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PPC seeing gradual recovery in business

23rd March 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed PPC expects total group cement sales volumes for the 12 months ending March 31 to increase by 4% to 8% year-on-year, with double-digit volume growth in Zimbabwe and Rwanda.

South Africa and Botswana experienced low single-digit growth in cement sales as volumes normalised from a high base.

Relative to the 2020 financial year, which was pre-Covid-19, group cement sales are expected to increase by 11% to 15% for the period under review.

The group’s materials businesses also experienced a recovery in demand with year-on-year growth in sales volumes.

SOUTH AFRICA & BOTSWANA

PPC expects cement sales volumes in South Africa and Botswana to increase by 0% to 3% year-on-year for the period.

The prior comparable period benefited from strong retail demand owing to increased expenditure on home improvements.

Relative to the 2020 financial year, cement sales in South Africa and Botswana are expected to increase by 5% to 9%.

PPC South Africa and Botswana cement sales continue to benefit from demand growth in the rural and informal markets, albeit at a “normalised” rate following the post-Covid-19 lockdown spike in demand.

Industrial construction activity in the inland area shows pockets of demand growth from the construction of distribution centres and an increase in mining activity, PPC points out.

PPC experienced an increase in cement sales in the coastal region, with low single-digit year-on-year demand growth supported by a recovery in industrial construction demand.

However, despite the improvement in demand, cement sales in the coastal region are still below that of the 2021 financial year.

PPC says it has yet to experience any meaningful uplift in cement sales from the government’s designation related to the use of locally produced cement on government projects.

“Except for some limited road construction and rehabilitation activity, there have been no large infrastructure projects. PPC is well-positioned to benefit from this potential boost in cement demand once the infrastructure programme gathers momentum.

“PPC can immediately make additional capacity available to capture an upswing in demand,” it states.

PPC implemented price increases to offset input cost inflation, with realised selling prices having increased by 4% to 7% year-on-year.

Cement imports, mainly from Vietnam, increased by 11% year-on-year and currently exceed pre-Covid-19 levels.

PPC estimates that imports account for about 10% of South African cement sales.

“In conjunction with the industry, PPC continues to engage with the relevant authorities for relief against unfair competition from imports, which threatens the financial sustainability of a vital component of the manufacturing and construction sector and erodes the industry's ability to maintain jobs,” it points out.

MATERIALS

The readymix and aggregates businesses continue to experience a recovery in demand supported by a pick-up in construction activity in the regions in which they operate.

For the year, PPC expects readymix volumes to increase by 5% to 10% year-on-year, while aggregate volumes are expected to increase by 10% to 14% year-on-year.

Fly ash sales volumes are expected to decrease by 14% to 18% owing to an unusually strong performance in the prior year owing to lack of slag in the market.

Overall, revenues for the materials division are expected to increase owing to the increase in sales of readymix and aggregates.

On the financial side, the South African business’s gross debt declined to R1.2-billion as at February 28, owing to a continued focus on cash generation and the proceeds from the sale of PPC Lime and the Botswana aggregates business.

In terms of outlook, PPC says it is well-positioned to benefit from growing cement demand in the territories it operates.

The group remains focused on improving operational efficiencies to ensure financial sustainability through all demand cycles.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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