May 27, 2011
Rate of decline in cement demand slowing, says PPCBack
Construction|Engineering|Africa|Aggregates|Cement|Environment|Eskom|Flow|PPC|Projects|Renewable Energy|Renewable-Energy|Africa|South Africa|Zimbabwe|Colleen Bawn Factory|Building|Cement Demand|Cement Industry|Cement Producer|Cement Sales|Cement Sales Volumes|Cement Volumes|Energy|Equipment|Flow|Logistics|Maintenance|Service|Steel|Wind Energy|Eastern Cape|Western Cape|Environmental|Paul Stuiver|Operations|Eastern Cape
© Reuse this
Pretoria Portland Cement (PPC) says South Africa’s cement sales volumes fell by 4% year-on-year from October 2010 to March 2011, which is the smallest contraction for a six-month reporting period since September 2008.
Cement demand in the Western and Eastern Cape regions is the worst affected, while inland regions are less affected, the company reports, adding that some rural areas recorded slight increases in sales volumes over the previous year.
For the six months to the end of March, PPC’s cement volumes declined by 7%, owing to weaker sales across all divisions and increases in selling prices that are lower than the rate of cost inflation. High exposure to the Western Cape and the Eastern Cape has seen PPC’s cement sales decline by slightly more than the national average.
Headline earnings a share slumped 38% to 71,8c and operating profit decreased by 26% to R823-million. Earnings before interest, tax, depreciation and amortisation (Ebitda) declined by 32% to R1,04-billion and revenue declined by 5% to R3,26-billion.
Describing the cement industry as being in a “grind”, and that “basic” operational efficiencies remain key, CEO Paul Stuiver says that PPC’s results reflected industry trends.
“Despite the results not being as good as previously, cash flow generation remains good and the lower margins are still respectable,” he explains.
Capital expenditure (capex) was cut by about R120-million to R480-million for the year – in line with lower capacity requirements. The South Africa-focused capex will focus on maintenance, expansion, new projects and capacity upgrades in the Western Cape.
The lime and aggregates divisions of the business also took a knock, with lime sales declining by 10%, and Ebitda falling by 19% to R77-million. This is the result of being impacted on by key customers in the steel and alloys industries.
The aggregates division experienced a 20% reduction in sales volumes, with Ebitda reduced to R18-million, in line with the downturn in the construction industry.
Exports to neighbouring countries remain challenging and volumes decreased by 35%. Domestic sales increased in Zimbabwe by about 20%, but operating performance is challenged by production problems at the Colleen Bawn factory and price inflation of key items.
Stuiver says the company’s long-term organic growth strategy will seek to expand its operations into countries in Africa.
Despite the weaker performance and the difficult business environment in the local building and construction industry, the company remains well placed to recover, Stuiver tells Engineering News.
“Customer service, keeping control of costs and equipment maintenance remain key into the future. Should volumes improve, we are ready for this – expect quite a lot of operating leveraging coming through.”
As with most industries in South Africa, electricity pricing remains a significant challenge for the cement producer.
“In previous years, the price of electricity contributed about 5% of our costs, and has now crept up to about 8%. But we expect, once Eskom looks into price increases, that this cost will climb up to about 10%,” Stuiver says.
“I continue to be frustrated with this issue. The pricing of liquid fuels and electricity remains a significant challenge for PPC. We have looked at alternative energy prices and need alternative energy suppliers, particularly in wind energy. But such efforts continue to be hindered by uncertainty around the renewable-energy feed-in-tariff rates. The pricing of liquid fuels is also out of our control, despite PPC optimising its logistics,” he tells Engineering News.
PPC says it expects the R3-billion “capacity modernisation” upgrades in the Western Cape to lower costs and improve efficiency. Phase one of the three-phased De Hoek factory started in February and is expected to be completed next year, by which time phase two will have already started.
Detailed proposals for the upgrade of the Riebeeck factory were invited from potential suppliers and the environmental-impact assessment is progressing as scheduled.
“We are hopeful that we can continue in an upward trend into the future, as long as nothing unexpected surprises the industry,” Stuiver says.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Article contains comments
Article contains comments
Updated 20 minutes ago South Africa needs to develop a broadly shared understanding of the concept of national interest, which International Relations and Cooperation Minister Maite Nkoana-Mashabane says should not be too “narrow in scope and overly economic in its focus”. The Minister was...
Updated 27 minutes ago More national and provincial departments, including their entities have received clean audits for the 2013/14 financial year, Auditor-General Kimi Makwetu said on Wednesday. The Auditor-General said this when briefing the media on the audit outcomes for national and...
Updated 33 minutes ago Eskom has asked its staff to consider voluntary retrenchment packages, a spokesman confirmed on Wednesday. "We can confirm that we have announced the process by which employees can apply for voluntary separation packages," spokesman Andrew Etzinger said.
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.