SA’s largest cement maker PPC has again opted to hold onto its dividend for its half year to end-September, with margins coming under some pressure amid a pickup in competition and demand pressure locally, although it is said it delivered a sound performance in tough conditions.
Group revenue increased 9% to R4.2 billion, when excluding hyperinflation hit Zimbabwe, but was boosted by price increases, and volumes fell 1% amid some reduced demand in SA’s inland regions. The firm reported a R85 million loss, from profit of R933 million previously, and it took a R206 million net hit due to hyperinflation in Zimbabwe, with that country’s dollar falling 72% against the rand since the end of March.
Despite this, group net debt declined to R677 million on from just over R1 billion at the end of March, citing positive cash generation and strict capital allocation discipline.
SA, which is almost two-thirds of group revenue, did see increased sales in the coastal region, due to strong demand and a decrease in imports, but this was offset by difficult trading conditions in the inland region, the firm said on Monday. Volumes in this market and Botswana fell 2.6%.
The coastal region continues to experience an upswing in cement owing to a recovery in industrial construction activity and the resumption of postponed government projects. In addition, a decrease in cement imports into the Western Cape due to global supply chain constraints and a weaker rand positively impacted PPC’s cement sales volumes to the retail segment.
The inland region saw above-average seasonal rainfall at the beginning of the firms 2023 year, which began in April, and a subdued macroeconomic backdrop.
This resulted in a decline in cement sales to both the retail and construction segments, while the recent flooding in the KwaZulu-Natal region lowered cement consumption in that region. “As a result, cement destined for that market made its way to the inland region and thereby intensified the competitive pressures further in an already depressed market,” the firm said.
PPC said on Monday that without a significant increase in infrastructure spending and tangible action against imports, SA’s cement demand is expected 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 capital expenditure required,” it added.
In morning trade PPC’s shares were up 5.26% to R2.40, but have still more than halved so far in 2022.
Click here for details on PPC’s shares and other info.