PPC posts rise, concerns over rest of year

PPC posts rise, concerns over rest of year
12 May 2010

South Africa’s biggest cement maker PPC posted a 10 per cent rise in first half profit helped by its Zimbabwean unit, but said it was concerned about the outlook for the rest of the year.

PPC said headline earnings per share totalled 116 cents for the six months to end-March, compared with 105.4 cents a year earlier.

Headline EPS is the main profit gauge in South Africa and strips out certain one-time and financial items.

Revenue increased five per cent to ZAR3.4bn (US$459m), boosted by contributions from PPC’s Zimbabwean cement operations.

CEO Paul Stuiver on Tuesday expressed concern over the outlook for the cement market, as demand in South Africa and Botswana continued on a downward trend, particularly in the residential and construction sectors.

PPC’s lime and aggregates divisions also experienced improvements in volume during the six months under review. Lime volumes increased by more than 30% as demand from the steel and alloys markets continued to recover.

Stuiver said the cement industry was now entering its third year of decline.

“We are not sure that we have hit the bottom of the cycle yet. We are not sure whether we will see the long-awaited economic upturn in this financial year.”

Stuiver said residential cement demand – linked to the interest rate – could pick up, but noted that there was typically an 18-month lag between interest rates coming down and cement demand picking up.

The residential market was currently responsible for an estimated 35% to 40% of PPC’s demand, where it had historically been around 50%, said Stuiver.

“Demand is linked to consumer confidence.”

 The construction sector absorbed around 20% of PPC’s output.

The company has now  launched a strategy to expand its business beyond its existing geographical boundaries, possibly through joint ventures or acquisitions in other African countries.

Stuiver said PPC had a dedicated team looking at expansion opportunities and had also appointed external advisors.

"We are trying to find opportunities to add value to PPC."
Published under Cement News