PPC scales back following local downturn

PPC scales back following local downturn
23 February 2011

Pretoria Portland Cement (PPC) has clamped down on overhead costs – other than advertising and strategic projects – because of the severe downturn in the industry.

Cement volumes were still declining, the listed cement and lime producer said in a presentation to investment analysts posted on its website yesterday.

PPC acknowledged at its annual general meeting earlier this month that it remained concerned about the outlook for the local building and construction industries in the short term, because South African cement sales had declined 5 percent for the quarter to December.

In regard to operating costs and overheads, PPC said yesterday that all obvious operational savings had been extracted and it expressed concern over rising coal, electricity and liquid fuel prices.

Bad debts were also increasing but were not yet significant, it said. The company said where possible and sensible it was postponing capital expenditure and updated capital expenditure forecasts would be presented as part of its half-year financial results.

PPC’s strategic projects include its Western Cape modernisation plan and its expansion into more countries in sub-Saharan Africa.

However, PPC announced in August last year that it had cut back its planned capacity expansion project in the Western Cape by a third and extended the time frame.

In its new plan, PPC would spend ZARR3bn (US$421m) over six years instead of ZAR4.5bn (US$631m) over four years and rather upgrade and increase capacity at its existing Riebeeck and De Hoek operations instead of building a single new factory.

Paul Stuiver, PPC’s chief executive, said at the time that the original design was done during a period of peak demand and cement shortages, but the economic landscape and capacity requirements had changed significantly since then.

The company said yesterday that the new environmental impact assessment process had commenced and the project team was still exploring various approaches to equipment configuration and selection and project management “to reduce capex (capital expenditure) further”.
Published under Cement News