Currency devaluation negates PPC Zim’s revenues by 35%

HARARE – PPC Zimbabwe’s revenue slumped by 35% during the four month period to July 30 2019 due to currency devaluation introduced in February 2019.

In February this year, the reserve bank of Zimbabwe launched SI 33 which dismissed parity between the local RTGS/bond and the US dollar initially pegged at 1:2.5 against the greenback but has since shed more than 270% of its value.

In a trading update, the Group, PPC limited listed on the JSE highlighted the operations of its Zimbabwean unit bemoaning harsh macro-economic headwinds which have affected the revenue performance and profitability of the ZSE listed unit.

Worsening the trading conditions in Zimbabwe include among others the persisting liquidity constraints and inflationary pressures.

“The devaluation of the Real Time Gross Settlement (RTGS) dollar versus the US$ impacted revenue, which declined by 30 – 35% in Rands,” the Group said.

The Group indicated that the local unit however remains focused on optimising its local operations and implementing its cash preservation strategy to ensure the business is self-sufficient.

The update indicated a 25-30% contraction in the sales volumes due to a weaker economic climate.  Feeding into the trend is the Cement pricing, which was aligned with increased cost of business in the local market, which was significantly higher than the previous comparable period.

EBITDA declined by 10 – 15%, while EBITDA margins remained within the guided range of 30 – 35%.

Overall, the Group’s EBITDA increased by between 5-10% during the period under review on the back of continued selling price momentum in South Africa and ongoing cost optimisation in terms of R70/tonne savings initiative.

The Group’s regional operations include the South African market, Rwanda, Democratic Republic of Congo and Ethiopia.

PPC enjoys a 74% market share in Zimbabwe and given the weakening economic fundamentals, PPC now has 90% of its inputs sourced locally with just 10% import material.

In Rwanda, PPC unit Cimerwa continues to benefit from increased construction activity and high economic growth. In the DRC demand remained subdued with the EBITDA performance of the business sailing below last year, mainly as a result of a competitive pricing environment during the first two months of the financial year.

On the outlook the Group said it will continue to focus on stabilising the performance of its core operations and positioning the group for future growth.

“The restructuring of the head office will enable the alignment of the business to its operational requirements and enable PPC to focus on maximising EBITDA in all markets it operates in and reducing financial leverage,” the Group said.

Equity Axis News

Raynold Mhotseka

Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, rayjnr.mhotseka@gmail.com and raynoldm@equityaxis.net.

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