Subdued construction activity, higher imports cut PPC’s sales volumes

JSE-listed cement producer PPC has
reported difficult trading conditions for the nine months to December 31, 2018,
with cement volumes down between 2% and
3%, against a backdrop of estimated market contraction of between 4% and 5%.

The company said an uncharacteristically weak
December retail segment and
subdued construction activity had
contributed to the market contraction.

Total cement imports had increased
by 80% during the period from January to November 2018, compared with the prior
comparable period, with imports into Cape Town having
increased by 48% to around 209 000 t, although it was still substantially lower
than the imports into Durban, which increased by 84%.

PPC on Tuesday said
the Western Cape had seen
a marginal recovery in volumes since the drought.

Price increases of between 8% and 12% were
implemented by PPC on January 15 this year
in certain regions. PPC intends to maintain the
price increases that have already been implemented.

The company had also engaged with authorities with
regard to imports to ensure industry sustainability and also market
stabilisation.

Meanwhile, PPC’s SURERANGE product line
continued to gain traction and has positioned the company well against
blended product and
imports. The business continued
to focus on achieving its R70/t profitability initiatives.

Further, the company’s lime business had shown
resilience in terms of profitability, while the aggregates and readymix business remained under
pressure from a demand and pricing perspective.

PPC’s readymix business remained
an important channel to market.

For the nine months period under review, PPC reported
that volumes in Zimbabwe had grown by
low single digits, owing to operational challenges experienced in the third
quarter of the financial year.

Pricing had been aligned with local inflationary
increases. Nonetheless, recent policy announcements regarding fuel price
increases had placed consumers in Zimbabwe under
strain.

The fuel increases and cost of living increases
afforded to PPC Zimbabwe employees
was expected to impact on earnings before interest, taxes, depreciation and
amortisation (Ebitda) margins by between 1% and 2%.

PPC Zimbabwe management
is implementing a number of initiatives to mitigate the impact of inflation and
liquidity constraints on the business and on
the broader PPC group, including

through focusing on local procurement, with 90% of
input costs sourced locally; increasing exports to neighbouring countries;
continuing clinker imports from South Africa; and share
buy-backs of PPC shares listed on
the Zimbabwe Stock
Exchange.

In the Democratic
Republic of Congo (DRC), PPC Barnet
continued to operate in a challenging environment, especially
during the December national elections, during which infrastructure demand
remained subdued.

The business continued
to execute on strategic plans to maximise Ebitda and free cash flow generation in
order to minimise capital requirements.

PPC was engaging with its lenders to restructure the debt in the DRC and put in place a more sustainable capital structure. http://www.engineeringnews.co.za/article/ppc-navigates-increased-imports-price-changes-in-2018-2019-02-05