Cement manufacturer Portland Holdings Limited (Porthold) in Zimbabwe, which had its results de-consolidated from parent company, Pretoria Portland Cement Company (PPC) last year, recorded a R5.4 million hyperinflationary loss in 2004. PPC said in its 2004 annual report that the results of Porthold remain de-consolidated from the group’s main accounts.
The South African group said Porthold, whose operations have been suffering under government-imposed price controls, had suffered a R5.4 million loss. This is despite the fact that revenue during the period under review surged from R49.1 million to R171.5 million (in hyperinflationary terms). Rising overheads and high energy charges have started chewing into the cement manufacturer’s bottomline. Porthold has also been hit hard by the shortages of coal due to delivery bottlenecks.
In the statement, PPC said its subsidiary’s profitability was severely impacted by price controls, which were lifted in May but continue to be monitored by government. "Although price controls were lifted, selling prices are still subject to government price monitoring and high increases in input costs such as wages, electricity and coal in particular have reduced margins," said Tony Phillips, PPC chairman. "Circumstances in Zimbabwe are such that there are severe restrictions placed on our ability to access foreign currency and remit funds.
This, together with the significant constraints impacting on the normal operations of Porthold, has resulted in the PPC board concluding that management does not have the ability to exercise effective control over the business," PPC said.
With falling cement demand, an unstable currency and plummeting exports, PPC does not expect the situation at its Zimbabwean subsidiary to improve any time soon. Phillips said demand in Zimbabwe during the period under review "was abysmally low" as the economy continued to lurch from one crisis to another. The group was also unable to increase exports to neighbouring countries and earn the much-needed foreign currency, Phillips said.