http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.65Change: -0.15
R/$ = 10.59Change: -0.09
Au 1284.10 $/ozChange: 2.48
Pt 1404.50 $/ozChange: 4.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Nelson Mandela 1918 - 2013   Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science & Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Nov 11, 2009

PPC expects demand to remain flat, admits to cartel activity

Back
Hercules|PPC|South Africa|Zimbabwe|Cement Cartel|Cement Market|Cement Producer|Cement Producers|Lawful Cement Cartel|Steel|Stuiver|Ricoh Caplio R30 Digital Camera|The Competition Tribunal Proceedings
hercules|ppc|south-africa|zimbabwe|cement-cartel|cement-market|cement-producer|cement-producers|lawful-cement-cartel|steel|stuiver|ricoh-caplio-r30-digital-camera|the-competition-tribunal-proceedings
© Reuse this



Demand and sales volumes for Pretoria Portland Cement’s (PPC’s) products, in the 2010 financial year, were likely to remain at similar levels to that of the 2009 financial year, CEO Paul Stuiver said on Wednesday.

He told Engineering News Online that the cement producer was “quietly optimistic” about the year ahead, despite still seeing mixed signals from the market.

While demand levels have not significantly improved in the past few months, the company has also not seen evidence of demand levels worsening significantly, he noted.

One worrying factor was that the residential building sector in metropolitan areas generally started recovering from about nine months to 12 months after an interest rate decline.

South Africa was now about nine months “down the track” following the start of declining interest rates and there still were no signs of an upswing in demand from the residential sector, said Stuiver.

PPC, which also on Wednesday admitted to participating in “market-sharing activity” reported a 25% drop in net profit for the 2009 financial year to R1,1-billion, compared with R1,5-billion the year before.

Its revenues increased by 9% to R6,8-billion in the year ended September 30, 2009, compared with R6,2-billion in 2008, while its earnings a share dropped 26% to 210,1c a share, compared with 283,5c a share.

The producer had warned, in October, that its earnings a share would be impacted on, as a result of an International Financial Reporting Standards 2 charge related to a broad-based black economic-empowerment deal.

MARKET-SHARING PRACTICES STOPPED

Meanwhile, Stuiver announced that PPC had concluded a conditional leniency agreement with the Competition Commission, with regard to the commission’s earlier investigations into the cement market.

He highlighted that the group has admitted to the Commission to participating in “market-sharing” activities.

The Competition Commission had confirmed in a statement that PPC had confessed to being part of a cement cartel.

“The Competition Commission has granted PPC conditional leniency from prosecution under the Competition Act, in exchange for PPC’s complete and truthful disclosure of all cartel activities between PPC and its competitors,” it stated.

The commission had raided and seized documents from PPC and a number of its competitors, in June, in pursuance of an investigation into possible collusion.                                      

The company had initiated an independent study, conducted by legal advisers, earlier this year, which had “revealed market-sharing arrangements” with other cement producers in the 1990s, PPC reported.

The commission highlighted that the company had confirmed the existence of a cartel to divide markets among four cement producers, which were believed to have agreed to divide the market among themselves in order to maintain the market share each held before 1996, when a lawful cement cartel was brought into existence and which was regulated by exemptions to the competition legislation.

“The agreement was implemented up until this year through highly disaggregated sales information each producer submitted to the Cement and Concrete Institute of South Africa (C&CI) through an audit firm appointed by C&CI. The four cement producers are the main members of C&CI,” the commission noted.

Stuiver explained that a few employees who worked for PPC in the 1990s had influenced a number of decisions, which led to the introduction of practices into the organisation that were “disguised as normal commercial behaviour”.

While the market-sharing meetings and agreements had stopped during the 1990s, some of the practices had continued until recently.

Stuiver assured shareholders that PPC had stopped all the cartel practices it was aware of, including the detailed sharing of information, with immediate effect.

In terms of the agreement with the Competition Commission, the cement producer would have immunity from prosecution, conditional on ongoing cooperation with the Commission until the Competition Tribunal proceedings were concluded.

OPERATIONAL PERFORMANCE

Regional cement demand had declined by 11%, while PPC’s cement sales declined by 10% in the financial year. Demand from the construction sector had grown by 11%, which the company said reflected the positive impact from the many infrastructure projects.

This was, however, offset by lower demand from the residential sector.

The company noted that it had, given the lower local demand, also been able to stop the importation of cement into South Africa and been able to start exporting its cement to other African countries.

Further, while both the Hercules mill and the Riebeeck West mill projects were facing some delays, the company was not concerned at present, given the current lower demand levels.

Stuiver explained that the construction of the Hercules mill had proved to be more difficult than initially anticipated, as a result of more difficult ground conditions.

The mill would now only be commissioned in the first quarter of the 2010 calendar year.

The construction of the Riebeeck West expansion project, in the Western Cape, would now likely be delayed by a year or two, added Stuiver, noting that construction had initially been scheduled to start in 2011.

Environmental-impact assessment and other regulatory approvals were currently holding up the process.

However, Stuiver emphasised that the project remained important, as much of its capacity in the Western Cape was very old, while new environmental legislation was being implemented. It made sense for the company to continue with the project, he said.

Meanwhile, the producer was satisfied with progress of its Zimbabwean Porthold cement business, where utilisation levels at both its facilities had improved to between 35% and 45%, compared with below 10% in the previous year.

“The situation in Zimbabwe remains difficult to predict. Should utilisation levels remain as they are currently, we can look forward to a positive contribution from our Zimbabwean operations in future,” Stuiver noted in a statement.

Demand for lime and aggregates had, meanwhile, declined by 30% in the financial year, owing to the impact of the economic downturn on the local steel and alloy industries.

This, combined with higher coal and electricity prices, had impacted on the operating profits and margins of the lime and aggregates business.

PPC noted, however, that there were indications that the steel and alloy industries were moving out of the economic downturn, which could boost demand for lime.

Edited by: Mariaan Webb
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
 
Latest News
Updated 6 hours ago As industry prepares for the launch of South Africa’s digital terrestrial migration, the South African Communications Forum (SACF) hosted a workshop to determine the country’s readiness in terms of compliance of set-top boxes [STBs] and access to funding. The...
Higher Education and Training Minister Blade Nzimande
Updated 6 hours ago Higher Education and Training Minister Blade Nzimande has outlined plans for the development of a new health and allied sciences university into which the Medical University of Southern Africa (Medunsa) campus of the University of Limpopo, located in Ga-Rankuwa, will...
Communications Minister Yunus Carrim
Updated 6 hours ago The costs of communicating have to drop, Communications Minister Yunus Carrim said on Wednesday. "Clearly, the costs have to come down. It's not just in the interests of the poor and disadvantaged but the economy as a whole," Carrim said in a statement following a...
More
 
 
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
 
 
 
 
 
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
MORE IN SA Phase 2 should see local content on the mainline locomotive increase from 65% to 80% by the end of 2014
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks