South Africa: PPC hails lack of cheap imports for surge in cement sales
South Africa’s closed borders have helped lift cement producer PPC’s sales because no cheap imports are coming into the country.
For the rest of Africa, sales in Rwanda boosted its portfolio, especially since PPC is the sole cement producer in Rwanda, along with its other operations in Botswana, the Democratic Republic of the Congo, Ethiopia and Zimbabwe.
In June 2020, cement sales volumes in South Africa grew by double digits compared to June 2019, according to the company.
“This recovery is mostly driven by the absence of imports. … [This] has given an opportunity for local producers like PPC South Africa to grow. In line with earlier communication and action plans, PPC considers it crucial for the sustainability of the local cement industry that substandard cement and imports are properly addressed,” noted PPC.
At PPC International, cement sales volumes also showed a year-on-year growth in June 2020.
PPC is the largest cement producer domestically and on the continent.
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However, its sales volumes in South Africa have declined in recent years because of rising competition from cheap imports and a stagnant local construction sector.
Furthermore, its dominance in Rwanda is not guaranteed because of the impending entry of new players in that market.
Its troubles in South Africa have been most apparent in its share price, which has trended lower over the past five years on the Johannesburg Stock Exchange. The company has also had a succession of CEOs in the same period, with the latest – Roland van Wijnen – appointed in June 2019.
In May 2020, when COVID-19 lockdown restrictions were substantially eased, the company ramped up its cement operations across most jurisdictions where it operates.
Sales mean cash
“On the back of the improved sales volumes and the various cost and cash preservation measures, the cash flows for the last two months have shown a positive trajectory,” according to PPC.
In addition, the cement producer continues to have the support of its lenders “to navigate the impact of the health and economic crisis.”
“The discussions with the lenders around the announced capital restructuring continue in a constructive climate. More information on this important project will be shared at the announcement of the [financial year 2020] annual results,” the company has announced.
The results presentation is scheduled for, or about, 30 August 2020.
The COVID-19 factor
In its latest trading statement, PPC has informed the market that:
- The company expects basic earnings and headline earnings per share to drop more than 20% compared with the prior comparable period ended 31 March 2019.
- “These movements are after taking into account impairments of property, plant and equipment, expected credit losses and other fair value adjustments.”
“The general economic environment and the COVID-19 pandemic will have a material impact on these adjustments, which are being finalised,” according to the company.
In September 2018, President Cyril Ramaphosa announced an economic stimulus and recovery plan. In the plan, Ramaphosa identified infrastructure as a key enabler of growth.
But substantive progress and a project pipeline have stalled – this has frustrated industry players whose capacity utilisation has dwindled significantly.
In a 2019 interview with The Africa Report, Njombo Lekula, PPC MD for Southern Africa, cautioned against overenthusiasm about the South African government’s infrastructure plans until results started showing.