May 27, 2011
Rate of decline in cement demand slowing, says PPCBack
Construction|Engineering|Africa|Aggregates|Cement|Energy|Eskom|Flow|PPC|Projects|Renewable Energy|Renewable-Energy|Africa|South Africa|Zimbabwe|Colleen Bawn Factory|Cement Demand|Cement Industry|Cement Producer|Cement Sales|Cement Sales Volumes|Cement Volumes|Energy|Equipment|Flow|Logistics|Steel|Wind Energy|Eastern Cape|Western Cape|Environmental|Paul Stuiver|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
Other Construction News
Updated 4 hours ago Freedom Property Fund will undertake an assessment and the adoption of a share participation scheme to increase the ownership of its shares by previously disadvantaged individuals through a black economic-empowerment (BEE) structure. “Our investment model thrives...
Updated 18 minutes ago South Africa’s newly drafted National Integrated Information and Communication Technology (ICT) Policy White Paper would be finalised by February 2015, new Telecommunications and Postal Services Minister Dr Siyabonga Cwele has revealed. In a response to a...
Updated 42 minutes ago The Passenger Rail Agency of South Africa (PRASA) will continue refurbishing its existing Metrorail fleet for another 15 years, despite the R51-billion acquisition of 600 new trains of six cars each, signed last year. Not all the new coaches will come on stream at...
Updated 57 minutes ago Talks are under way to establish a network of technology incubators across Africa, Western Cape Economic Opportunities Minister Alan Winde said on Wednesday. Following a recent Western Cape Government-led delegation to Nigeria and Ghana to present an ‘African...
Recent Research Reports
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.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
Local aerospace company Denel Aerostructures (DAe), part of the State-owned Denel Group, has won a fourth contract to manufacture parts for the Airbus A400M military air transport and air-to-air refuelling aircraft. The new contract, which was won in an international...
Although CEO Mark McChlery and chief marketing officer Bob Skinstad likened themselves to children in a playground when taking on the task of “reengineering and repositioning” the Seartec brand, the “young, dynamic and enthusiastic guys” were like proud...
An increasing number of buyers, in both the new and used car markets, are opting for finance structures that lower their monthly repayments, says asset financing company WesBank. These include the use of large balloon payments (also known as residuals), as well as...
Tertiary education institutions can use search engine giant Google’s Chromebook to provide secure mobile end-point devices for students on which they can share documents, work collaboratively on documents and access education materials and applications being used...
Local ceiling and partition company Abbeycon has beaten global competition at the Saint-Gobain Gypsum International Trophy competition, which was held last month in Berlin, Germany.