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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 1999 CONSOLIDATED INCOME STATEMENT
1999 1998
RESTATED % RM RM CHANGE TURNOVER 1886.5 1804.3 5 OPERATING PROFIT 242.0 311.8 -22 INVESTMENT INCOME 20.0 13.1
INTEREST RECEIVED 10.7 14.0 PROFIT BEFORE INTEREST PAID
AND TAXATION 272.7 338.9 -20 LESS INTEREST PAID 53.8 20.8
PROFIT BEFORE EXCEPTIONAL ITEMS 218.9 318.1 -31 EXCEPTIONAL ITEMS (12.9) (0.2)
PROFIT BEFORE TAXATION 206.0 317.9
TAXATION 25.0 84.4
SA NORMAL 43.1 89.5
DEFERRED TAXATION RATE CHANGE (29.8)
STC 11.7 (5.1)
PROFIT AFTER TAXATION 181.0 233.5 -22 SHARE OF ASSOCIATE COMPANIES
RETAINED PROFIT 3.7 9.3 -60 NET PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 184.7 242.8 -24 NET PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 184.7 242.8 -24 EXCEPTIONAL ITEMS AFTER TAXATION 9.3 (0.4) NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS BEFORE
EXCEPTIONAL ITEMS 194.0 242.4 -20 NUMBER OF SHARES UPON WHICH EARNINGS
PER SHARE IS BASED (000) 49496 46681 EARNINGS PER SHARE (CENTS)
BEFORE EXCEPTIONAL ITEMS 391.9 519.4 -25 AFTER EXCEPTIONAL ITEMS 373.1 520.1 -28 DIVIDENDS (CENTS) 270.0 325.0 -17 DIVIDEND COVER 1.4 1.6 CHANGE IN ACCOUNTING POLICY
DURING THE YEAR THE COMPANY CHANGED ITS ACCOUNTING POLICY IN RESPECT OF ITS TREATMENT OF ASSOCIATE COMPANIES FROM PROPORTIONATE CONSOLIDATION METHOD TO EQUITY ACCOUNTING METHOD.
THERE IS NO EFFECT ON THE EARNINGS ATTRIBUTABLE TO THE SHAREHOLDERS OF THE COMPANY AS A RESULT OF THIS CHANGE. FULL DETAILS OF THIS CHANGE WILL BE REFLECTED IN THE ANNUAL FINANCIAL STATEMENTS.
COMPARATIVE FIGURES HAVE BEEN RESTATED IN ACCORDANCE WITH THE NEW POLICY. CONSOLIDATED BALANCE SHEET
1999 1998
RESTATED
RM RM CAPITAL EMPLOYED
CAPITAL AND PREMIUM 613.9 505.8
NON-DISTRIBUTABLE RESERVE 67.2 53.8
DISTRIBUTABLE RESERVE 811.4 774.8
SHAREHOLDERS' EQUITY 1492.5 1334.4
DEFERRED TAXATION 209.3 201.6
LONG-TERM LIABILITIES 267.2 271.9
1969.0 1807.9 EMPLOYMENT OF CAPITAL PROPERTY, PLANT AND EQUIPMENT, INVESTMENTS, LOANS AND
DEFERRED TAXATION ASSET 1810.3 1650.2
NET CURRENT ASSETS 158.7 157.7 CURRENT ASSETS
INVENTORIES AND ACCOUNTS RECEIVABLE 468.9 477.1
LIQUID FUNDS 73.5 25.0
542.4 502.1 CURRENT LIABILITIES
SHORT-TERM LOANS 25.0 8.0
ACCOUNTS PAYABLE 358.7 336.4
383.7 344.4
1969.0 1807.9 CONSOLIDATED CASHFLOW STATEMENT
1999 1998
RESTATED
RM RM
PROFIT BEFORE EXCEPTIONAL ITEMS 218.9 318.1
ADD DEPRECIATION AND OTHER 133.3 96.6
NET INCREASE IN WORKING CAPITAL 24.4 6.5
TAXATION PAID (7.7) (47.5)
DIVIDEND PAID (42.6) (59.4)
NET CASH INFLOW FROM OPERATIONS 326.3 314.3
REPLACEMENT CAPITAL EXPENDITURE (136.9) (64.8)
INVESTMENT IN FUTURE OPERATIONS (92.1) (344.6)
OTHER CASH FLOWS 21.1 (23.0) NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (207.9) (432.4)
NET CASH GENERATED/(UTILISED) 118.4 (118.1) DIVISIONAL ANALYSIS OF THE GROUP TURNOVER
1999 1998 % CHANGE RESTATED RM RM
CEMENT 1332.7 1323.3 1
LIME 258.9 240.8 8
PACKAGING AND TRANSPORT 294.9 240.2 23
1886.5 1804.3 5 OPERATING PROFIT
1999 1998 % CHANGE
CEMENT 192.5 249.0 -23
LIME 32.7 52.0 -37
PACKAGING AND TRANSPORT 16.8 10.8 56
242.0 311.8 -22 OPERATING MARGIN 1999 1998 CEMENT 14.4% 18.8% LIME 12.6% 21.6% PACKAGING AND TRANSPORT 5.7% 4.5% 12.8% 17.3%
NET OPERATING ASSETS
1999 1998 % CHANGE
CEMENT 1191.3 1239.9 -4
LIME 355.6 290.0 23
PACKAGING AND TRANSPORT 173.1 157.0 10
1720.0 1686.9 2 DECLARATION OF DIVIDEND NO 185
FINAL DIVIDEND NO 185 OF 185 CENTS PER SHARE HAS BEEN DECLARED PAYABLE TO SHAREHOLDERS REGISTERED IN THE SHARE REGISTER OF THE COMPANY AT THE CLOSE OF BUSINESS ON 3 DECEMBER 1999.
THE TRANSFER BOOKS AND REGISTER OF MEMBERS OF THE COMPANY WILL BE CLOSED FROM 4 DECEMBER 1999 TO 12 DECEMBER 1999, BOTH DAYS INCLUSIVE, FOR THE PURPOSE OF DETERMINING THOSE SHAREHOLDERS TO WHOM THE DIVIDEND WILL BE PAID.
DIVIDEND WARRANTS WILL BE POSTED TO SHAREHOLDERS ON OR ABOUT 13 JANUARY 2000 AT THEIR REGISTERED ADDRESSES OR IN ACCORDANCE WITH THEIR WRITTEN INSTRUCTIONS RECEIVED UP TO AND INCLUDING 3 DECEMBER 1999.
THE DIVIDEND IS DECLARED AND PAYABLE IN THE CURRENCY OF THE REPUBLIC OF SOUTH AFRICA. BY ORDER OF THE BOARD BARLOWS TRUST COMPANY LIMITED
SECRETARIES 9 NOVEMBER 1999 DIRECTORS:
WAM CLEWLOW (CHAIRMAN), JE GOMERSALL* (GROUP MANAGING DIRECTOR), DC ARNOLD, PJ BLACKBEARD, RKJ CHAMBERS, RH DENT, AJ LAMPRECHT, AJ PHILLIPS*, IG STEVENS, P STUIVER+, E P THERON. *BRITISH + DUTCH
REGISTERED OFFICE: TRANSFER SECRETARIES:
BARLOW PARK MERCANTILE REGISTRARS LIMITED KATHERINE STREET 11 DIAGONAL STREET SANDTON 2196 JOHANNESBURG 2001 SOUTH AFRICA SOUTH AFRICA P O BOX 782248 P O BOX 1053 SANDTON 2146 JOHANNESBURG 2000 SOUTH AFRICA. SOUTH AFRICA.
THESE RESULTS AND OTHER INFORMATION FOR INVESTORS ARE AVAILABLE ON THE PPC INTERNET WEBSITE WWW.PPC.CO.ZA COMMENT
1999 WAS A DIFFICULT YEAR WHERE THE REDUCED DEMAND FOR OUR PRODUCTS CAUSED BY THE DECLINING FIXED INVESTMENT ACTIVITY COMBINED WITH NON-RECURRING COSTS RESULTED IN OPERATING PROFIT DECREASING BY 22% TO R242,0 MILLION (1998 : R311,8 MILLION). THE COMPANY WAS HOWEVER SUCCESSFUL IN INCREASING EXPORTS TO MINIMISE THE IMPACT OF WEAK DOMESTIC MARKETS AND THE GROUP'S EXPORT TURNOVER ROSE BY 53% TO R150 MILLION. DUE TO INTERNATIONAL MARKET CONDITIONS THE PROFITABILITY OF THESE EXPORTS WAS INSUFFICIENT TO COMPENSATE FOR THE LOWER LOCAL DEMAND. THE DOWNTURN IN DEMAND FURTHER ACCELERATED THE NEED FOR RATIONALISATION IN THE YEAR UNDER REVIEW. STEPS TAKEN TO RATIONALISE PRODUCTION AND IMPROVE
EFFICIENCIES RESULTED IN ONCE-OFF COSTS OF R13,2 MILLION. GROUP MANNING REDUCED THIS YEAR BY 536 (14,4%) WHICH TOGETHER WITH THE REDUCTION IN 1998 OF 236 REPRESENTS A DECREASE OF 20% OVER THE TWO YEARS. IN ADDITION, AS PART OF OUR CEMENT PRODUCTION RATIONALISATION, THE JUPITER PLANT WAS MOTHBALLED
NECESSITATING AN EXCEPTIONAL CHARGE OF R12 MILLION FOR THE IMPAIRMENT OF THESE ASSETS IN TERMS OF INTERNATIONAL ACCOUNTING STANDARDS.
OUR MAJOR CAPITAL PROJECTS HAVE BEEN COMPLETED, BUT THESE HAVE TRANSLATED INTO HIGHER DEPRECIATION CHARGES OF R30 MILLION AND INCREASED FINANCE COSTS OF R33 MILLION THIS YEAR. MAJOR BENEFITS WILL FLOW FROM THESE PROJECTS IN FUTURE YEARS. NET PROFIT BEFORE EXCEPTIONAL ITEMS, DECLINED BY 20% TO R194 MILLION AND EARNINGS PER SHARE DECLINED BY 25% TO 391,9 CENTS.
IN SPITE OF THE PRESSURE ON EARNINGS THE STRONG NET CASH GENERATED OF R118 MILLION REFLECTED A SUBSTANTIAL IMPROVEMENT OVER LAST YEAR (NEGATIVE R118 MILLION).
A FINAL CASH DIVIDEND OF 185 CENTS PER SHARE HAS BEEN DECLARED WHICH TOGETHER WITH THE INTERIM DIVIDEND GIVES A TOTAL OF 270 CENTS PER SHARE FOR THE YEAR (1998 TOTAL: 325 CENTS PER SHARE). CEMENT
NATIONAL CEMENT DEMAND DECLINED BY 7% DUE TO THE IMPACT OF HIGHER INTEREST RATES ON BUILDING AND CONSTRUCTION ACTIVITY AND LIMITED PUBLIC SECTOR
INFRASTRUCTURE INVESTMENT. THE WESTERN CAPE WAS PARTICULARLY BADLY AFFECTED WITH A DECLINE OF JUST OVER 17% IN DEMAND. THE COMPANY'S POSITION AS PRINCIPAL SUPPLIER TO THIS REGION RESULTED IN OUR TOTAL DOMESTIC SALES OF CEMENT DECLINING BY 11%. THIS EFFECTIVELY REDUCED OUR NATIONAL MARKET SHARE BUT IN ALL OTHER REGIONS THE COMPANY MAINTAINED ITS MARKET SHARE.
OPERATING PROFIT DECLINED BY 23% TO R192,5 MILLION DUE TO THE LOWER DOMESTIC SALES VOLUMES, HIGHER DEPRECIATION CHARGES, RATIONALISATION COSTS OF R11,2 MILLION AND AN INCREASE IN BAD DEBT PROVISIONS OF R10 MILLION.
THE DIVISION HAS NEVERTHELESS MADE FURTHER PROGRESS IN IMPROVING ITS GLOBAL COMPETITIVENESS. WHILST THESE BENEFITS HAVE BEEN OFFSET IN THE CURRENT YEAR BY THE NON-RECURRING COSTS AND INCREASED DEPRECIATION REFERRED TO EARLIER THEY PROVIDE A STRONG FOUNDATION FOR THE FUTURE. LIME
LIME TURNOVER REDUCED BY 6% DUE MAINLY TO WEAKNESS IN WORLD STEEL MARKETS WHICH REFLECTED IN LOWER DOMESTIC STEEL OUTPUT. TURNOVER WAS BOOSTED BY R35 MILLION FOLLOWING THE COMMISSIONING OF OUR MATERIAL HANDLING FACILITY AT SALDANHA STEEL. UNFORTUNATELY A SMALL LOSS WAS INCURRED DUE TO THE SLOW START-UP IN STEEL PRODUCTION. THE LOWER LIME TURNOVER, TOGETHER WITH INCREASED DEPRECIATION CHARGES AND THE SALDANHA LOSS RESULTED IN OPERATING PROFIT DECLINING BY 37% TO R32,7 MILLION. PACKAGING AND TRANSPORT
AFRIPACK'S OPERATING PROFIT INCREASED BY 25% REFLECTING THE BENEFITS OF THE PLANT MODERNISATION PROGRAMME. WHILST DOMESTIC CEMENT SACK SALES WERE LOWER, GAINS WERE MADE IN EXPORT AND LOCAL NON-CEMENT SACK MARKETS.
TRANSPORT PROFITS INCREASED DUE TO HIGHER TURNOVER, IMPROVED FLEET UTILISATION, RATIONALISATION OF OPERATIONS AND REDUCED COSTS.
THE OPERATING PROFIT OF THE DIVISION SHOWED A PLEASING INCREASE OF 56% TO R16.8 MILLION. YEAR 2000
THE COMPANY'S BUSINESS SYSTEMS ARE YEAR 2000 READY. THE COST OF ACHIEVING THIS STATUS HAS NOT BEEN MATERIAL AND HAS BEEN ACCOUNTED FOR AS INCURRED. CONTINUED ATTENTION IS BEING GIVEN TO MINIMISING THE RISK OF ANY OF OUR SUPPLIERS AND CUSTOMERS NOT BEING READY. PROSPECTS
THE CURRENT YEAR'S RESULTS MASK THE SOLID FOUNDATION OF INVESTMENT, COST REDUCTION AND RATIONALISATION STEPS THAT HAVE BEEN TAKEN OVER THE LAST FEW YEARS.
GIVEN A STABLE INTEREST RATE ENVIRONMENT A MODEST VOLUME GROWTH IS EXPECTED IN THE LATTER PART OF THE FORTHCOMING FINANCIAL YEAR. PPC'S MARKET SHARE IS EXPECTED TO REMAIN STABLE AND REAL CEMENT SELLING PRICE INCREASES ARE
ANTICIPATED IN THE NEXT FEW YEARS. IT IS NOTED THAT SOUTH AFRICAN CEMENT PRICES ARE CURRENTLY IN THE BOTTOM QUARTILE OF WORLD PRICES. THE FUTURE OF EMPLOYMENT GROWTH AND THE RETURNS REQUIRED FOR LONG TERM INVESTMENT IN THE INDUSTRY POINT TO THE NEED FOR ADJUSTMENTS IN THIS REGARD.
THE EXPECTED BENEFITS OF OUR R280 MILLION INVESTMENT IN SALDANHA HAVE BEEN SLOW TO MATERIALISE. HOWEVER, THE PROJECT IS EXPECTED TO REALISE A SMALL PROFIT IN THE YEAR AHEAD AND TO PROVIDE POSITIVE RETURNS OVER ITS LIFE OF 15 TO 20 YEARS. STEPS TAKEN IN ALL OUR BUSINESSES TO IMPROVE OPERATING EFFICIENCIES AND REDUCE COSTS SHOULD ENABLE THE COMPANY TO REPORT HIGHER EARNINGS NEXT YEAR ON MINIMAL INCREASES IN SALES VOLUMES.
THE COMPANY IS THUS WELL POISED TO TAKE ADVANTAGE OF ANY SUSTAINED IMPROVEMENT IN MARKET CONDITIONS. A RECOVERY IN DEMAND OVER THE NEXT FEW YEARS WILL PROVIDE SIGNIFICANT LEVERAGE ON EARNINGS AND CASH FLOW. FOR AND ON BEHALF OF THE BOARD W A M CLEWLOW, CHAIRMAN
J E GOMERSALL, GROUP MANAGING DIRECTOR 9 NOVEMBER 1999
