Construction materials supplier PPC expects to report a headline loss a share of between 8c and 10.5c and a loss a share of between 21.5c and 22.5c for the financial year ended March 31.

This compares with headline earnings a share of 13c and earnings a share of 5c reported for the 2022 financial year, the company points out in a trading statement ahead of the planned release of its financial results on June 26.

For continuing operations, the loss a share is expected to widen to between 15.5c and 16.5c, from a 5c loss a share the year before, while the headline loss a share is expected to widen from 3c in 2022 to between 7.75c and 8.25c.

“Despite challenging times in our core South African market, I am pleased that we achieved positive cash flow generation, further reduced our debt and are in a strong financial position to weather the local economic cycle,” JSE-listed PPC CEO Roland van Wijnen says.

“Increased demand through an enhanced infrastructure investment programme and a stronger economic climate is required to enable us to more effectively use the capacity available in our primary market.

“We therefore remain hopeful that the South African government will roll out its infrastructure development plans and protect the local cement market through the introduction of import tariffs to create a level playing field for domestic producers,” he adds.

SA OBLIGOR GROUP
PPC’s South African obligor group operationally comprises the South African and Botswana cement and materials businesses.

The coastal region of the cement business continued to see relatively better demand for cement compared with the inland region and benefited from muted imports given the weaker rand over this period.

However, trading conditions in the inland region remained difficult, resulting in overall cement volumes reducing by 5.8% year-on-year.

Positively, during the current period, PPC says it was able to continue to increase its selling prices on a biannual basis and achieved an average selling price increase of 8%.

PPC’s South Africa and Botswana cement revenue increased by 1.7% during the current period. High input cost inflation remained a key feature requiring rigorous cost mitigation measures to cushion the impact of these high input costs.

Overall, total costs increased by 4% compared with the prior period.

The smaller materials business was challenged during the year owing to difficult trading conditions, including high fixed costs, while also being negatively impacted on by loadshedding, particularly in the second half of the year.

Volumes reduced across all its key business lines – readymix, fly ash and aggregates – resulting in a loss before interest, taxes, depreciation and amortisation of R65-million.

Measures were implemented prior to period end to restructure, in particular, the aggregates business to decrease absolute fixed costs and convert certain fixed costs to variable costs as part of the turnaround efforts for the overall materials businesses.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) for the SA obligor group, excluding the dividends received from Zimbabwe and Rwanda, decreased by 26% to R570-million.

The Ebitda margin decreased from 11.8% in the prior period to 8.7% for the 12 months under review.

The SA obligor group’s net debt reduced to R800-million, while gross debt (excluding capitalised transaction costs) declined from R1.21-billion in the prior year to R931-million at period end in accordance with the debt repayment terms.

The reduction in gross debt results in a gross debt to Ebitda ratio, including dividends from Rwanda and Zimbabwe, of 1.2 times.

PPC ZIMBABWE
Volumes were 16% lower year-on-year despite robust cement demand from concrete product manufacturers and government-funded infrastructure projects. This is owing to the impact of the planned kiln maintenance shutdown in the first half of the year, which negatively impacted on performance.

In addition, plant stoppages owing to power interruptions negatively affected performance in the second half of the financial year.

PPC Zimbabwe has gradually recovered market share lost over this period and is well positioned to deliver strong volume growth going forward.

CIMERWA
Cimerwa’s volumes increased by 1% for the current period, in line with expectations given the planned kiln maintenance shutdown in the second half of the year.

Revenue for the business, in Rwanda, increased by 29% in part as a result of the 9% depreciation of the rand and strong price increases to offset cost inflation.

OUTLOOK
PPC says it will continue to focus its resources on Southern Africa, including Zimbabwe, while preserving its sound market position in Rwanda.

Further operational efficiencies and cost containment measures have been identified to mitigate rising input costs as the economic climate in its key South African market remains muted and competition remains high across the portfolio.

PPC will continue to implement biannual price increases to achieve margin recovery.

It warns, however, that without a significant increase in infrastructure spending and economic growth, South Africa’s cement demand is likely to remain subdued.

PPC South Africa is said to be well positioned to benefit from an increase in cement demand, with additional capacity readily available to capture an upswing in demand without additional capital expenditure being needed.

Further, PPC Zimbabwe anticipates a continued recovery and the outlook for Cimerwa remains positive. PPC’s focus will continue to be on cash generation and capital allocation efficiency.

With the South African gross debt to Ebitda ratio now at the targeted level, PPC intends to prioritise returning cash to shareholders through dividends or a share repurchase programme in the absence of any value-enhancing corporate activity, it states.