The growth in the South African economy and continued high demand in both the residential and non-residential building sectors boosted cement volumes to record levels. This, together with improved operational efficiencies, tight cost control and some price realisation has resulted in a very good performance by the Group for the year.
Group revenue increased 16% to R4,0 billion while operating profit rose 29% to R1,5bn on the back of record domestic cement demand. The Lime and Packaging divisions also improved profitability. The ability to access foreign currency and remit funds from Zimbabwe remains severely restricted and the results of Porthold have again not been consolidated. Investment income decreased due to both lower cash balances and interest rates, whilst finance costs were higher, arising from increased borrowings during the year. Capital expenditure amounted to R180,6 million (2004: R82,5 million) with major expenditure being on quarrying equipment for both the cement and aggregate mining operations.
PPC’s domestic cement sales remained buoyant with volume growth of 14% experienced for the year and all provinces reflected significant growth with the exception of the Eastern Cape, where volumes decreased due to the completion of the Ngqura harbour project. Reduced economic growth resulted in a contraction in cement demand in Botswana. Operating profit increased by 32% from R1 041,1 million to R1 375,0 million on the revenue increase of 20%.
Porthold in Zimbabwe continued to experience very difficult operating and trading conditions, with continuous shortages of transport and production inputs leading to plant stoppages, impacting on our ability to supply customers. Despite these constraints, the company remained cash positive for the year.
The PPC Board approved the R1 360 million Batsweledi project which will increase PPC"s cement capacity by over 1 million tons per annum, in what will be South Africa’s first new cement kiln in 20 years. R1 230 million will be invested in the installation of a new kiln line and related infrastructure at the existing Dwaalboom cement factory. A further R130 million will be spent on recommissioning and upgrading the existing cement milling and dispatch facilities at the Jupiter factory situated in Germiston.
The R48 million project to re-commission the 550 000 ton Jupiter kiln, is currently well advanced and will provide security of cement supply to the market over the two and a half year construction and commissioning period of the new expansion project. Production is anticipated to commence early in the new calendar year.The capital expenditure will be financed by a combination of operating cash flows and borrowings spread over three financial years from 2006, with
expenditure peaking in 2007.