Regional operations carry PPC despite 'challenging' SA conditions

A robust contribution from Zimbabwe and the rest of its African operations saw cement producer PPC [JSE:PPC] report a 7% growth in revenue, to R10.3bn, for the year ended March 31, 2018.

This is despite a flat performance from its South African operations, where volumes remained static with regulatory concerns stifling business.

The cement maker’s results, released on Monday, showed revenue from the Rest of Africa (RoA) was up 30% to R2.8bn, while revenue from South Africa was flat at R5.5bn.

Like-for-like EBITDA improved by 4%, while recurring EBITDA is 17% higher than reported after adjusting for corporate action and other non-recurring costs.

Headline earnings for the period increased to R231m, up from R85m, while headline earnings per share increased by 114% to 15 cents a share, up from 7c compared to last year.

Performance from PPC's Zimbabwe operations was very strong, with its revenue growing by 34% to R1.8bn. This was after sales volumes increased by 46%, while the selling price was up by 3% in USD.

Overall, domestic cement volumes in Zimbabwe increased by more than 40% compared to the previous year.

DRC's revenue growth was even stronger, growing by 488% to R144m, although this was coming from a low base of R24m.

The DRC operations, however, recorded an EBITDA loss of R105m and an operating loss of R254m after recognising a R165m impairment of the plant.

Commenting on South African operations, PPC said the operating landscape remained an economically challenging trading environment, with minimal GDP growth projected for the next 12 months.

PPC volumes declined 1% - 2% for nine months to Dec 2017, an improvement compared to the first half of the year. Volumes in the last quarter of FY18 were impacted by the contraction in GDP. PPC bemoaned the increasing regulatory regime, which it said was adding to compliance costs in the SA cement sector.

The cement maker said South Africa's trading and regulatory environment "remains challenging and will impact the revenue prospects" for most of its product lines.

"The cement business, with its focused R50/tonne savings initiatives, will continue its disciplined approach to growing price and volume, and driving operational efficiencies," PPC said. 

Regional operations will, however, continue to offer positive support amid expectations that encouraging political developments in Zimbabwe, DRC, and Ethiopia will give further confidence to the construction market.

The Group expects strong demand to continue in Zimbabwe and Rwanda, while production and sales will also be ramped up in DRC and Ethiopia.