PPC progresses expansion strategy, despite warning of lower H1 earnings

Cement supplier PPC says its expansion programme remains on track, with construction at sites in the Democratic Republic of the Congo, Zimbabwe and Ethiopia continuing to progress on schedule.

The company continued to advance its proposed acquisition of ready-mix concrete supplier 3Q Mahuma Concrete, in line with its stated intent of becoming a provider of materials and solutions into the basic services sector and progressing the company’s ready-mix channel management strategy.

Looking to PPC’s operational performance, overall cement sales volumes declined by 3% for the first quarter of 2016, while cement sales in the South African business declined by 1.6% and the international businesses
recorded an 8% decline.

“Despite the tough South African operating environment, coastal regions achieved positive volume growth; however, this was more than offset by declines in the increasingly competitive Gauteng and inland regions.

“For the same period, average selling prices decreased by 4%,” the group said in a trading update on Monday.

Meanwhile, PPC reported that the conclusion of major infrastructure projects in Zimbabwe had led to double-digit declines in local sales, while cement exports had also reduced significantly on the back of exchange-rate effects.

“After a strong performance in 2015, cement sales volumes in Botswana have reduced, as the retail market remains highly contested owing to weak demand and intense competitor activity,” the company added.

Meanwhile, in the first quarter of 2016, cement sold by PPC’s operation in Rwanda more than doubled at the expected earnings before interest, depreciation and amortisation margin.

High rainfall, coupled with constrained export opportunities, had a negative impact on sales.

The new 600 000 t/y plant was, however, performing satisfactorily and the kiln had passed its performance test in terms of output and heat consumption.

Performance in the lime division was negatively affected by the performance of the local steel and alloys industry over the period, with new projects secured by the aggregates and Pronto divisions leading to improved performance.

“Normalised earnings for the first half of 2016 are anticipated to reflect a year-on-year decline on the back of a tough operating environment and increased interest charges owing to the ramping-up of the Rwanda
operations.

“While the South African and rest of Africa trading environment continue to face headwinds, we believe that our various response strategies have positioned PPC well to limit the impact on the group,” the company said.