Building materials and solutions provider PPC’s strategic actions have enabled the group to continue to reduce debt and maintain its market leading position in its core market despite challenging and competitive trading conditions.

This was noted by CEO Roland van Wijnen in a November 16 trading statement and operational update providing insights to its interim results for the six months ended September 30.

“We are in a strong financial position to weather the local economic cycle and are well placed to supply any increase in demand as the roll out of the South African government’s infrastructure development plans gain momentum,” he said.

PPC noted that, by looking at comparable earnings measures by stripping out discontinued operations and PPC Zimbabwe – which is subject to hyperinflation and noted to considerably skew the group performance – earnings a share are expected to be between 3c and 7c, compared with the 8c reported for the prior period.

Headline earnings a share are expected to be between 2c and 6c, compared with 10c apiece.

Group earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased by 12% compared to the prior year.

The decrease in margin is owing to considerably higher fuel and energy costs in South Africa and Botswana not being sufficiently mitigated by the group’s cost savings initiatives and contributions from other operations.

Net debt in South Africa and Botswana decreased by R140-million during the current period to R935-million. Overall, including PPC Zimbabwe, group net debt continued to improve reducing to R677-million at period end from R1.01-billion as at March 31.

“Some of the cost reduction actions take time to implement, and for the period under review were not able to fully offset high inflationary cost increases in South Africa and Botswana, resulting in Ebitda margin compression.

“Cimerwa, which benefitted from continuous operational improvements and solid market dynamics, delivered a strong performance which contributed positively to the overall results.

“As expected, PPC Zimbabwe’s financial performance was negatively impacted by a planned kiln shutdown during the first quarter but has since recovered and is experiencing robust demand while the business maintains its ability to repatriate dividends,” said Van Wijnen.

SOUTH AFRICA AND BOTSWANA CEMENT

Increases in sales volumes in the coastal region owing to stronger demand and a decrease in imports were offset by difficult trading conditions in the inland region, leaving cement sales volumes slightly down overall by 2.6%.

To retain volumes, sales price increases were limited to 5% in the period under review.

Revenues increased by 4% assisted by price increases and product mix. Despite cost control efforts, margins decreased from 18.7% to 12.2% owing to pressure from higher fuel and energy costs which increased by double-digits in percentage terms.

Ebitda decreased from R515-million to R368-million. Cash generation remained robust with net debt for South Africa and Botswana reducing by R140-million to R935-million.

“Looking ahead, Cimerwa’s outlook remains favourable which together with PPC Zimbabwe’s anticipated recovery in sales volumes should contribute positively to the second half-year performance.

“We are encouraged by the recent announcements by the South African National Roads Agency Limited to award large construction projects in South Africa as well as the comments on increased infrastructure spending made in the recent mid-term budget speech of the South African Minister of Finance,” Van Wijnen said.

“With additional capacity available to capture an upswing in demand without additional capital expenditure required, PPC is well positioned to support the much-needed construction work across South Africa,” he added.

In the current economic conditions, the group will continue to focus on cash generation and enhancing operational efficiencies in an effort to further strengthen its financial position and reduce the impact of rising input cost inflation.

Without a significant increase in infrastructure investments, cement demand in South Africa is anticipated to remain subdued. PPC South Africa and Botswana is noted to be well positioned to benefit from an increase in cement demand with additional capacity available to capture an upswing in demand without additional capital expenditure required.

PPC Zimbabwe anticipates a recovery for the balance of the financial year and the outlook for Cimerwa remains positive.