PPC’s performance hit hard as sales fall and costs rise
Cement supplier PPC says it expects a loss of up to 8c per share when it posts interim results for the six months to September 30 later this month.
The company said in a trading statement on Wednesday that an overall headline loss of 4c to 8c per share was likely, a drop of more than 100% from the 42c per share profit it achieved in the previous matching period.
Expected losses per share for continuing operations were 3c to 7c per share, compared with headline earnings of 55c per share in the prior period.
The JSE-listed company, with operations spread across six African countries, ascribed the reverse in its results to lower earnings generation in SA and Botswana as well as hyperinflation and a planned kiln shutdown in Zimbabwe.
Despite double-digit increases for key input costs, the business limited sales price increases in SA and Botswana to 5% for the period to maintain volumes, said PPC CEO Roland van Wijnen.
“Whilst various cost mitigation initiatives are under way, 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,” Van Wijnen said.
Sales volumes in SA and Botswana were down 2.6% and the “significant” rise in fuel and energy costs saw margins erode from 18.7% to 12.2%.
Ebitda for the SA and Botswana cement business decreased from R515m to R368m, but the group was able to reduce net debt by R140m to R935m for the period.
Rwandan-based CIMERWA cement producer, in which PPC hold a 51% stake, performed better over the period with sales volumes increasing 11% and Ebitda jumping 63% to R249m. Despite robust cement demand from residential construction and government-funded infrastructure projects, PPC Zimbabwe’s volumes dropped 13% period on period due to the planned kiln shutdown in the first quarter, said PPC.
Ebitda for the Zimbabwe operations, which were severely affected by hyperinflation in that country, reduced 48% to R148m. The company said that it expected some recovery for PPC Zimbabwe for the rest of the financial year.
Without a significant increase in infrastructure investment, cement demand in SA is expected to remain subdued, but the company was “encouraged” by recent announcements by the SA National Roads Agency (Sanral) on large construction projects in SA as well as the comments on increased infrastructure spending made in the recent medium-term budget policy statement.
“PPC is well positioned to benefit from increased cement demand to support the muchneeded construction work across SA,” said Van Wijnen.
By the JSE’s close PPC’s share price had gained 3.64% to R2.28. It has, however, lost nearly 55% so far this year.