Different markets in different countries where PPC operates
SANDTON – The twelve months ending 31 March 2023 has been characterized by different market conditions in each of the markets in which PPC operates, being South Africa & Botswana, Zimbabwe and Rwanda.
In South Africa & Botswana, the market has been affected by a decline in disposable income and the absence of any material increase in demand from infrastructure spending.
Zimbabwe and Rwanda continue to experience growth in cement demand supported by infrastructure spending and retail demand in both countries. The one common factor across the markets has been a significant increase in input costs due to the rise of energy costs globally.
Deleveraging continued to be a priority in South Africa & Botswana. PPC expects net debt in South Africa & Botswana to be between R725 million and R775 million at year-end down from R1,075 million at 31 March 2022 and R935 million at 30 September 2022.
Gross debt is anticipated to reach our targeted levels by year-end, which would allow for distributions while maintaining gross leverage at 1.3 – 1.5x of the full South African and Botswana operations EBITDA, which includes dividends from Zimbabwe and Rwanda.
In Rwanda, CIMERWA’s debt continues to decrease and matures in August 2024. Both PPC Zimbabwe and CIMERWA expect to be in a net cash position at 31 March 2023 with sustained dividend payments being a key priority.
CIMERWA declared its first dividend in the current financial year, which is anticipated to be paid out before end March 2023.
OUTLOOK
PPC plans to implement further cost reduction measures across its portfolio to protect and restore EBITDA margins. This is in particular important for South Africa, where the business environment is expected to remain difficult as loadshedding and other challenges persist. Further cement price increases will be necessary to ensure the long-term sustainability of the domestic industry and PPC will continue to implement the required price increases whilst protecting its leading market position.
However, PPC remains prepared and able to activate additional capacity when the impact of infrastructure programs materialises. This can be done in a matter of weeks without significant fixed costs or capital expenditure.
The subsidiaries outside South Africa & Botswana are well positioned to continue to deliver a strong performance with regular and increasing dividend declarations to South Africa.
With the South African gross debt to EBITDA ratio expected to be at the stated optimal level, PPC intends to prioritize returning cash to shareholders through dividends or a share repurchase program in the absence of any value enhancing corporate activity.
