JSE-listed cement company PPC has reported a 2.1% decline in revenue for the four months ended July 31, compared with the same period last year.

The decline follows PPC’s recent efforts to stabilise its balance sheet, sell non-strategic assets and improve overall profitability and returns on remaining assets.

“Although interest rates in South Africa have begun to decline and local sentiment is improving, there is still no clear evidence of large-scale infrastructure or retail developments. Consequently, the overall outlook for the South Africa and Botswana group remains subdued,” the company said on September 30.

In an operating update for the four months ended July 31, PPC stated that the turnaround intervention is focused on people, organisational culture, processes and industrial and supply chain optimisation to enhance the group’s competitive position in its markets.

However, the company said it expects the positive effects of these efforts to only become evident in the next financial year.

The PPC group operates in South Africa, Botswana and Zimbabwe, with its divisions including cement, materials and group services.

Revenue in the South Africa and Botswana division dropped by 1%, while Zimbabwe experienced a 4.5% revenue decrease. Zimbabwe contributed 30% to the group’s revenue in the current period, down from 33% for the 12 months ended March 31.

Cement remains PPC’s core business, contributing 90% of revenue for the four-month period, while materials contributed the remaining 10%, in line with the previous year.

Cement selling prices increased across the group, but sales volumes, including in Zimbabwe, were down 5.3% year-on-year. Although pricing increased across all three materials businesses, declines in volumes in the readymix and ash businesses offset these gains.

PPC’s earnings before interest, taxes, depreciation and amortisation (Ebitda) margin fell from 15.9% to 13.7%, as the previous year’s margin was positively impacted on by market tailwinds, the company said.

However, despite the reduction in Ebitda, net cash generation by PPC’s South African and Botswanan arms, excluding dividends from PPC Zimbabwe, improved from R129-million to R192-million, driven by an improvement in working capital, particularly in inventory levels.

During the period, PPC declared and paid an ordinary dividend of R213-million.

On the positive side, PPC’s gross cash balances rose from R897-million on March 31 to R969-million on July 31. However, group debt remained unchanged at R775-million.

A special dividend of R521-million, declared on August 28, was settled on September 23, although no dividend was received from PPC Zimbabwe during the period, compared to $4-million in the previous period. However, PPC Zimbabwe declared a $4-million dividend on September 6.

Cement sales volumes in South Africa and Botswana fell by 4.6% during the current period compared with the prior period. The average selling price in South Africa increased by 5.5%, allowing revenue for the South Africa and Botswana cement business to grow by 1.6%.

Despite nearly flat variable costs per tonne, Ebitda for the period decreased by 10.4% year-on-year and the Ebitda margin dropped from 11.6% in the comparable period last year to 10.3% for the four months under review.

Overall, however, PPC said the South African cement business remained the key focus of its turnaround strategy.

The materials division saw a continued decline in volumes in the readymix business. However, cost control measures resulted in a marginally positive Ebitda for the four-month period, compared to a marginally negative result a year prior.

In Zimbabwe, PPC’s cement sales volumes decreased by 10.9% year-on-year. In response to rising electricity tariffs, PPC implemented an average price increase of 4% in January, limiting the revenue decline in rand terms to 4.5%.

PPC Zimbabwe’s Ebitda margin decreased slightly to 29%, from 29.8% in the previous period, as the business managed ongoing input price pressures.

There were no planned maintenance shutdowns during the period under review, nor were there any during the same period last year. However, planned shutdowns did occur subsequently in August last year and again in August and September this year.

These delayed shutdowns affected the Ebitda margin, PPC said.

No dividend was declared for the period under review, compared with a $4-million dividend declared in July last year. However, PPC Zimbabwe did declare a $4-million dividend in September.

PPC said it would continue its turnaround efforts in the cement businesses, focusing on improving profitability and cash generation.

In Zimbabwe, imports continue to increase, contributing to lower PPC Zimbabwe volumes. All told, the company expects its cost containment efforts and ongoing turnaround initiatives to positively impact its earnings.