Harare – Pretoria Portland Cement, PPC said the South African landscape remains an economically challenging trading environment, with a minimal gross domestic product (GDP) growth projected for the next 12 months.

PPC said the regulatory framework in the Southern African country is increasingly adding to compliance cost in the cement sector.

The cement maker also said the outlook for its materials division is also muted, as it is linked to infrastructure investment growth, with lime division mainly exposed to steel industry, and ready-mix aggregates relying on construction projects.

To curb these challenges the company said it has various mitigation measures it will embark on.

“To mitigate this, management will implement the BEE 111 transaction to strategically position the business for a commercial and regulatory standpoint.

“The cement business, with its focused R50/tonne savings initiatives, will continue its disciplined approach to growing price and volume, and driving operational efficiencies.

“The business will continue to defend and maintain its leading position and competitive advantage from the perspectives of footprint, scale and efficiency,” it said.

The group noted that despite the unfavourable business environment in South Africa, it expects strong demand to continue in the rest of its African plants.

“In the rest of Africa, strong demand is expected to continue, driven by Zimbabwe and Rwanda businesses, while we ramp up in Democratic Republic of Congo (DRC) and Ethiopia. Political landscape is improving in Zimbabwe, with elections scheduled for July 2018.

“The CIMERWA plant has been modified to improve efficiencies to operate at optimal capacity and efficiency. Continued good growth in Rwanda’s GDP should sustain demand, which currently is appears to be exceeding supply.

“In DRC, elections are scheduled for December 2018 and we continue to ramp up in that country, despite being constrained by overcapacity and muted demand.

In Ethiopia, the political landscape is expected to improve, with forecast strong growth in GDP of 7 to 8 percent supporting cement demand in that country.”

Going forward, PPC said it will continue to execute its FOH-FOUR strategic priorities over the next 12 to 18 months.

The group also said it will optimise capital allocation based on the valued-based management system implemented, in pursuit of achieving an optimal capital structure through the cycle.

PPC also said it will continue to look at options with regard to PPC Barnet in DRC, to further mitigate the group’s risk exposure.

“We have completed our major capex investments and, in the process, enhanced and modernised our plants. Reduced capex, coupled with significantly lower interests rates charges, is expected to improve free cash flow going forward,” it said adding that the group remain well positioned to benefit from growth in the regions in which it operates.