PPC experienced muted cement sales in April and May 2020 as a result of COVID-19 related trading restrictions in South Africa. Cement sales have since rebounded with double-digit year-on-year growth since June 2020.
The increase in volumes is primarily retail led. PPC is also beginning to experience the positive impact of increased infrastructure spending.
Over the first six months of FY21, PPC South Africa and Botswana cement volumes declined by 5% to 10% with declines in the coastal regions offsetting growth in the inland areas. Q1 cement sales declined by more than 35%, followed by a strong rebound of 20% to 25% in Q2.
The sales momentum has continued into October and November.
PPC estimates that the South African cement industry sales volumes were in line with prior year despite the COVID-19 related sales restrictions. A shortage of extenders has impacted blender activity, and this has benefitted integrated cement producers such as PPC.
The availability of non-conforming cement in the market remains a concern for the industry over the medium term.
Cement imports continue to pose a threat to the sustainability of the South African cement industry. Although imports of cement and clinker decreased by approximately 6% to 621 609 tonnes in the current reporting period due to the lockdown restrictions, this is likely to change as the global economy reopens.
PPC, in conjunction with The Concrete Institute (TCI) and other industry players, have applied to the relevant authorities for relief against unfair competition. All the necessary documentation and processes have been completed.
PPC has received a verification report confirming receipt of all required information for the application process and is now awaiting the initiation of an investigation by the regulator.
Revenue in South Africa and Botswana declined by 8% to R2 355 million (September 2019: R2 555 million). Average realised selling prices were flat on prior year as change in the product mix offset the impact of price increases.
EBITDA reduced by 8% to R337 million (September 2019: R367 million) with EBITDA margin of 14.3% (September 2019: 14.4%).
The lime division’s revenue declined by 36% to R279 million (September 2019: R434 million) with volumes and pricing under pressure due to the decline in steel-related activity. The shut-down of operations by a major customer further reduced demand for lime products.
A number of initiatives have been implemented to improve the performance of this business. EBITDA contracted by 56% to R22 million (September 2019: R50 million) primarily due to a similar decline in volumes. With the reported shortage of locally manufactured steel, PPC expects demand to recover in the latter part of the financial year.