PPC - March 2019

S&P Global Ratings has downgraded PPC to one notch above non-investment grade due to the poor performance of its South Africa business. Weaker-than-expected profitability in the South Africa market has led S&P to expect an increase in PPC’s debt to EBITDA in the face of tightening competition and falling demand. In the nine months ending December 2018, PPC’s South Africa business increased prices by two per cent, while cement volumes came in three per cent down. S&P also noted that the market was suffering from as much as 35 per cent overcapacity with considerable additional tonnage from importers and local blenders.

Uncertainty in the Zimbabwe market also contributed to the cut in PPC’s S&P rating. In 2018 Zimbabwe was responsible for 30 per cent of the group’s EBITDA and 63 per cent of the cash balance. However, the slowdown in the country’s economy and depreciation of its currency against the rand have severe negative implications for PPC’s Zimbabwe business in the short term. The company has also had to contend with cheaper imports, especially in the country’s coastal areas.

Earlier this month, PPC Zimbabwe called on the government to pass legislation protecting domestically-produced cement from imports. The flood of imports has rendered the company “uncompetitive” says Kelibone Masiyane, managing director, PPC Zimbabwe. “Definitely the price of imported cement is much lower than ours and we cannot compete because of high costs of production,” he added. Last year the Zimbabwe government lifted a two-year import ban on some basic commodities, including cement, to reduce shortages that drove the public to panic buy.