PPC not out of the woods yet, but sees growth potential
PPC has posted flat earnings before interest, taxes, depreciation and amortisation (Ebitda) of R1,14bn for the six months ended September 30, while its Ebitda margin, at 22,2%, was negatively impacted on by selling price pressures and the timing of administration and other operating expenses.
The cement producer further noted that owing to higher finance costs and revaluation losses on the foreign currency monetary items, together with the non-recurrence of the prior period’s exceptional profit on the sale of noncore assets, net profit attributable to shareholders declined by 72% to R102m.
In line with this, earnings a share were 76% lower year-on-year at 13c and headline earnings a share 66% lower year-on-year at 14c.
However, PPC’s revenue increased by 15% to R5.2-billion for the six months under review, up from the R4.6-billion reported in the first half of the prior financial year, as a result of higher group cement sales volumes, specifically in South Africa, where cement volumes were up 13%, and Rwanda, where volumes were up 19%.
Another major boost to the company’s balance sheet was the capital raise that was completed in September.
The company raised R4-billion through the placing of 920-million rights offer shares, significantly improving its debt position. CEO Darryll Castle said reducing the debt through the cash raising derisked the company.
The group’s Ebitda to sales ratio also reduced to 2.6 times from 3.8 times in the comparative period.
“We believe government will use this fact to stimulate the economy, which would assist our industry,” he added.
PPC‘s overall cement sales volumes were 13% higher during the six months, reflecting the impact of double-digit volume growth in the coastal regions, as the Western and Eastern Cape continue to benefit from lower import activity coupled with sustained growth in local infrastructure projects.
Increased competitor activity has also affected the inland regions, in particular Gauteng, Mpumalanga and the North West. The Limpopo region, although under pressure, showed some resilience with positive volume growth supported by the launch of the P&L house brand which is produced by PPC.
South African sales volumes were up 7% year-on-year, while selling prices were 4% lower year-on-year. The cost of sales for the respective period was 3% higher than the prior period on a rand-per-tonne basis.
A question that remains regarding the oversaturated cement industry, in a low-growth construction environment, is whether consolidation between the country’s cement producers would not improve margins.