.


Meanwhile, Gomersall said that PPC was in the final throes of concluding its long-awaited black economic-empowerment deal, and had already chosen its partners.

The company had been finalising the transaction at the same time that it was undergoing a financial restructuring, which was making it complicated.

Meanwhile, he went on to say that the usual major local empowerment groups would not form part of the deal.

“I would say that you probably would accept that you don’t see the usual suspects in our deal,” Gomersall stated. “That’s another reason why it’s been so broad based and problematic.”

“To do a deal with a single ‘usual suspect’ you can do very quickly,” he concluded.

In a slide presentation, PPC said that it would sell an initial 15% stake.

South African law introduced to redress apartheid requires companies to sell a portion of their shares to the local black population, with the view to involving more people of this skin colour in the formal economy.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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