Construction World August 2018

CEMENT & CONCRETE TECHNOLOGY

STRATEGIC PRIORITIES ACTIONED PPC recently announced its financial results for the year ended 31 March 2018. Optimising the capital structure, increasing free cash flow,

revised long-term gearing targets and lender covenants.” Group net debt dropped from R4,7-billion to R3,8-billion while net debt to EBITDA improved from 2,3x to 2x. Net cashflow from operating activities increased by 69% to R1,4-billion owing to positive working capital movements totalling R411-million, a 9% reduction in finance costs and lower effec- tive taxation rate. The group restructured its South African debt over a longer term of between three to four years at lower effective interest rate costs of 10 – 11% and negotiated a two-year capital holiday for its DRC project funding debt. “Our performance has been resilient against the backdrop of challenging environ- ments. Zimbabwe and Rwanda, achieved a positive performance, contributing nicely to the group profitability, while the DRC and Ethiopian plants were commissioned late in the financial year and are in early ramp-up phase. The performance from Southern Africa cement and materials was subdued while certain once off costs had an impact on our overall financial performance,” added Claassen. The performance from the southern Africa cement division, which includes Botswana, was impacted by a contraction in volumes, although higher selling prices of 2,5% were achieved due to the focused route-to-market strategy. Pleasingly, vol- umes are estimated to be better than the overall market volume decline. The R50/tonne cost saving initiatives implemented during the financial year together with the ongoing rationalisation of head office, integration of Safika Cement as well as the modernisation of the Slurry complex are expected to deliver further cost benefits, in line with the three mega plant strategy. Rwanda and Zimbabwe continued their strong performance, contributing well to group profits for the year. Zimbabwe grew its revenue by 33% supported by volumes increasing over 45%, setting new sales records. Rwanda grew revenue by 10% and volumes by 20% with its annualised capacity utilisation being above 65%. DRC and Ethiopia were in early stages of operation having been recently commis- sioned and therefore had a temporary drag on the group’s performance. The materials division incorporating lime, aggregates and readymix, delivered a muted performance for the year as it faced reduced demand and increased competition in a low infrastructure investment environment.

T otal cement sales volumes increased by 6% to 5,9 million tonnes, translating into group revenue growth of 7% to R10,3-billion. An increase in cost of sales as well as once- off costs relating to corporate action, the DRC and restructuring costs negatively im- pacted EBITDA. However, net profit attribut- able to PPC shareholders increased 60% to R149-million. Earnings per share improved 25% to 10 cents and headline earnings per share rose by 114% to 15 cents. Johan Claassen, PPC CEO commented: “The group has achieved key milestones in delivering on its FOH-FOUR strategic priorities that were introduced in 2017. These encompass the optimisation of the financial, operational and human capital of the group. Addressing these priorities has laid an important foundation that will enable us to create long-term sustainable value for stakeholders in future.” “In particular, we have made good prog- ress towards achieving our optimal capital structure. The focus on liquidity and capital management is paying off as we have improved free cash-flow generation and reduced our debt to be in line with our operationalising new plants and ensuring long-term sustainability and value creation were the key focus areas for the period. • Earnings per share up 25% to 10 cents and headline earnings per share up 114% at 15 cents • Net cash flow improved 69% to R1,4-billion • Debt reduced by R900-million, maturity profile lengthened and interest rates lowered • Strong performance from Rwanda and Zimbabwe plants • New plants in Ethiopia and DRC operationalised and in ramp-up phase

Johan Claassen, PPC CEO.

Management’s focus is firmly on delivering improved profitability and further improving free cash flow generation in the short term. “Tied to the achievement of our strategic priorities, we are working hard to entrench a performance driven culture across the busi- ness. As a first step in this regard, we have revised our values and brand proposition.” “Additionally, in delivering on our brand promise of ‘strength beyond’ we are working with employees to enhance our employee value proposition with a view to retain talent and skills in the business,” added Claassen. Locally, the environment is expected to remain challenging economically, but the business will continue to defend and main- tain its leading position and competitive advantage by leveraging its footprint, scale and focus on efficiency. On the international front, strong demand is expected to be driven by Zimbabwe and Rwanda while the DRC and Ethiopian plants ramp up. The group has also completed its major capex investments which enhanced and modernised its plants. “Management’s focus is firmly on deliver- ing improved profitability and further improv- ing free cash flow generation in the short term. This will be supported by reduced capex together with significantly lower inter- est rate charges, while considerable focus has been directed towards strategic and operational initiatives to ensure greater competitiveness and improved effi- ciencies in markets exhibiting lower growth,” concluded Claassen. 

46

CONSTRUCTION WORLD AUGUST 2018