PPC's group revenues, excluding Zimbabwe, for the five months ended August 2022, increased by nine per cent, driven by robust demand in Rwanda but impacted by hyperinflation accounting. Group cement sales volumes (including Zimbabwe) for the period were in line with the previous comparable period as subdued demand in South Africa and the impact of a maintenance-related kiln shutdown in Zimbabwe were offset by robust demand growth in Rwanda. In addition, cash generation remains positive and the group reduced net debt from 31 March 2022 levels.
Cement sales volumes in South Africa and Botswana decreased by one per cent for the five months ended August 2022. Cement sales volumes in the inland region decreased after experiencing a slow start to FY22-23, offsetting the high single-digit demand growth in the coastal areas. Inland cement sales volumes were negatively impacted by above average seasonal rainfall and sluggish retail demand at the beginning of FY22-23, which was partially offset by increased sales to the industrial and construction sectors. Cement sales volumes in the coastal region increased due to a decline in imports in the Western Cape, South Africa, as well as due to a recovery in industrial construction activity and the resumption of postponed government projects, the company said. The average selling price increased by five per cent during the period under review. This was insufficient to fully offset the impact of input cost inflation as the cash cost of sales increased by low double-digits in percentage terms. Coming off a relatively high EBITDA base in the first half of FY21-22, PPC continues to prioritise cash generation by optimising net working capital and adhering to stringent capital allocation. This contributed to South Africa and Botswana's gross debt decreasing from ZAR1.2bn (US$68.6m) on 31 March 2022 to ZAR1bn on 31August 2022.
The cement market in Zimbabwe continued to show robust high single-digit growth as a result of both residential construction and government-funded infrastructure projects. PPC Zimbabwe implemented planned maintenance at the beginning of FY22-23 and recorded a seven per cent decline in cement sales volumes when compared with the year-ago equivalent period.
However, the resumption of clinker manufacturing by PPC Zimbabwe at the end of May 2022 enabled improved sales volumes in the 2QFY22-23. PPC Zimbabwe implemented US$ price increases of five per cent in March 2022, two per cent in April 2022 and a further five per cent increase in August 2022. PPC noted increased availability of foreign currency in the Zimbabwean economy, with more than 70 per cent of cement sales during the period under review occurring in foreign currency.
CIMERWA continues to see strong demand for cement in all its markets, with cement sales volumes increasing by 16 per cent for the five months ended August 2022.
Outlook
Without a significant increase in infrastructure investments, cement demand in South Africa is anticipated to remain subdued. PPC South Africa is well positioned to benefit from an increase in cement demand with additional capacity available to capture an upswing in demand without additional capex investment required.
