PPC volumes dip as units suffer economic downturn

  • PPC Zimbabwe volumes down by 15% to 20%
  • SA cement volumes dipped by 16% to 18%, total imports up by 17%
  • Group capex lower than the same comparable period and is expected to be lower end of the guided range given in the Group’s interim results

Harare – Regional cement manufacturer Pretoria Portland Cement Company Limited (PPC), dual listed on the Zimbabwe Stock Exchange recorded reduced volumes for the 11 months period ended 29 February 2020.

In an operations update the company said its Zimbabwe unit recorded a 15% to 20% dip in overall cement volumes due to a weaker economic climate offset by cement pricing which has been aligned to input cost inflation.

In spite of the challenging trading environment in Zimbabwe, the unit remains self-sufficient and has seen an improvement in EBITDA margins of 35% to 38%. The company has continued to meet its debt obligations in the country.

Volumes in the major market, South Africa, declined by 16% to 18% compared to the same period last year owing to increased importer and blender activity which impacted PPC’s domestic volumes and pricing.

Total cement imports however increased by 17% for January 2019 to December 2019 compared to the same period in 2018, amounting to approximately 1.2 million tonnes.

Commenting on the Southern Africa Cement, the group said, “The coastal business is experiencing a downturn in volumes impacted by imports, whilst inland volumes are showing signs of improvement. The Concrete Institute (“TCI”) on behalf of the domestic cement industry has completed its submission to the International Trade Administration Commission (“ITAC”) highlighting the impact of imports on domestic cement production.

“The trading performance in the Group’s Southern Africa businesses has started to show signs of stabilisation in terms of cement volumes whilst the business continues to realise year-on-year cement price increases.”

Meanwhile, Cimerwa Cement Limited in Rwanda achieved higher volumes with EBITDA tracking in line with the prior period supported by stable pricing. This is attributed ton increased construction activity and high economic growth.

PPC holds a 51% stake in Cimerwa and the latter has indicated to PPC its intention to list the business in this calendar year on the Rwandan Stock Exchange, a move deemed a positive step by the company to diversify its shareholder base and unlock value for PPC shareholders.

The Democratic Republic of Congo (DRC) unit registered a higher EBITDA performance compared to the same period last year due to stable sales volumes and pricing. Furthermore, PPC is presently engaging with its lenders to restructure the debt in the DRC and put in place a more sustainable capital structure which expired in January 2020.

PPC said the International cement business has delivered a resilient performance for the period with continued year-on-year revenue growth in DRC and Rwanda.

According to the Group, group capital expenditure reduced significantly when compared to the same period last year and the group anticipate it to be at the lower end of the guided range of R600 million to R800 million given at the Group’s interim results. The reduction in capex is expected to counter the negative impact of reduced EBITDA.

On the outlook, PPC said it will focus on concluding the refinancing and restructuring in the International business, improving the performance of its core operations and positioning the Group for future growth as the leading organisation in the South Africa cement industry.

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