Cement producer PPC recorded a 9% year-on-year increase in revenue, excluding its Zimbabwe operations, for the five months ended August 31, driven by robust demand in Rwanda.

Cash generation remains positive and the group has reduced its net debt, the company notes in a September 14 trading update to shareholders.

Group cement sales volumes, including Zimbabwe, were in line with the previous comparable period. Subdued demand in South Africa and the impact of a maintenance-related kiln shutdown in Zimbabwe were offset by robust demand growth in Rwanda.

"Given the current economic climate, the group will continue to enhance operational efficiencies to mitigate 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 is well positioned to benefit from an increase in cement demand, with additional capacity available to capture an upswing in demand without additional capital expenditure (capex) investment required.

“PPC Zimbabwe anticipates a recovery for the balance of the financial year and the outlook for Cimerwa, in Rwanda, remains positive," the company points out.

In a separate presentation during the RMB Morgan Stanley Big Five and Off Piste Investor Conference, in Cape Town, also on September 14, the company detailed short- to long-term targets.

The company has allocated R664-million in capex to achieve a 10% reduction from 756 kg of carbon dioxide per ton (CO₂/t) of cementitious product in 2020 to 680 kg of CO₂/t of cementitious product in 2025.

PPC's medium-term goals to 2030 are aimed at achieving a 27% reduction in carbon intensity compared with 2020 to less than 550 kg of CO₂/t cementitious product.

It noted that capex allocations had yet to be determined and that targets may be refined in line with emerging policies, technologies and changing market dynamics.

The long-term goals of the company beyond 2030 include achieving net-zero Scope 1 and 2 emissions.

OPERATIONAL PERFORMANCE
Cimerwa, in Rwanda, continues to see strong demand for cement in all its markets, with cement sales volumes having increased by 16% year-on-year for the five months ended August 31.

Cimerwa’s domestic cement sales benefited from increased demand from government-sponsored infrastructure projects and a recovery in general building activity.

In addition, cement exports benefited from sustained demand in eastern Democratic Republic of Congo and the expansion of Cimerwa's route to market initiatives. Cimerwa's efforts to enhance industrial performance and reliability are beginning to bear fruit with the benefits reflected in the increase in cement sales volumes, PPC noted.

Further, cement sales volumes in South Africa and Botswana decreased by 1% year-on-year for the five months under review. Cement sales volumes in the inland region decreased after experiencing a slow start to the 2023 financial year, offsetting the high single-digit demand growth in the coastal areas.

Inland cement sales volumes were negatively impacted on by above-average seasonal rainfall and sluggish retail demand at the beginning of the 2023 financial year, which was partially offset by increased sales to the industrial and construction sectors.

Cement sales volumes in the coastal region increased owing to a decline in imports in the Western Cape, a recovery in industrial construction activity and the resumption of postponed government projects. The average selling price increased by 5% during the period under review. This was insufficient to fully offset the impact of input cost inflation as the cash cost of sales increased by low double-digits in percentage terms.

"PPC will continue its efforts to counter input price inflation through price adjustments, operational efficiencies and improved industrial performance.

“Coming off a relatively high earnings before interest, taxes, depreciation and amortisation base in the first half of the 2022 financial year, PPC continues to prioritise cash generation by optimising net working capital and adhering to stringent capital allocation. This contributed to South Africa and Botswana's gross debt decreasing to R1-billion on August 31 from R1.2-billion on March 31," it said.

Additionally, the cement market in Zimbabwe continued to show robust, high single-digit growth as a result of both residential construction and government-funded infrastructure projects.

PPC Zimbabwe implemented planned maintenance at the beginning of the 2023 financial year and recorded a 7% decline in cement sales volumes year-on-year. However, the resumption of clinker manufacturing by PPC Zimbabwe at the end of May enabled improved sales volumes in the second quarter of the 2023 financial year.

PPC Zimbabwe implemented US dollar price increases of 5% in March, 2% in April and a further 5% in August. PPC noted increased availability of foreign currency in the Zimbabwean economy, with more than 70% of cement sales during the period under review occurring in foreign currency.