PPC’s share price shot up 6.73% yesterday morning after a 4% increase in cement volumes, moderate price increases and rand depreciation caused revenue to rise a sturdy 20.9% to R6.2 billion in the six months to September 30 and the group moved back into the black.
The sub-Saharan Africa provider of building materials and solutions reported improved performance at all its businesses and earnings per share, and headline earnings a share increased to 24 cents and 26c respectively, from losses in the comparative period.
Operating profit was R675 million compared with R273m a year before, while earnings before interest, tax, depreciation and amortisation (Ebitda) was up by 46.8% to R1.1bn, benefiting from expanded margins in the core southern Africa markets. This margin improvement was a good sign for the future for these markets, CEO Roland van Wijnen said.
Van Wijnen, interviewed on his last results presentation for PPC prior to his contract coming to an end, said the next six months would be “more of the same, doing what we can to bring down costs and introduce operating efficiencies, there will be another price increase in January, we aim to conclude the sale of the Cimerwa investment in Rwanda, and then it will be the task of the management under a new CEO to come up with something new”.
“With a strong balance sheet, PPC is well positioned to continue to navigate the tough economic cycle” and good strides had been made to optimise operations and create a more sustainable business, he said.
He said there were plans being implemented to reduce carbon emissions by 2030 and the group’s reliance on coal as an energy source. He said the group would likely also move to a Level 1 black empowerment rating from Level 2 soon, and from Level 6 some four years ago.
He said the main drivers of the better interim performance were a market share recovery in PPC Zimbabwe, cost controls and savings from, for example, the mothballing of the Jupiter plant in South Africa, and a return to profitability of the materials business.
Prioritisation of cash generation across the group delivered R578m in net free cash flow before financing activities.
Finance costs fell slightly even through interest rates increased, with net debt declining from R677m to R381m and gross leverage levels remaining below target. De-gearing would continue, he said.
“We are in a robust financial position owing to our disciplined focus on enhancing efficiencies, driving strong cash generation and de-leveraging the balance sheet. Our work is not done and we remain committed to capital discipline and margin management to unlock further value,” said chief financial officer Brenda Berlin.
South Africa and Botswana cement recorded a 4.7% increase in revenue to R3bn, supported by average price increases of 8.8%. Ebitda increased 8.2% to R398m.
Overall cement sales volumes were down 4.7%, mainly due to a decline in sales in the coastal and Botswana regions. Sales were only marginally negative in the inland region despite the ongoing oversupply and competitive pressures.
Van Wijnen said excess cement production capacity was around 20% to 25%, but a large increase in demand could only occur if there was a bigger improvement in economic growth, or if there was a substantial increase in overall fixed investment,
The materials business performance reflected turnaround measures initiated prior to March 31, 2023. While revenue decreased 6.2% to R574m, Ebitda increased to R14m from a loss of R14m in the comparative period.
PPC Zimbabwe’s revenue was 104% higher at R1.7bn, which together with the focus on costs resulted in Ebitda margins increasing and a 190% increase in Ebitda to R429m.
Cimerwa, PPC’s 51% owned Rwandan business, delivered a 14.5% increase in revenue to R883m on the back of an 11.9% rise in sales volumes. Ebitda increased 4.4% to R260m.
On Friday, PPC announced that National Cement Holding, part of the Devki Group, would acquire PPC’s stake in Cimerwa for $42.5 million (R783m) cash.
Matias Cardarelli has signed a four-year contract, which is subject to him obtaining the necessary work permit. He is expected to start in his new role during the last quarter of this year.
Cardarelli has a long record in the cement industry, across multiple emerging markets. He spent the last five years in South Africa as CEO and chairperson of Natal Portland Cement (NPC), part of InterCement group, PPC pointed out.
During his tenure at NPC, he is said to have successfully transformed the organisation by improving efficiencies, boosting margins and Ebitda and increasing cash generation.
With this deep understanding of the local industry and his proven leadership skill set, Cardarelli is expected to play a pivotal role in continuing to drive PPC’s growth, improve profitability and enhance returns.
Prior to moving to South Africa in 2019 to join NPC, Cardarelli led the operational and financial turnaround of Amreyah Cement, in Egypt, and the scaling-up of Yguazu Cementos, in Paraguay.
Following the onset of Covid-19 and the emergence of a new entrant in the Mozambican cement market, Cardarelli’s portfolio was expanded to include Cimentos de Mozambique, where he successfully implemented an operational and commercial plan to return the company to profitability.
“I am excited to be joining PPC at this important time in its journey and highly value the trust placed in me by the board. I equally look forward to working together with the PPC team as we write this iconic company’s next chapter.
“In the five years we have lived here my family and I have come to deeply love South Africa and her people. I look forward to contributing positively to both PPC and the country,” Cardarelli said.
The PPC board welcomed Cardarelli and said it looked forward to his leadership and contribution to the company’s path to sustainable profitability.
It also thanked Van Wijnen, averring that under his leadership, PPC had undergone a strategic repositioning through successfully implementing a restructuring of its debt, realigning its governance and reporting procedures and refocusing its growth objectives in southern Africa, while navigating the challenges posed by Covid-19.