PPC Operational Update for the Ten Months ended 31 January 2024

PPC revenue increased by 27.6% for the ten-month period ended 31 January 2024 (the “current period”), when compared to the 10 months ended 31 January 2023 (the “comparable period”).

This was driven mainly by continued strong growth in PPC’s Zimbabwe operations relative to the low base in the comparable period. This is higher than the 22.1% revenue growth to the end of September 2023 (the “half year”) compared to the six months ended 30 September 2022 (the “previous half”) calculated on a consistent basis to exclude CIMERWA. Revenue growth in the South African and Botswana cement business continued to be driven by price increases, positively offsetting the declining sales volumes as experienced in the half year.

Group EBITDA margins improved to 13.6% in the current period from 9.9% in the comparable period.

However, this is lower than the half-year EBITDA margin (excluding CIMERWA) of 15.3%. The decrease in margins compared to the half year is due to lower South Africa cement margins, a weak performance in the materials business, one-off costs at a group level as well as marginally lower EBITDA margins in the Zimbabwean operations.

Capital expenditure for the group remains behind the guidance of R600 million for the full financial year mainly due to the delay of the fly ash project (expansion capex) in Zimbabwe. This is a timing issue due to a delay in accessing the power plant to complete the plant design and commercial contract. This is now expected to commence early in FY25 as opposed to FY24 thereby delaying the benefits of this expansion project for approximately one year. The South African and Botswana free cashflow, being net cash inflow before financing activities and excluding dividends from Zimbabwe, increased to R364 million in the current period from R242 million in the comparable period. The share repurchase program reached the R200 million approved level during the first half of March 2024.

Following the receipt of the proceeds from the disposal of CIMERWA, South Africa and Botswana turned cash positive during the current period and at 31 January 2024, were in a net cash position of R280 million. Zimbabwe continues to remain debt free and held R95 million in unencumbered cash at 31 January 2024. The Group’s targeted gross leverage of 1.3 to 1.5 times the South African and Botswana operations EBITDA (including dividends from Zimbabwe) remains unchanged.

PPC OUTLOOK

The short-term outlook for the South African and Botswana markets remains subdued. The short-term outlook for PPC Zimbabwe remains positive.

The reorganised and strengthened executive committee (Exco) team announced on 18 January 2024 now has the right blend of global and local cement industry experience, institutional and technical knowledge and a renewed energy to drive the needed improvements at PPC’s operational level. The Exco is conducting a comprehensive review to ensure that PPC is agile, well-managed and resilient in a challenging South African macroeconomic context. The key focus areas include:

• the optimisation of structure, processes and controls;
• the refocusing of the business on contribution margin through an assessment of the South African businesses commercial footprint; and
• the reduction in fixed operational and overhead costs.

The above will require improvements to the internal management reporting systems to better support its commercial and operational decision making. The board has targeted achieving a sustainable return on capital for its South African and Botswana business in the medium-term.

PPC intends to increase engagement with regulators and other key market stakeholders as a commitment to developing a sustainable cement industry in South Africa through creating a level playing field among local, regional and international competitors on key issues such as imported cement and low quality standard products.

With the South African gross debt to EBITDA ratio expected to be well below the stated optimal level, PPC intends to continue to return cash to shareholders through dividends or the implementation of a share repurchase program in the absence of any value enhancing corporate activity.