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PRETORIA PORTLAND CEMENT COMPANY LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
COMPANY REGISTRATION NUMBER 01/00667/06
AUDITED PRELIMINARY REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 1998
CONSOLIDATED INCOME STATEMENT
1998 1997 %
RM RM CHANGE
TURNOVER 1920.6 1809.4 6
OPERATING PROFIT 333.1 308.7 8
INVESTMENT INCOME 10.2 10.1
INTEREST RECEIVED 14.6 12.6
PROFIT BEFORE INTEREST PAID AND TAXATION 357.9 331.4 8
LESS INTEREST PAID 23.6 11.2
PROFIT BEFORE EXCEPTIONAL ITEMS 334.3 320.2 4
EXCEPTIONAL ITEMS (0.2) 17.9
PROFIT BEFORE TAXATION 334.1 338.1
TAXATION 91.3 112.5
PROFIT AFTER TAXATION 242.8 225.6 8
PROFIT AFTER TAXATION 242.8 225.6 8
EXCEPTIONAL ITEMS AFTER TAXATION (0.4) (8.2)
PROFIT AFTER TAXATION BEFORE EXCEPTIONAL
ITEMS 242.4 217.4 11
NUMBER OF SHARES UPON WHICH
EARNINGS PER SHARE IS BASED (000) 46681 44719
EARNINGS PER SHARE (CENTS)
BEFORE EXCEPTIONAL ITEMS 519.4 486.1 7
AFTER EXCEPTIONAL ITEMS 520.1 504.5 3
CASH EQUIVALENT DIVIDENDS (CENTS) 325 305 7
CASH EQUIVALENT DIVIDEND COVER 1.6 1.6
CONSOLIDATED BALANCE SHEET
1998 1997
RM RM
CAPITAL EMPLOYED
CAPITAL AND PREMIUM 505.8 395.3
NON-DISTRIBUTABLE RESERVE 53.8 20.1
DISTRIBUTABLE RESERVE 774.8 720.5
SHAREHOLDERS EQUITY 1334.4 1135.9
LONG TERM LIABILITIES 281.2 117.9
DEFERRED TAXATION 222.9 169.9
1838.5 1423.7
EMPLOYMENT OF CAPITAL
PROPERTY, PLANT AND EQUIPMENT, INVESTMENTS AND LOANS 1683.9 1264.1
NET CURRENT ASSETS 154.6 159.6
CURRENT ASSETS
INVENTORIES AND ACCOUNTS RECEIVABLE 502.4 489.7
LIQUID FUNDS 26.1 100.0
528.5 589.7
CURRENT LIABILITIES
SHORT TERM LOANS 15.2 83.4
ACCOUNTS PAYABLE 358.7 346.7
373.9 430.1
1838.5 1423.7
DIVISIONAL ANALYSIS OF THE GROUP
TURNOVER
1998 1997 % CHANGE
CEMENT 1323.3 1231.9 7
LIME 221.9 198.4 12
PACKAGING, TRANSPORT
AND JOINT VENTURES 375.4 379.1 (1)
1920.6 1809.4 6
OPERATING PROFIT
1998 1997 % CHANGE
CEMENT 249.0 228.2 9
LIME 52.0 51.4 1
PACKAGING, TRANSPORT
AND JOINT VENTURES 32.1 29.1 10
333.1 308.7 8
OPERATING MARGIN
1998 1997
CEMENT 18.8% 18.5%
LIME 23.4% 25.9%
PACKAGING, TRANSPORT
AND JOINT VENTURES 8.6% 7.7%
17.3% 17.1%
NET OPERATING ASSETS
1998 1997 % CHANGE
CEMENT 1234.7 1098.3 12
LIME 290.0 199.9 45
PACKAGING, TRANSPORT
AND JOINT VENTURES 243.1 170.3 43
1767.8 1468.5 20
COMMENT
AFTER A POSITIVE FIRST HALF, DETERIORATING TRADING CONDITIONS RESULTED IN
CEMENT AND LIME DEMAND IN SOUTH AFRICA REMAINING UNCHANGED FROM THE PREVIOUS
YEAR.
THE COMPANY PERFORMED WELL AND OPERATING PROFIT ROSE 8 % TO R333.1 MILLION. KEY
FACTORS WERE A STRONG PERFORMANCE FROM THE CEMENT DIVISION AND A TURNAROUND IN
PROFITABILITY IN THE TRANSPORT DIVISION.
THE RISE IN FINANCING COSTS FROM R11,2 MILLION IN 1997 TO R23,5 MILLION WAS
OFFSET BY A LOWER TAXATION CHARGE AND PROFIT BEFORE EXCEPTIONAL ITEMS INCREASED
BY 11% TO R242.4 MILLION. EARNINGS PER SHARE INCREASED BY 7% TO 519.4 CENTS PER
SHARE.
THE DIVIDEND FOR THE YEAR HAS BEEN INCREASED 7% TO 325 CENTS AND YOUR BOARD HAS
RESOLVED TO OFFER SHAREHOLDERS THE OPPORTUNITY OF TAKING UP A NEW ISSUE OF
ORDINARY SHARES IN LIEU OF THE FINAL CASH DIVIDEND OF 230 CENTS. THIS OFFER HAS
BEEN UNDERWRITTEN BY BARLOW LIMITED.
CEMENT
FOLLOWING A GOOD FIRST HALF, DOMESTIC SALES VOLUMES FOR THE YEAR ENDED SLIGHTLY
DOWN ON LAST YEAR. MODEST PRICE INCREASES AND A HIGHER PROPORTION OF DELIVERED
SALES RESULTED IN A 7% INCREASE IN TURNOVER TO R1 323,3 MILLION. OPERATING
EFFICIENCY IMPROVEMENTS RESULTED IN IMPROVED MARGINS (UP FROM 18,5% TO 18,8%)
AND OPERATING PROFIT ROSE 9% TO R249,0 MILLION.
LIME
PPC'S LONG TERM STRATEGY OF CONCENTRATING ON METALLURGICAL INDUSTRIES CONTINUED
TO YIELD BENEFITS. SALES VOLUMES AND MARKET SHARE INCREASED, MAINLY DUE TO A
SIGNIFICANT RISE IN BURNT DOLOMITE SALES.
TURNOVER ROSE BY 12% TO R221.9 MILLION DUE MAINLY TO THE INCREASE IN SALES
VOLUMES.
LOW SELLING PRICE INCREASES AND HIGHER PRODUCTION COSTS RESULTED IN THE
OPERATING MARGIN DECLINING FROM 25,9% IN 1997 TO 23,4% IN THE YEAR UNDER
REVIEW. OPERATING PROFIT ROSE 1% TO R52,0 MILLION.
SPENDING ON THE PPC SALDANHA MATERIALS HANDLING PROJECT IS ALMOST COMPLETE. AS
A RESULT OF THE LATER THAN EXPECTED START-UP OF SALDANHA STEEL, THIS INVESTMENT
WILL ONLY CONTRIBUTE TO PROFIT IN THE YEAR 2000.
PACKAGING, TRANSPORT & JOINT VENTURES
THE REFURBISHMENT OF AFRIPACK'S FACTORY WAS COMPLETED IN JULY 1998 AND THE
ANTICIPATED COST SAVINGS ARE ALREADY BEING ACHIEVED. DIFFICULT TRADING
CONDITIONS RESULTED IN A DECLINE IN PROFIT FOR THE YEAR.
NOTWITHSTANDING A LACK OF MARKET GROWTH, PPC TRANSPORT ACHIEVED A SIGNIFICANT
TURNAROUND IN PROFITABILITY AFTER INCURRING A LOSS IN 1997. THE MAIN SOURCE OF
THIS IMPROVEMENT WAS INCREASED UTILISATION OF THE EXISTING FLEET AND LOWER
OPERATING COSTS ACHIEVED THROUGH OPERATIONS RATIONALISATION AND THE REPLACEMENT
OF OLDER AND LESS COST-EFFICIENT UNITS.
NATAL PORTLAND CEMENT EXPERIENCED A DECLINE IN CEMENT DEMAND IN THE
KWAZULU-NATAL COASTAL AREA. INCREASED OPERATING COSTS REDUCED MARGINS AND
OVERALL PROFITABILITY DECLINED.
YEAR 2000 COMPLIANCE
THIS ISSUE IS BEING ADDRESSED THROUGH A SPECIAL IN-HOUSE COMMITTEE THAT HAS
IDENTIFIED ALL SYSTEMS AND PROCEDURES THAT ARE NOT CURRENTLY YEAR 2000
COMPLIANT. THE ACTION REQUIRED AND COST OF RECTIFICATION IS NOT MATERIAL. ALL
OF PPC'S SYSTEMS WILL BE YEAR 2000 COMPLIANT BY MID 1999.
PROSPECTS
EARNINGS GROWTH IS DEPENDENT ON LOWER INTEREST RATES AND AN IMPROVEMENT IN
FIXED INVESTMENT EXPENDITURE. THE BENEFITS OF INCREASED EARNINGS FROM THE
CURRENT INVESTMENT PROGRAMME WILL ONLY BE REALISED WITH A RESUMPTION OF
ECONOMIC GROWTH.
IMPROVEMENTS IN OPERATING EFFICIENCIES WILL CONTINUE IN THE YEAR AHEAD. CASH
FLOW IS EXPECTED TO BE REASONABLY STRONG, DUE TO A LOWER LEVEL OF CAPITAL
EXPENDITURE, AS THE CURRENT INVESTMENT PROGRAMME IS NEARING COMPLETION. THE
BALANCE SHEET IS SOUND AND YOUR COMPANY REMAINS WELL POSITIONED TO BENEFIT FROM
AN ECONOMIC UPTURN.
FOR AND ON BEHALF OF THE BOARD
W A M CLEWLOW, CHAIRMAN
J E GOMERSALL, GROUP MANAGING DIRECTOR 10 NOVEMBER 1998
CAPITALISATION SHARE AWARD AND FINAL DIVIDEND
NOTICE IS HEREBY GIVEN THAT THE DIRECTORS HAVE RESOLVED TO MAKE A
CAPITALISATION SHARE AWARD TO SHAREHOLDERS REGISTERED IN THE BOOKS OF THE
COMPANY AT THE CLOSE OF BUSINESS ON FRIDAY, 27 NOVEMBER 1998 ("THE RECORD
DATE") DETERMINED BY THE RATIO THAT 230 CENTS BEARS TO THE CLOSING PRICE OF THE
COMPANY'S SHARES AT THE CLOSE OF BUSINESS OF THE JOHANNESBURG STOCK EXCHANGE
("THE JSE") ON WEDNESDAY, 6 JANUARY 1999 ("THE CLOSING PRICE") AVERAGED WITH
THE CLOSING PRICES FOR THE THREE PRIOR TRADING DAYS; OR ENTITLE SHAREHOLDERS
REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON FRIDAY, 27
NOVEMBER 1998 ("THE RECORD DATE") TO RENOUNCE THEIR ENTITLEMENT TO THE
CAPITALISATION AWARD OR ANY PART THEREOF TO BARLOW LIMITED AT THE CLOSING
PRICES OF THE COMPANY'S SHARES AT THE CLOSE OF BUSINESS ON THE JSE ON
WEDNESDAY, 6 JANUARY 1999 AVERAGED WITH THE CLOSING PRICES FOR THE THREE PRIOR
TRADING DAYS. FRACTIONS OF ORDINARY SHARES WILL NOT BE ISSUED BUT WILL BE
AGGREGATED AND SOLD ON THE JSE FOR THE BENEFIT OF THE RELEVANT SHAREHOLDERS AND
SHAREHOLDERS WILL RECEIVE THE NET PROCEEDS OF THE FRACTIONS IN CASH.
DOCUMENTATION DEALING WITH THE CAPITALISATION AWARD AND THE ELECTION WILL BE
POSTED TO SHAREHOLDERS ON OR ABOUT THURSDAY, 3 DECEMBER 1998. VALID COMPLETED
ELECTION FORMS MUST BE RECEIVED BY THE COMPANY'S TRANSFER SECRETARIES BY NO
LATER THAN 12:00 ON WEDNESDAY, 6 JANUARY 1999. SHOULD SUCH ELECTION FORMS NOT
BE RECEIVED BY THAT DATE AND TIME THE COMPANY WILL AUTOMATICALLY ISSUE
CAPITALISATION SHARES TO THE RELEVANT SHAREHOLDERS.
APPLICATION WILL BE MADE TO THE JSE FOR THE CAPITALISATION SHARES, TO BE ISSUED
PURSUANT TO THE CAPITALISATION AWARD, TO BE LISTED WITH EFFECT FROM THE
COMMENCEMENT OF BUSINESS ON THURSDAY, 14 JANUARY 1999. IT IS EXPECTED THAT
FRACTION CHEQUES AND CERTIFICATES IN RESPECT OF THE NEW SHARES WILL BE POSTED
TO SHAREHOLDERS BY REGISTERED POST ON OR ABOUT THURSDAY, 14 JANUARY 1999.
FOR THE PURPOSE OF THE CAPITALISATION SHARE AWARD AND FINAL DIVIDEND, THE
REGISTER OF ORDINARY SHAREHOLDERS WILL BE CLOSED FROM 28 NOVEMBER 1998 TO 4
DECEMBER 1998, INCLUSIVE.
BY ORDER OF THE BOARD
BARLOW TRUST COMPANY LIMITED
SECRETARIES
DIRECTORS:
W A M CLEWLOW (CHAIRMAN)
J E GOMERSALL * (GROUP MANAGING DIRECTOR)
D C ARNOLD, P J BLACKBEARD, R K J CHAMBERS, R H DENT,
A J LAMPRECHT, G R LUYT, A J PHILLIPS *, I G STEVENS,
P STUIVER (, C R TASKER, E P THERON.
* BRITISH ( DUTCH
REGISTERED OFFICE:
BARLOW PARK
KATHERINE STREET
SANDTON 2196, SOUTH AFRICA
(P O BOX 782248 SANDTON, 2146
SOUTH AFRICA)
TRANSFER SECRETARIES:
RAND REGISTRARS LIMITED
BLOCK C, 100 NORTHERN PARKWAY
ORMONDE 2091, SOUTH AFRICA
(P O BOX 82549, SOUTHDALE 2135
SOUTH AFRICA)
THESE RESULTS AND OTHER INFORMATION FOR INVESTORS ARE AVAILABLE ON THE PPC
INTERNET WEBSITE WWW.PPC.CO.ZA
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