Cement sales jump as smaller builders buy

Johannesburg - First quarter cement sales jumped more than 15% as demand from smaller players made up for the slump in the building sector led by bigger companies, analysts said.

Sales rose to 2.87 million tonnes in the first quarter of 2015, according to the report released by PPC [JSE:PPC] on behalf of the eight major cement producers on Wednesday.    

With the order books of the major firms not looking healthy, the jump in cement sales could be the result of smaller companies such as Afrimat attracting more business or individual builders seeing an uptick, Imara SP Reid analyst Sibonginkosi Nyanga said.

Cement producing newcomer Sephaku has said that it had a very good first quarter this year, and could also be a substantial contributor to the 15% rise in sales, Nyanga said.

Despite the increase, listed construction firms mostly struggle to increase profit since the end of the building boom for the 2010 soccer World Cup.

Shares in Aveng [JSE:AEG], the largest company in the sector, has fallen 67% in the year to date, while Murray & Roberts has shed more than 40% of its value.

"While higher cement sales is a good sign for the construction sector, it is not necessarily good for the large listed companies," Nyanga said.

Aveng flagged a 50% drop in its full-year earnings last month citing a slump in demand in its home market that shrunk its building orders by 10% since December.