South Africa's biggest cement maker, PPC, advised yesterday that its earnings in the six months to the end of March 2015 may fall by as much as 45 per cent partly due to rising finance costs.
The company said in a trading statement released yesterday that it headline earnings per share for the six for the first half of the fiscal year is expected to be between 25 and 45 per cent lower than the comparative period of the previous year. “Notwithstanding a weaker trading environment, the main contributors to the decline were a once off tax credit in the prior reporting year and an increase in finance costs in the current year,” PPC said in a statement.
Quarterly regional sales update: October - December 2014
In a trading statement for 1QFY14-15, the group said positive cement sales volumes were achieved, supported by the consolidation of Safika Cement (South Africa) and growth achieved in Zimbabwe and Botswana. On a like-for-like basis, excluding Safika Cement, group cement volumes would have recorded single-digit declines against the comparable period last year.
The company noted that the operating environment in South Africa remains challenging on the back of weak economic growth, which has been exacerbated by power shortages, and increased competitor activity. Domestic sales volume growth in Zimbabwe and Botswana have shown an upward trend. However, in all territories muted selling price growth has been achieved.
On its outlook, PPC said that while the South African trading environment will remain tough and highly competitive, the release of major infrastructural projects in South Africa, Botswana and Zimbabwe would provide a key driver for demand of cement products.
Plant construction continues
In line with its 'rest of Africa' expansion strategy, construction continues in Rwanda, Zimbabwe, Ethiopia and the Democratic Republic of the Congo. The company is finalising the transaction that will see it increase its stake in Habesha Cement Co (Ethiopia) to 51 per cent. The civil and mechanical construction of the 600,000tpa plant in Rwanda is complete, with only the electrical installation work to be finalised, it added. Production is expected to commence in the second half of 2015.
Merger still under consideration
Regarding the merger offer received from rival AfriSam late last year, PPC said that its board is “considering the merits of the merger proposal” and further announcements will be made.
Newly-constituted board
PPC's board has been newly constituted following the company's AGM this week. From a reduced list of 10 nominees, shareholders elected six new board members: former Reserve Bank governor Tito Mboweni, former PPC finance director Peter Nelson, Nicky Goldin, Timothy Leaf-Wright, former Afrisam CEO Charles Naude and Daniel Ufitikirezi.
Ufitikirezi is chairman of PPC's Rwandan business. Two other PPC directors retired by rotation. The appointment of Darryll Castle as CEO was also approved by shareholders.
