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PPC delivers strong interim performance following repositioning efforts

An image of PPC CEO Roland van Wijnen

Roland van Wijnen

23rd November 2021

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Building materials and solutions provider PPC delivered a solid performance for the six months ended September 30 against generally challenging conditions, supported by the significant progress made in achieving the company’s strategic objectives which saw it capture volume growth, improve cost competitiveness and generate strong cash flows, CEO Roland van Wijnen has told Engineering News.

He lists the challenges as the slow vaccine rollout and uptake in some regions, although this was now improving; and difficult economic conditions as a result of the pandemic, which was also improving.

As a result of the capital restructuring and refinancing project, PPC Barnet continues to be reported as a discontinued operation.

Group revenue increased by 20% to R5.1-billion, benefiting from a 12% increase in cement sales volumes and the positive impact of hyperinflation on PPC Zimbabwe’s financials.

Excluding PPC Zimbabwe, revenue growth was 12% and, relative to the same period in 2019, growth of 7% shows an improvement on pre-Covid-19 levels.

Cost of sales increased by 24% to R4-billion taking Zimbabwe-related hyperinflation into account.

Excluding this, cost of sales increased in line with cement volumes, which PPC says demonstrates good control of costs, which have generally increased significantly owing to high input cost inflation of 9.2%.

Group earnings before interest, taxes, depreciation and amortisation (Ebitda) ended the period 13% higher at R945-million, while group operating profit increased by 10% to R633-million.

Excluding PPC Zimbabwe, Ebitda was 28% higher and, relative to 2019, 23% higher.

Taking fair value adjustments, profits on disposals and hyperinflation into account, group headline earnings increased to R786-million and group basic headline earnings per share (HEPS) rose by 83% to 55c.

Cash generation was strong and PPC continued with its efforts to degear the group balance sheet, settling a further R309-million in debt.

As part of the group’s capital restructuring efforts, a net profit of R189-million was realised on the disposal of PPC Lime and PPC Botswana Aggregates.

“The capital restructuring is nearing completion and we have successfully removed the need for an equity capital raise. We continue to deliver on our promise of degearing the balance sheet and have used the proceeds from the sale of PPC Lime and Botswana to reduce debt further after the reporting period,” said CFO Brenda Berlin.

South Africa and Botswana Cement experienced continued strong retail demand, which saw cement sales volumes increase by 12% to 15%, and by 3% to 6% relative to 2019.

Sales to the retail and rural segments continued to outpace other segments of the market. In line with the biannual price review, selling prices were raised to partially offset input cost inflation and an increase of 4% to 8% was realised for the period.

Revenue increased by 17% to R2.8-billion and Ebitda rose by 53% to R515-million, while the Ebitda margin increased from 14.3% to 18.7%. Relative to 2019, Ebitda was 40% higher and Ebitda margins increased by 4.4%.

PPC estimates that cement and clinker imports increased by 30% year-on-year for the nine months ended September 30, and forecasts that imports will account for about 10% of total industry volumes by the end of the year.

PPC, together with Cement & Concrete SA and other industry players, is awaiting a decision from the relevant authorities regarding an application (updated to include both cement and clinker) that seeks relief against what it says is unfair competition in the form of import tariffs.

Van Wijnen said the recent designation of locally produced cement for all government-funded projects was welcome news. He said this would have a positive impact on the industry, and would benefit PPC in terms of improved sales, depending on how well the government enforces it and the speed of its infrastructure project rollout.

He pointed out that, not only does locally produced cement provide jobs in the country, but, it also supports communities, with such benefits negated by imports.

The materials division benefitted from a recovery in construction activity in the respective addressable markets which drove sales volumes for readymix and aggregates.

Fly ash sales volumes declined off of a high base. Revenue increased by 30% to R600-million and Ebitda improved to R37-million.

Looking ahead, PPC’s focus is on optimising operational efficiencies to mitigate increasing input cost pressures and reducing its environmental footprint while further enhancing its financial resilience.

Van Wijnen said the group sees opportunities presented by the rollout of South Africa’s infrastructure programme, with PPC having spare capacity to support this and not having to put in additional investment.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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