PPC: first-half cement sales edge higher

PPC announced its group cement sales were two per cent higher for the first half of the year to the end of March 2014. Improvements in export sales and the consolidation of sales from its Rwanda operation and newly-acquired Safika Cement business were partly offset by declining sales volumes in South Africa and Botswana.

Group revenue increased by nine per cent to ZAR4157m (2013: ZAR3812m) helped also by improving cement pricing and the favourable impact of the devaluation of the rand against both the US dollar and Botswana pula. Group revenue was further supported by a nine and 22 per cent growth in revenue for the lime and aggregates divisions, respectively.

Net income for the six months ended March advanced to SAR494m (US$47.6m) from SAR325m a year earlier, the Johannesburg-based company said in a statement today. Operating earnings before a number of one-time items rose three per cent to SAR884m, while sales climbed nine percent to SAR4.16bn.

Cement division
PPC’s South African cement sales volumes decreased by two per cent while average selling prices rose four per cent. Industrial action on the platinum belt as well as above-average rainfall in the inland regions had a severely negative impact on cement sales volumes. Volume growth was, however, experienced in the Limpopo and Eastern Cape regions.

Cement cost of sales rose by four per cent on a rand per ton basis for the South African operations, with electricity and outbound logistics rising by nine and six per cent, respectively, partly offset by lower coal costs. “This pleasing performance is a reflection of the success of our three-large-plant strategy which focuses on clinker production at our most efficient plants. The lower volumes did, however, reduce fixed cost absorption on a rand per ton basis,” PPC said in a statement. On completion of the detailed feasibility study, Slurry kiln 8 will be upgraded to increase capacity and improve thermal efficiency.

A slowdown in the Zimbabwean economy has led to muted domestic growth in cement sales. Increased efforts to export product from Zimbabwe to neighbouring countries has boosted cement sales volumes from these operations. 

PPC Botswana’s cement sales volumes remain under some pressure due to low levels of demand as well as aggressive competitor activity.

Exports to Mozambique ended marginally below last year but favourable growth was realised with additional exports into other African territories.

Prospects and strategy
PPC is expanding in Africa, including countries such as the Democratic Republic of Congo, Algeria and Ethiopia, to boost foreign sales to 40 per cent by 2017. In South Africa, PPC’s main market, the trading environment remains tough due to over capacity and rising imports amid modest demand growth.

Construction projects are underway in four countries; Rwanda, the Democratic Republic of the Congo, Zimbabwe and Ethiopia. At the end of 2014, PPC will begin commissioning its 0.6Mta plant in Rwanda. A positive outcome of a detailed feasibility study into establishing cement operations in Algeria would result in the construction of yet another plant in a new part of Africa for the group.

At home, Slurry kiln 8 will be upgraded to increase capacity and improve thermal efficiency, thereby helping the plant to drive down operating costs.

PPC said it remains optimistic that cement sales volumes will improve in its operating geographies.