PPC group’s cement sales volumes fell 4.6% in South Africa and Botswana for the four months to end July, but an average 5.5% increase in selling prices resulted in revenue rising by 1.6%, the group said in an operational update yesterday.
PPC’s directors said although interest rates had begun to decline and local sentiment was improving, there was still no clear evidence of large-scale infrastructure or retail developments.
As a result, the overall outlook for the SA and Botswana group remained “subdued.” PPC would continue to focus on the turnaround of its cement businesses to improve profitability and cash generation.
In the four month period the variable cost per ton was almost flat, but fixed costs increased by more than inflation and earnings before interest tax depreciation and amortisation (EBITDA) decreased by 10.4%.
“The South African cement business is the key focus area of the turnaround actions,” the directors said.
PPC recently started a process to improve profitability and returns on assets, a process that had followed the stabilisation of the balance sheet, and sale of non-strategic assets in recent years.
The turnaround is focused on people, organisational culture, processes, as well as industrial and supply chain optimisation, and it aims to enhance the competitive position of the group. The positive effects were expected to become evident in the next financial year.
The group intends to provide guidance on the size and timing of opportunities from the turnaround plan in the results for the six months to September 30, which is expected to be released on November 18.
In Zimbabwe, imports increased and contributed to the reduced volumes of PPC Zimbabwe. Cost containment would continue. This, with turnaround initiatives, was expected to have a positive impact on PPC Zimbabwe’s earnings.
Sales volumes in the group’s ready mix business fell, but cost controls resulted in the materials businesses being marginally positive, compared to being marginally negative previously.
PPC Zimbabwe’s cement sales volumes fell 10.9%. An average US dollar price increase of 4%, implemented in January, kept the revenue decrease in rands to 4.5%.
PPC Zimbabwe’s EBITDA margin fell to 29% compared to 29.8% in the prior period.
For the four months to July group revenue declined 2.1%. Zimbabwe contributed 30% to group revenue compared to the 33% for the twelve months ended March 31, 2024. Cement contributed 90% of revenue, while materials contributed 10%.
Net cash generation by the SA and Botswana group, before financing and excluding dividends from PPC Zimbabwe, improved to R192m from R129m.
The biggest single contributor was the improvement in working capital mainly in inventory levels. Total group debt remained unchanged since March 31 at R775m. A special dividend totalling R521m was declared on August 28 and settled on September 23.
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