PPC says Africa expansion strategy is on track

PPC, the South Africa-based cement producer, has reported its results for the full year ending 30 September, with cement sales volumes ending 2% up y/y. Revenue was up 9% at R9039 million, in large part due to the consolidation of Safika Cement and Pronto Readymix as well as the full-year impact of CIMERWA, the group’s Rwandan operation.

The cost of sales grew 13% to R6266 million and gross profit remained flat y/y at R2773 million. Administration and other operating expenditure also increased to R1030 million, a 21% rise from FY13. PPC attributes the increased costs to the consolidation of new acquisitions, currency movements and additional costs incurred in executing its African expansion strategy.

Normalised EBITDA fell by 5% to R2374 million and operating profit was down 11% y/y at R1759 million. This latter figure excludes the impact of BBBEE IFRS 2 charges and Zimbabwe indigenisation and restructuring costs. In the year ending 30 September, EBITDA and operating margins contracted to 26% and 19%, respectively.

The group recorded cash from operations of R2583 million, lower than last year’s R2885 million, due to net reductions in working capital related to one-off payments of the interest swap liability and restructuring costs.

Cement

Revenue from the cement sector rose 7% to R7710 million, while EBITDA fell 5% to R2132 million. In South Africa, the impact of the acquisition of Safika Cement is already being felt. Cement sales volumes were down 2% y/y, but would have declined by 7% without Safika Cement. The decline can be attributed to poor economic growth, industrial action on the platinum belt and the steel industry, increased imports and local competition as well as adverse weather conditions. Volumes did grow in some areas and a 3% price increase was achieved during the year.

A number of upgrade projects were completed in the country, including the upgrade of the De Hoek kiln 5 baghouse filter, bringing dust emissions down and saving on water consumption. At the Slurry operations, air-quality upgrades on finish mills 1 and 2 were completed, bringing the plant in compliance with environmental legislation that is being introduced in 2020.

Overseas, PPC Zimbabwe experienced increased sales volumes as demand growth continues and local exports also picked up.

• Increased competition in South Africa had an adverse effect on sales volumes and prices in Botswana, making it difficult for PPC to recover cost increases.
• In Mozambique, PPC relocated its office from Maputo to Tete. The group intends to supply southern Mozambique direct from South Africa and the Tete region from its Zimbabwe plant.
• Progress has been made in improving the performance of the company’s existing plant in Rwanda, and sales have surpassed the 100 000 t target. A new plant will come online early next year and the existing plant will be decommissioned.

Lime aggregates & readymix

Increased sales of limestone brought revenue in the lime business 2% higher y/y, while sales of burnt product were 6% down due to reduced business from the steel and alloy industries. The increased revenue was offset by the rising cost of sales and higher fuel and manpower costs. EBITDA fell to R136 million from R162 million last year.

Aggregates revenues were up 18% y/y at R395 million thanks to increased sales volumes in South Africa and Botswana. ABITDA was up 33% at R61 million. The acquisition of the remaining 50% stake in Pronto Readymix has already contributed positively to the group’s results.

Africa growth strategy

PPC has signed EPC contracts in four different countries over this fiscal.

• It is building a 1 million tpa integrated plant in the Democratic Republic of Congo in partnership with the Barnet Group at an investment of US$280 million.
• Commissioning of the 600 000 tpa plant in Rwanda is due to take place in the first half of next year.
• Construction of a 700 000 tpa cement mill is underway in Harare, Zimbabwe, at an investment of about US$85 million.
• PPC plans to increase its shareholding in Ethiopia’s Habesha Cement to 51%. Construction of the 1.4 million tpa plant is underway and commissioning is scheduled for 2016.
• A feasibility study is ongoing in Algeria regarding a 49% shareholding in an Algerian company that is building a 2 million tpa cement plant. A decision on this investment is set to be made in the first half of next year.

Adapted from press release by Katherine Guenioui

Read the article online at: https://www.worldcement.com/africa-middle-east/18112014/ppc-says-africa-expansion-strategy-is-on-track-870/