PPC cement sales price increases limited to 5%
The PPC group continues to deliver sound cash generation and deleverage the balance sheet despite difficult trading conditions in its core South African and Botswana cement market, offset by positive trading conditions in its Zimbabwe and Rwanda (CIMERWA) operations.
To maintain volumes in the South African and Botswana cement markets, sales price increases were limited to 5% in the period for the six months ended 30 September 2022. Key input costs, especially those related to fuel and energy, increased at double-digits in percentage terms.
Whilst various cost mitigation initiatives are underway, these actions take time to implement, and for the period under review were not able to fully offset cost increases, resulting in EBITDA margin compression. CIMERWA delivered strong results based on continuous operational improvements and solid market dynamics. PPC remains focused on mitigating inflationary cost pressures as much as possible and being prudent in our capital allocation in this business.
As expected, PPC Zimbabwe’s financial performance was negatively impacted by a planned kiln shut down during the first quarter but has since recovered and is experiencing robust demand while the business maintains its ability to repatriate dividends. Hyperinflation in Zimbabwe skews the group’s results and analysing the group excluding Zimbabwe is therefore more meaningful.
Looking forward, PPC is encouraged by the recent announcements by SANRAL to award large construction projects in South Africa as well as the comments on increased infrastructure spending made in the recent mid-term budget speech of the South African Minister of Finance. PPC is well positioned to benefit from increased cement demand to support the much-needed construction work across South Africa.
The impact of the above-mentioned factors on the group’s operations resulted in group EBITDA declining by 23% to R728 million (September 2021: R945 million). Excluding PPC Zimbabwe, with its related hyperinflation accounting adjustments, EBITDA decreased by 12% compared to the six months ended September 2021.
The net debt of the group continued to improve, with group net debt reducing to R677 million on 30 September 2022 (March 2022: R1 009 million).
