PPC first-half sales rise eight per cent, South Africa

Pretoria Portland Cement, South Africa’s largest cement producer, reported an eight per cent rise in first-half profit (ending March 2012) and forecasts rises in regional demand.

Net income rose to ZAR369m (US$45m) in the six months through March, from ZAR343m a year earlier.
Cement sales volumes declined 3% for the period under review, mainly as a result of weak demand in the Western Cape and Botswana markets. However, group revenue increased by 8% to ZAR3.529bn as a result of favourable pricing on cement and lime products.

CEO Paul Stuiver said the results improved despite being tempered by weak demand in the Western Cape and Botswana and fierce competition on cement prices in all its regions.

"Administered price increases on electricity and fuel made cost containment difficult. We have made significant progress on African projects but are not yet at a stage where we can disclose details. Overall, cement demand in southern Africa has turned positive and we expect this to continue as the building and construction industries recover."

Costs of sales of ZAR2.347bn were 11% higher than in 2011. The group continues to be significantly impacted by higher energy costs with electricity prices increasing by 30% and diesel prices by 30% compared to last year. These administered price increases were partially offset by successful coal price negotiations and a decrease in salary costs following staff reduction programmes during 2011.

Looking ahead, Stuiver said in line with the strategy to increase revenue from the rest of the African continent, PPC has made significant progress on some projects.

The acquisition of Pronto Holdings that was approved by the Competition Commission is being finalised. Due to the timing and structure of the transaction it will make a modest contribution to results during the remainder of the financial year.

"We expect the positive trend in South African cement demand to continue in the near to medium term. The South African government's continued commitment to increase infrastructure spend and their initiatives to unlock delivery constraints, are encouraging," he said.

"Cement demand in Zimbabwe continues to grow and our operations there should make an improved contribution to the group in the second half. We have made good progress towards finalisation of our indigenisation plan," he added.