• Group sales volumes increased by 3%
  • Zim unit sales volumes increased by 42%
  • Volumes in South Africa remained subdued

Harare- PPC Limited has reported a 3% growth in sales volumes for the five months leading up to August 31, 2023, as stated in the company's latest trading update. This positive performance was primarily driven by PPC's operations in Zimbabwe and, to a lesser extent, Rwanda. However, the report also reveals a continued decline in cement volumes within the South African market.

In Zimbabwe, the cement market continued to experience growth during the mentioned period. This growth was attributed to residential construction projects and government-funded infrastructure initiatives, particularly in roads and housing.

As a result of these favorable market conditions, cement sales volumes in Zimbabwe increased by 42% compared to the previous period. The average selling price of cement in US dollars also saw a 12% increase when measured against the parallel exchange rate.

According to the statement by the Group, the increased volumes of cement sales and improved pricing had a significant positive impact on the company's EBITDA margins. During the period under review, the EBITDA margins improved to 27%, showcasing a notable enhancement compared to the 14% margin observed in the corresponding period.

“PPC received a US$3.5 million dividend in July 2023 and anticipates an additional dividend to be declared upon the publication of PPC Zimbabwe's interim results in November 2023 and shareholders were previously advised that 19% of the 29.6% of PPC Zimbabwe held by various indigenisation parties vested on 5 July 2023 and PPC Zimbabwe expected to re-purchase such shares at US$ one cent each in accordance with the relevant agreements.

“The repurchase of such shares was approved at an extraordinary general meeting of PPC Zimbabwe’s shareholders on 29 August 2023 and all such shares were subsequently repurchased at US$ one cent each and cancelled.”

As a result of the share repurchase, PPC currently holds a 90% ownership stake in PPC Zimbabwe. From an economic perspective, PPC will receive 99.5% of all dividends until the remaining indigenous shareholder's notional vendor financing is fully repaid.

In relation to the unwinding of the indigenisation transaction, PPC incurred one-time costs totaling R42 million. These costs were associated with the process of canceling the repurchased shares and resolving the indigenisation arrangement.

Rwanda continued to experience strong demand for cement in all its markets, with cement sales volumes increasing by 13% period-on-period for the five months ended August 2023. This was due to the country's robust domestic position and the sustained demand from infrastructure projects.

However, Rwanda's cement exports were impacted by increased competition from new competitors in the market. Despite implementing a 6% increase in pricing, the rise in input costs could not be fully absorbed, resulting in a 9% increase in EBITDA (measured in ZAR) and a reduction in the EBITDA margin to 29% from 32% in the comparable period.

In contrast to the positive performance in Rwanda, cement sales volumes in South Africa and Botswana experienced a decline of 6% period-on-period for the five months ending in August 2023. Within South Africa, the inland region saw a continued decline in cement sales volumes, although at a slower rate. Additionally, the coastal region experienced a downturn in volumes due to higher-than-usual rainfall and weak retail demand.

Despite the decrease in sales volumes, the average selling price of cement increased by 10% during the period. This increase can be attributed to bi-annual price adjustments implemented in January and July 2023. As a result, there was a revenue growth of 5% during the period.

In terms of profitability, EBITDA for the period increased by 5%. This improvement can be attributed to stabilized margins when compared to the comparable period.

“PPC will continue its efforts to counter input price inflation through price adjustments, operational efficiencies and improved industrial performance.”

South Africa and Botswana group's gross debt remained unchanged from March 31, 2023. However, there has been a notable increase in cash from R131 million to R283 million during the same period. As a result, the net debt of the group decreased from R800 million at the end of March 2023 to R648 million at the end of August 2023.

On the outlook, PPC anticipates maintaining its focus on improving profitability and cash generation in South Africa, while preserving its solid market positions in Zimbabwe and Rwanda. The company recognizes the need for operational efficiencies and cost containment measures to mitigate the impact of rising input costs, given the muted economic climate in its key South African market.

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