Sustained double digit growth in cement demand has resulted in the domestic industry reaching full capacity according to Pretoria Portland Cement Ltd (PPC) who released their full year results to September, today.
Commenting on the results John Gomersall, chief executive officer of PPC said: “Regional cement sales grew 17% year-on-year and boosted market share as PPC supplied an increased customer base.”
“Both the residential and non-residential construction sectors continued to exhibit strong growth. Consequently, the buoyant market conditions have driven cement demand to record levels. The South African, together with neighboroughing states cement consumption, is now at the same level as the United Kingdom,” added Gomersall.
At the interim stage Gomersall warned that as the company reached full capacity, earnings growth would slow until the increased output from expansion projects becomes available. Today Gomersall reiterated that the earnings growth achieved over the past few years is unlikely to resume until additional capacity from the Batsweledi project becomes available.
“Owing to the increased demand, all production units, including the Jupiter kiln which was re-commissioned in March, were fully operational, providing much needed additional capacity in the second half,” said Gomersall.
PPC cautioned, however that operating older kiln lines resulted in higher operating costs. In addition logistics costs had also increased due to the increased complexity in the movements of product to keep customers supplied. These additional costs put some pressure on cement margins.
Capital expenditure amounted to R395.0 million (2005: R180.6 m) and related mainly to the Batsweledi expansion and Jupiter projects.