PPC posts 23% drop in EBITDA

PPC Ltd, which is currently finalising its results for the six months ended 30 September 2022, has posted a 23 per cent YoY drop in EBITDA to ZAR728m (US$42.1m) in the six months ended 30 September 2022. Excluding PPC Zimbabwe, EBITDA fell 12 per cent YoY. Net debt continued to improve, coming in at ZAR677m on 30 September 2022, compared to ZAR1009m in March of this year.

According to the company, shareholders should expect earnings per share (EPS) for the 2022 six-month period to “differ by at least 20 per cent from that of the previous corresponding period, being the six months ended 30 September 2021.” EPS, including discontinued operations, is forecast to be a loss of 7-11c per share, compared to the 61c per share profit in the prior period, This is being attributed to lower earnings in South Africa, Botswana and Zimbabwe, hyperinflation in Zimbabwe, and the impact of discontinued operations which resulted in a ZAR153m positive contribution in the prior period but a ZAR107m negative contribution in the current period.

Roland van Wijnen, chief executive officer of PPC, said: “The PPC group continues to deliver sound cash generation and deleverage the balance sheet despite difficult trading conditions in its core South African and Botswana cement markets, offset by positive trading conditions in its Zimbabwe and Rwanda (CIMERWA) operations. To maintain volumes in the South African and Botswana cement markets, sales price increases were limited to five per cent in the period under review.

"Key input costs, especially those related to fuel and energy, increased at double-digits in percentage terms. Whilst various cost mitigation initiatives are underway, these actions take time to implement, and for the period under review were not able to fully offset cost increases, resulting in EBITDA margin compression. CIMERWA delivered strong results based on continuous operational improvements and solid market dynamics. We remain focussed on mitigating inflationary cost pressures as much as possible and being prudent in our capital allocation in this business.”

In South Africa and Botswana, increases in sales volumes in the coastal region due to stronger demand and a decrease in imports were offset by difficult trading conditions in the inland region leaving cement sales volumes slightly down overall YoY by 2.6 per cent. Revenues increased by four per cent assisted by price increases and product mix. Despite cost control efforts, margins remained under pressure, due to significantly higher fuel and energy costs, and decreased from 18.7 per cent to 12.2 per cent. EBITDA declined from ZAR515m to ZAR368m for the current period. 

CIMERWA’s volumes increased by 11 per cent YoY and EBITDA advanced by 63 per cent to ZAR249m, with margins improving from 28.4 per cent to 32.3 per cent. CIMERWA also de-geared and ended the current period with cash holdings of ZAR345m, according to the company. Meanwhile, despite robust cement demand from residential construction and government-funded infrastructure projects, PPC Zimbabwe’s volumes declined YoY by 13 per cent due to the planned kiln shutdown in the first quarter. Margins were negatively affected by the use of imported clinker, primarily from PPC South Africa, and increased maintenance costs. Volumes, compared to the first quarter, increased during the second quarter of the current period. However, hyperinflation resulted in EBITDA declining 48 per cent YoY to ZAR148m with margins falling from 23.2 per cent to 17.3 per cent. 

In light of the current economic climate, the group will continue to improve cash generation and enhance operational efficiencies in an effort to further strengthen its financial position and reduce the impact of rising input cost inflation. Without a significant increase in infrastructure investments, cement demand in South Africa is anticipated to remain subdued. PPC South Africa is well positioned to benefit from an increase in cement demand with additional capacity available to capture an upswing in demand without additional capital expenditure required. PPC Zimbabwe anticipates a recovery for the balance of the financial year and the outlook for CIMERWA remains positive.