South Africa: PPC eyes African cement growth

As South Africa entered a potentially slow growth year, rising cement demand in the rest of Africa presented strong growth opportunities for Pretoria Portland Cement (PPC), said outgoing CEO Paul Stuiver. PPC views a number of African countries, particularly Zimbabwe as good growth stories, aimed to enter four new markets in the eastern region of Africa in 2013.

While the details of the potential acquisitions and greenfield projects could not be disclosed owing to confidentiality agreements, Stuiver noted that countries from Mozambique, Zimbabwe and Zambia, stretching through to Ethiopia and South Sudan, showed healthy cement demand growth.

The potential acquisitions and start-up projects were in line with the company’s diversification strategy, as well as its aims of close to doubling its revenue generated outside South Africa.

The cement company’s acquisition, earlier this year, of a 27% stake in the Habesha Cement Share Company (HCSCo), in Ethiopia, would boost revenue generated outside South Africa from the current 21%, to about 26% within the next three years.

HCSCo is building a US$130m, 1.4Mt cement plant, which was expected to come on-line during 2014. The second phase of the project included a doubling of capacity to 2.8Mta.

Meanwhile, South African cement demand, which showed encouraging growth during the financial year ended September, was expected to be “muted” on the back of, besides others, the recent mining and transport strikes and the lack of projects being released under the government infrastructure programme, said Stuiver, who would be succeeded by Ketso Gordhan from 1 January.

Stuiver said the effective roll-out of government’s infrastructure programme had the potential to ensure a sustained recovery in the South African cement market, but the lack of infrastructure projects was a concern, as “this has been bottled up in the economy for a long time.

“We might have a slowdown in South Africa over the next few years, but the rest of Africa is growing very strongly,” he added.

Despite being cautious of Zimbabwe’s national elections potentially interrupting the recent growth trend, the country has been a “wonderful story” in terms of cement demand. “Since they dollarised the economy, we have seen double-digit growth every year,” Stuiver said, adding that growth in Zimbabwe showed no signs of slowing down.

Demand in Botswana was expected to improve during 2013, as the government had recently released some sizeable infrastructure projects after a slowdown in government spending on infrastructure projects during the year ended September 2012.

PPC on Tuesday reported a decrease in profit for the year ended to September to ZAR846m in 2012, from the ZAR865m recorded in 2011. Operating profit rose 9% from ZAR1.7bn in 2011, to ZAR1.86bn this year.

Group revenue rose 8%, reaching ZAR7.34bn in the 2012 financial year, from the ZAR6.82bn recorded in the prior year, owing to improved selling prices compensating for lower cement sales volumes.