PPC Ltd. a leading pan-African provider of quality building materials and solutions today announced its financial results for the six months ended 30 September 2020, underpinned by solid strategic execution.
nd van Wijnen, PPC CEO commented: “After a difficult start to the financial year as a result of the COVID-19 related trading restrictions across the jurisdictions in which we operate, I am pleased that we are once again able to serve our customers and play our part in keeping the economy going. My gratitude goes to my colleagues who have been working diligently to keep our operations running while observing stringent health and safety protocols. Our business has benefitted from a strong recovery in cement sales in all our markets post the easing of the lockdown restrictions, and this has resulted in improved financial performance for the Group.”
Group revenue increased slightly to R5-billion. Cost of sales reduced by 4% to R3.9 billion while administration and other operating expenditure declined 10% to R492 million, reflecting successful efforts to improve cost competitiveness. Group EBITDA improved 15% to R996 million with operating profit 77% higher at R610 million. Finance costs increased by 5% to R330 million due to unfavourable foreign currency movements during the period. Overall profitability was impacted by fair value adjustments and hyperinflationary accounting, recording earnings per share (EPS) and headline earnings per share (HEPS) of 19 cents each.
Cash flow generated from operations totalled R981 million and benefitted from improved EBITDA and a reduction of net working capital absorption. Capex decreased 26% to R166 million. Gross debt showed a decrease of R582 million compared with 31 March 2020, mainly due to improved cash generation and favourable foreign currency impacts.
Ronel van Dijk, PPC CFO commented: “Our actions to improve cost competitiveness and reposition PPC on a sound financial footing are yielding encouraging results and we look to build on these efforts going forward.”
Cement South Africa and Botswana experienced muted cement sales in April and May 2020 as a result of COVID-19 related restrictions in South Africa, however benefitted from a subsequent rebound in demand which was mainly retail led, with double digit year-on-year growth in cement sales achieved since June. Volumes declined by 5% to 10% overall for the period with the coastal regions driving this decrease, while average realised selling prices were flat owing to changes in the product mix sold. Revenue and EBITDA each declined 8% to R2.4 billion and R337 million, respectively.
PPC estimates that overall market volumes were in line with the prior year and observed that a reduced availability of extenders impacted blender activity. The availability of non-conforming cement in the market remains a concern for the industry over the medium term while cement imports continue to pose an urgent and immediate threat to the sustainability of the South African cement industry. Although imports of cement and clinker decreased by approximately 6% during the reporting period due to lockdown restrictions, this has significantly changed in the last months. PPC, in conjunction with The Concrete Institute (TCI) and other industry players, has applied to the relevant authorities for relief against this unfair competition. All the necessary documentation and processes have been completed and submitted to the regulator with the launch of an investigation eagerly awaited. “Following a more than 35% decline in Q1 cement sales, we experienced a strong rebound of 20% to 25% in Q2. Pleasingly, this sales momentum has continued into October and November with increased infrastructure spend beginning to come through. Our sector is key to drive economic growth and employment and requires accelerated infrastructure spend and a level playing field to stimulate a sustained recovery,” says Njombo Lekula, MD PPC South Africa & Botswana.
Despite challenging economic conditions and the impact of COVID-19 related lockdown restrictions, PPC Zimbabwe cement sales for the period were in line with the overall market which grew 5% to 10%, supported by an increase in volumes of 35% to 40% in Q2. Revenue increased by 60% to R797 million supported by higher realised selling prices in US Dollars. EBITDA improved by 62% to R326 million. The positive sales momentum seen in Q2 was also experienced in October and November but at a normalised rate. PPC Zimbabwe continues to meet its debt obligations in country, is financially self-sufficient, and recently declared a dividend to its shareholders.
CIMERWA, in Rwanda which was also impacted by COVID-19 related restrictions, continued to benefit from robust cement demand, driven by large infrastructure projects, growth in the retail market and export demand in the eastern DRC. Revenue grew 28% to R659 million on the back of a 10% increase in volumes and stable pricing in US Dollars. Higher revenues and tight cost control delivered a 35% increase in EBITDA to R211 million.
In the DRC, PPC Barnet achieved revenue growth of 33% to R402 million driven by volume growth of 8%, higher US Dollar pricing and translation gains. EBITDA rose sharply by 64% to R133 million owing to stringent cost control and entrenchment of route to market strategies as well as clinker and cement inventory movements during the period.
PPC continues to achieve key milestones in its restructuring and refinancing project which aims to deliver a sustainable capital structure and improved investment prospects of the Group. PPC has signed revised facility agreements with two of its primary lenders in South Africa and agreed terms with the third lender. PPC has also signed a formal standstill agreement with the DRC lenders and is actively engaging them with the aim to agree the basis for a detailed restructuring plan. Following a number of unsolicited approaches regarding PPC Lime, PPC has decided to accelerate the sale of PPC Lime and appointed financial advisors to manage a structured sales process of the business. PPC is targeting deal certainty by the end of Q1 2021.
“Our teams are resolute on taking the necessary strategic and operational actions to continue to drive improved performance with the focus being on cash preservation and improving cost competitiveness. We have made steady progress towards a more sustainable capital structure and once this priority project is finalised, the Group will be positioned for long-term growth,” concluded Wijnen.
Ronel van Dijk, has decided to step down as Group CFO with effect from 31 March 2021 to rebalance her other commitments. She will be succeeded by Brenda Berlin who will join PPC as Group CFO Designate from 15 February 2021 to formally take over as Group CFO on 1 April 2021. Brenda is currently CFO and acting CEO at MC Mining and will contribute a wealth of experience and knowledge to PPC’s Finance function. Prior to MC Mining, she served as CFO of Impala Platinum Holdings Limited (“Implats”) for seven years. To ensure a smooth handover, Ronel has agreed to assist the Company with the upcoming year-end results and the audit process on a consultancy basis starting 1 April 2021.
Ronel has played a pivotal role in guiding the Company through one of its most difficult periods, which included negotiations with lenders to address the impact of COVID-19 lockdowns. She was instrumental in the delivery of the 2020 audited financial statements under very difficult circumstances and has introduced various initiatives aimed at improving the Group’s reporting processes and internal controls. The Board is appreciative of her valuable input and the dedication she has shown. The Board welcomes Brenda to Team PPC and looks forward to her contribution in further strengthening the financial reporting and controls of the Company.
