JSE-listed cement and construction materials company PPC has reported a 20.9% year-on-year increase in revenue to R6-billion for the six months ended September 30. 

Its earnings before interest, taxes, depreciation and amortisation (Ebitda) also increased by 46.8% to R1.06-billion.

The group Ebitda margin improved by three percentage points to 17.3%, while headline earnings a share increased to 26c a share, compared with a 5c a share headline loss reported for the comparable half-year period in the 2022 financial year.

The company reduced the net debt of its South Africa and Botswana group by R195-million, after spending R103-million on the share repurchase programme, to R730-million, down from R925-million in the comparable 2022 half-year period.

Further, the group’s net cash flow before financing activities increased to R578-million, up from R319-million in the comparable 2022 interim period, and cash generation remains a key priority.

“The period under review reflects an encouraging recovery for the PPC group, albeit off a low base. A key driver is that profitability shows improvement across our core Southern African markets, despite the weak macro environment and decline in cement volumes in South Africa,” outgoing PPC CEO Roland van Wijnen said during the company's results presentation on November 20.

Further, the rolling out of the South African government’s infrastructure development plans and protection of the local cement market through the introduction of import tariffs to create a level playing field for domestic producers remain elusive.

“Increased demand is required to enable us to more effectively use the capacity available in our primary market,” he said.

Profit before tax increased to R560-million, up from R106-million in the prior financial half-year, and profit after tax was R431-million, up from R22-million in the comparable prior interim period.

Group cost of sales increased 16.1% to R4.9-billion, up from R4.25-billion in the 2022 interim period. This was a lower rate of increase than revenue, which, when combined with marginally lower administration and other operating expenses resulted in a significant increase in operating profit to R675-million, up from R273-million in the half-year period in the 2022 financial year, said PPC CFO Brenda Berlin.

In line with the disciplined capital allocation policy, capital expenditure (capex) for the current period was R219-million. The board-approved share repurchase programme of R200-million was 52% completed at the end of the half-year reporting period.

“Our teams have delivered a solid performance in a difficult trading environment by keeping our strategic objectives front of mind.

“With a strong balance sheet, PPC is well-positioned to continue to successfully navigate the tough economic cycle and good strides have been made in optimising operations while creating a more sustainable business. I am proud of what has been achieved to date and look forward to seeing the business build on these successes in years to come,” Van Wijnen said.

The focus areas for the group were to enhance operational and equipment efficiency, reduce costs and lower its carbon intensity, he noted.

“We have done well and, across PPC, our plants have improved their most important operational metric, namely overall equipment efficiency. Combined with our cost containment measures, we were able to improve margins slightly.”

Additionally, PPC aims to ensure financial and operational flexibility to withstand the current economic conditions in South Africa and will continue to focus on low-cost and high operational discipline, as well as disciplined capital allocation. The company's balance sheet is stronger now than it has been for several years, he said.

PPC's capital allocation model remains unchanged, with capital first allocated to sustaining the business, which mainly means maintenance and compliance, and then to expansion capex and then returning cash to investors, explained Berlin.

“We guided for R600-million for capital allocation during the current financial year, and we expect to meet this target after having invested R220-million of this during the interim period,” she said.

Van Wijnen thanked the entire PPC team for achieving an improvement in the group's industrial performance, which is a core focus area for the group that is within its control, and there are further opportunities to reduce the clinker factor and improve thermal and electrical consumption.

Meanwhile, PPC has plans in place for further value-accretive projects to reduce its carbon emissions and enhance returns, as well as make the business more sustainable.

“We continue to invest in the focus areas where we can make an impact and we are implementing further measures to notch up the overall equipment efficiency and bring down costs. There are a few alternative fuels, but none yet that provides the results we aspire to,” he said.

Further, the focus for PPC will remain on its Southern Africa businesses, including Botswana, South Africa and Zimbabwe. This includes continuing to improve its profitability and enhance returns through further operational efficiencies and cost containment measures.

“Without a significant increase in infrastructure spending and South African gross domestic product, South Africa’s cement demand is expected to remain subdued, and sustainability is, therefore, dependent on capital discipline and margin management.

“PPC South Africa remains well positioned to benefit from an increase in cement demand with additional capacity readily available to capture an upswing in demand without significant additional capex being required,” Van Wijnen said.

PPC is well positioned, especially in South Africa, to take advantage of structural growth when it comes. The company has the operational and financial flexibility to benefit from an uptick in the Southern African economic environment, and to withstand the prolonged cycle it currently faces, he said.