PPC reports 3% decline in first-quarter sales

PPC reports 3% decline in first-quarter sales
Published: 26 January 2016

South African cement producer PPC reported a three per cent sales decline in its trading update for the October-December 2015 quarter, citing weak demand and tough competition.

Cement sales in the South African business were down by 1.6 per cent while the international businesses recorded an eight per cent drop including low margin cement exports to other African countries, the company said in a first-quarter trading statement released today.

Despite the tough South African operating environment, it noted that coastal regions achieved positive volume growth. However, this was more than offset by declines recorded in the increasingly-competitive Gauteng and inland regions. For the same period, average selling prices decreased by four per cent.

With effect from 18 December 2015, final anti-dumping duties were imposed on Portland cement originating in or imported from Pakistan. These duties will remain in place for the next five years.

Zimbabwe & Botswana
The conclusion of major infrastructure projects in Zimbabwe has led to double-digit drops in local sales and cement exports have also reduced significantly on the back of exchange rate effects.

In Botswana, after a strong performance in 2015, cement sales volumes have reduced as the retail market remains highly contested due to weak demand and intense competitor activity, PPC noted.

Rwanda
During the first quarter, cement sold by PPC's operation in Rwanda more than doubled at the expected EBITDA margin. High rainfall in the local market coupled with constrained export opportunities had a negative impact on sales.

PPC said the new 0.6Mta CIMERWA plant is performing satisfactorily and the kiln has passed its performance test in terms of output and heat consumption.

Lime division
Performance in the lime division was negatively affected by the performance of the local steel and alloys industry. New projects secured by the Aggregates and Pronto divisions led to improved performance.
Normalised earnings for the first half of 2016 are anticipated to reflect a YoY decline on the back of a tough operating environment and increased interest charges due to the ramping-up of the Rwanda
operations.

Expansion on track
New cement plant projects in the Democratic Republic of the Congo (DRC), Zimbabwe and Ethiopia are in line with expectations and expansion remains "well on track", according to the company.

Outlook
On its outlook, PPC said: "While the South African and rest of Africa trading environment continue to face headwinds, we believe that our various response strategies have positioned PPC well to limit the impact on the group. PPC will continue with its focus on the Profit Improvement Programme which continues to deliver solutions for sustainable long-term value creation."

The proposal to acquire Mahuma Concrete (Pty) Ltd is in line with PPC's intent of becoming a provider of materials and solutions into the basic services sector, and also progressing the company´s ready-mix channel management strategy.