PPC FY Heps flat, progress made on Africa expansion

18th November 2014

By: Creamer Media Reporter

  

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JSE-listed cement producer PPC, which on Tuesday reported headline earnings a share (Heps) of 179c for the financial year ended September 30, said its African expansion strategy had gained “solid momentum” during the year, with construction on cement plants under way in four countries.

The company had spent R2.12-billion on capital investment in the year under review, with more than R1-billion of this spent on the new projects in Rwanda, Zimbabwe and the Democratic Republic of the Congo (DRC).

PPC was building a $280-million, one-million-ton-a-year integrated cement plant in the western DRC, in partnership with Barnet Group.

Further, the 600 000 t/y plant in Rwanda remained on schedule for commissioning in the first half of 2015, while construction was under way on an $85-million 700 000 t/y cement mill in Harare, Zimbabwe.

In addition, construction had started on a $140-million, 1.4-million-ton-a-year cement facility near Addis Ababa, Ethiopia, which would be commissioned in 2016. PPC already owned a 27% interest in the project and had entered into an agreement with the Industrial Development Corporation to buy its 24% interest in the facility. The deal was expected to close in December.

PPC had also continued its investigation into potentially acquiring a 49% stake in an Algerian company that planned to build a two-million-ton-a-year cement plant in that country. A feasibility study for the project was at an advanced stage and PPC expected to make a final investment decision during the first half of 2015.

Meanwhile, in the financial year under review, PPC had lifted its cement sales by 2% year-on-year, while its revenue increased 9% year-on-year to R9.04-billion.

Its normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 5% year-on-year R2.37-billion, while operating profit was down 11% year-on-year at R1.76-billion.

The company’s Ebitda margin contracted to 26%, compared with 30% the year before, while its operating margin declined to 19%, down from 24% the year before.

Heps were flat while normalised earnings a share – after adjusting for International Financial Reporting Standards 2 charges, Zimbabwe indigenisation costs, restructuring costs, impairments and prior year taxation adjustments – were down 21% year-on-year to 170c.

In South Africa, the Safika Cement acquisition was starting to bear fruit, with cement sales volumes having fallen by only 2% year-on-year. On a like-for-like basis excluding Safika Cement, volumes were down 7%.

The decline in sales volumes was attributed to poor economic growth, industrial action in the platinum mining and steel sectors, higher cement imports and local competition, as well as above-average rainfall in the inland regions.

Volume growth was, however, experienced in the Limpopo and Eastern Cape regions.

“The challenging macroeconomic environment, coupled with declining capacity utilisation levels in the local cement industry, have constrained growth in selling prices, limiting our ability to fully recover cost increases,” stated PPC.

A 3% increase in the average selling price had been realised in the year under review. 

Meanwhile, a number of upgrade projects had been successfully concluded in the year under review. The bag house filter at De Hoek kiln 5 was upgraded, leading to dust emissions falling to below 10 mg/Nm3 and significant savings in water consumption.

At the Slurry operations, air-quality upgrades on finishing mill 1 and 2 were completed to comply with environmental legislation to be introduced in 2020.

INTERNATIONAL BUSINESS
Zimbabwe continued to enjoy a fifth consecutive year of higher cement demand albeit on a slower growth trajectory than in previous years. PPC Zimbabwe continued to realise sales volume increases ahead of local industry growth and good progress was made in growing exports to neighbouring countries, at improved pricing. 

However, the higher available cement capacity and competitiveness in South Africa had had an adverse impact on PPC’s Botswana volumes.

In Rwanda, sales volumes had exceeded the targeted 100 000 t mark in the year under review.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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