PPC full-year cement sales rise 2%

PPC full-year cement sales rise 2%
20 November 2014

South Africa's largest cement producer, PPC, reported a two per cent rise in cement sales for the full year to the end of September 2014, as growth in some of its sub-Saharan markets was offset by challenging operating conditions at home.

Group revenue increased by nine per cent to ZAR9.04bn (US$818m), mainly attributable to the consolidation of Safika Cement and Pronto Readymix as well as the full-year impact of Cimerwa. On a like-for-like basis, revenue would have been three per cent above last year. Group revenue was further supported by a two and 18 per cent growth in revenue for the lime and aggregates divisions, respectively.  EBITDA was down five per cent ZAR2.37bn, with EBITDA margins declining from 30.1 to 26.3 per cent.

Bheki Sibiya, executive chairman, said: " Group cement sales ended two per cent higher than last year, with improvements in export sales and the consolidation of sales from CIMERWA, our operations in Rwanda, and newly-acquired Safika Cement and Pronto Readymix businesses. These improvements were partly offset by declining sales volumes in South Africa."

Domestic decline limited
The acquisition of Safika Cement is already beginning to bear fruit as PPC's cement sales volumes in South Africa decreased by only two per cent  whilst on a like-for-like basis with the exclusion of Safika Cement, the volumes were down seven per cent.

This decline was due to poor economic growth, industrial action on the platinum belt and in the steel industry, increased cement imports and local competition as well as above-average rainfall in the inland regions. Volume growth was, however, experienced in the Limpopo and Eastern Cape regions. The challenging macroeconomic environment, coupled with declining capacity utilisation levels in the local cement industry, have constrained growth in selling prices, limiting PPC’s ability to fully recover cost increases. A three per cent increase in the average selling price was realised during the year under review. 

During the year, a number of upgrade projects were concluded including the upgrading of the bag house filter at De Hoek kiln 5,  leading to dust emissions falling to below 10mg/Nm3 and significant savings in water consumption. At the Slurry operations, air-quality upgrades on finishing mill 1 and 2 were completed to comply with environmental legislation to be introduced in 2020. 

Sub-Saharan operations
Zimbabwe continued to enjoy a fifth consecutive year of increasing cement demand albeit on a slower growth trajectory than the  previous years. PPC Zimbabwe continued to realise sales volume increases ahead of local industry growth and good progress was made in growing exports to neighbouring countries, at improved pricing. 

The increase in available cement capacity and competitiveness in South Africa have had an adverse impact on our Botswana volumes. The retail segment particularly has become increasingly price competitive, once again limiting the company's ability to fully recover cost increases. 

Aligned with PPC’s focus on the construction segment, a decision was taken during the year to refocus its presence in Mozambique by relocating the company’s Maputo office to Tete. PPC will continue to supply cement into the southern Mozambique market directly from South Africa while its Zimbabwe factory will supply the Tete region. 

In Rwanda, sales exceeded the targeted 100,000t mark, in line with the current plant's full capacity. While the majority of these sales were in Rwanda, export volumes continued to increase.

Expansion programme gains momentum
PPC’s expansion strategy gained momentum in the review period and the company has now signed EPC contracts in place in four different countries.

In partnership with the Barnet Group, PPC is building a 1Mta integrated cement plant for US$280m in the  western Democratic Republic of Congo.  Significant progress has been made with the 600,000tpa plant in Rwanda which will be commissioned in the first half of 2015. In Zimbabwe, construction is underway on a 700,000tpa cement mill in Harare for about US$85m.

In a recent announcement, PPC advised that pending finalisation of the necessary conditions, its shareholding in Habesha Cement in Ethiopia  will be increased to 51 per cent. The construction of the 1.4Mta facility has commenced at a project cost of about US$140m. The factory site is located 35km northwest of the capital Addis Ababa and is due to be commissioned in 2016.

Earlier in the year PPC announced its investigation into acquiring a 49 per cent shareholding in an Algerian company that will construct a cement  plant of up to 2Mta. The company said the feasibility study is now at an advanced stage and the board will make the final decision on this project in the first half of 2015.

On its outlook, PPC said growth in the South African economy remains subdued and that “Improved economic growth is necessary more especially at a time when cement capacity is increasing markedly.” The company therefore remains "confident about prospects for strong growth in the other African markets in which we operate.” The firm believes it is on track to meet its strategic objective of generating 40 per cent of revenues from the rest of the continent by 2017.

Published under Cement News