PPC prepares to move on fifth African project, forecasts big capex rise

19th November 2013

By: Terence Creamer

Creamer Media Editor

  

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Cement producer PPC plans to add a fifth project to its growing portfolio of African investments and reports that it is on track to meet its objective of generating 40% of its revenues from the rest of the continent by 2017.

CEO Ketso Gordhan tells Engineering News Online that the JSE-listed group is considering a number of prospects under its ‘Rest of Africa’ strategy and that a decision on the next project will be made during the first quarter of 2014.

The company has already made an investment in Ethiopia’s Habesha Cement Company, where it has acquired a 30% interest, and is participating in a 1.4-million-ton expansion, which is due to get under way in January. PPC, Gordhan reveals, is hoping either to acquire a larger interest in the company, or to participate in a second phase to double the plant’s output.

PPC has also purchased a majority stake in Rwanda’s CIMERWA, where construction of a 600 000 t/y facility is under way to add to the company’s existing 100 000 t/y output.

But priority attention is currently being given to the million-ton-a-year Democratic Republic of the Congo (DRC) project, where construction is scheduled to start in the first quarter of 2014, while the bankable feasibility study for a Zimbabwe/Mozambique plants should be completed in the coming four months.

The projects are all being pursued with Sinoma, of China, as PPC’s engineering procurement and construction partner, and a funding plan has been put in place. The developments are being project financed.

PPC has a R6-billion domestic bond programme listed, against which it has raised R650-million to date. It expects to return to the bond market later this year and again early next year to raise additional debt.

“We remain confident about prospects for strong growth in the rest of Africa,” Gordhan says, while acknowledging that the group’s capital expenditure (capex) is set to rise materially as a result of the investments.

In the year to September 30, PPC’s investments rose to more than R1.2-billion, but the figure is expected to peak at around R3-billion in 2015, before starting to decline.

The increase will be underpinned by the group’s African project portfolio, as well as a plan for a R600-million investment to raise the capacity of a mill in South Africa by 40%.

PPC is also hoping to receive regulatory approval soon for its R350-million bid for blended cement producer Safika Cement Holdings.

Group revenue increased 13% to R8.3-billion during the financial year on the back of higher cement sales in Zimbabwe and South Africa, while profit for the year rose to R931-million from R846-million rand a year earlier.

However, South African cement demand remained about 1.5-million tons below the sales peak of around 14-million tons recorded in 2007/8.

“Due to modest growth, the domestic trading environment remains tough and highly competitive,” Gordhan says, noting that imports had risen to around the one-million-ton level. “So even to return to those historic highs, we will need to reach around 15-million tons of consumption in South Africa for us to be selling 14-million tons.”

Only limited progress has been made during the period to advance PPC’s call for an ‘Infrastructure Codesa’. But Gordhan says consultations with other businesses and with government departments have continued and that he anticipates that some of the group’s ideas could begin “gaining traction in the coming six to nine months”.

He believes there is particular potential to accelerate delivery in the areas of school building and housing development and reports that government has shown receptiveness to innovative models for the delivery of such social infrastructure.

Edited by Creamer Media Reporter

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