PPC Zimbabwe show strong growth in cement volumes

Cement volumes continued to show strong growth, increasing 41% in the current period, albeit slightly lower than the half-year growth of 44% due to the impact of the stronger base in the comparable period. Growth continues to be as strong as a result of both residential construction and government funded infrastructure projects, constrained imports and a low base in the comparable period due to the extended shutdown.

EBITDA margins were 22% in the current period, an improvement from 18% in the comparable period but lower than 25% at the half-year. This was mainly due to the high cost of clinker imports as local production could not meet demand levels.

PPC Zimbabwe declared dividends of US$4 million in July 2023 and US$7million in November 2023.

RWANDA (CIMERWA)

PPC sold its 51% shareholding in CIMERWA on 25 January 2024 for a total selling price of US$42.5 million. PPC received the full selling price and paid capital gains tax in Rwanda of US$474 000 in February 2024. It is anticipated that no further capital gains taxes will be payable in South Africa. The approval by the Common Market for Eastern and Southern Africa (COMESA) Competition Commission, which was not required before implementation of the transaction, is still anticipated to be received within 120 days of the effective date.

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.