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Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
Company Registration number 1892/000667/06
Interim Report for the half-year ended 31 March 2001
Highlights * 52% growth in operating profit * 61% growth in earnings per share
* 33% increase in 2001 interim dividend
COMMENT
Earnings per share before exceptional items of 269.8 cents for the half-year
are 61% higher than the corresponding period last year. Headline earnings per
share for the same period were 269.5 cents (2000: 167.3 cents). All Divisions
reported substantially improved
results.
Group revenue rose by 16% to R954.7 million with domestic cement volumes 4%
higher than the first half last year which was negatively effected by abnormal
rains. A recovery in building activity in inland markets, an improved customer
mix, increased activity at PPC Saldanha and improved selling prices realised in
all Divisions, contributed to the improvement.
Operating profit increased by 52% to R187.6 million despite sharp increases in
fuel costs. The Group benefited from improved operating efficiencies as a
result of the Kambuku and Value Based Management initiatives, and further
reduced operating costs. Also, the costs associated with the previous year's
abnormal rains and rationalisation were not repeated. Operating margins
improved in all Divisions, and at the Group level increased to 20.5%, from
15.6% for the first half last year and 18.4% for the full year.
Income from investments rose to R28.1 million as a result of increased
dividends. While tax is in line with the increased profitability, it should be
noted that the tax charge for the full year 2000 reflected prior year credits
of R20.5 million. Net profit attributable to shareholders increased by 62% to
R135.5 million.
Net operating assets declined to R1 760 million due to a reduction in net
working capital and capital expenditure of R35.4 million compared to the R92.0
million incurred in the first half last year.
Net cash inflow from operating activities amounted to R78.7 million compared to
an outflow of R4.2 million in the first half last year.
CEMENT
Operating profit including income from associate companies increased by 47% to
R162.3 million following higher domestic volumes and improved operating
efficiencies. While export volumes declined, they generated higher margins than
last year.
LIME
Operating profit increased by 64% to R26.2 million following higher sales
volumes, improved operating costs and efficiencies compared with the first half
of last year which was negatively effected by the abnormal rains.
PPC Saldanha material handling facility increased revenue by 28.4% as Saldanha
Steel continued to gradually improve production levels. The higher level of
activity has consequently contributed to the improved operating profit of the
Division.
LOGISTICS AND PACKAGING
Operating profit increased to R7.6 million. The Logistics Division benefited
from increased cement volumes, geographical expansion of its activities, and
improved operating efficiencies. The Packaging Division also benefited from
improved domestic sales volumes, a planned reduction of low margin exports and
further improved efficiencies.
ASSOCIATE COMPANIES
The PPC share of associate companies' profits improved as a result of reduced
losses at Slagment (Pty) Limited and improved profits at Natal Portland Cement
Company (Pty) Limited and Ash Resources (Pty) Limited.
ACQUISITIONS
The company acquired 100% of Mooiplaas Dolomite (Pty) Limited ("Mooiplaas") for
R25 million effective from 19 March 2001.
In a cautionary announcement published on 2 May 2001, shareholders were advised
that PPC had reached agreement with Anglo American Corporation Zimbabwe Limited
to acquire their 48.09% interest in Portland Holdings Cement Limited, Zimbabwe
("Porthold"). An offer will also be made to the minority shareholders of
Porthold. The total offer price for 100% of Porthold will aggregate US$54
million and will be settled partly in cash and partly by way of the issue of
PPC shares to be listed on the Zimbabwe Stock Exchange and on the JSE
Securities Exchange South Africa.
The acquisition is based on long term strategic considerations and
opportunities for growth in the region. It is subject to the obtaining of
regulatory approvals which process is currently in progress. Details of the
transaction and its impact on PPC earnings will be released once the necessary
approvals have been obtained.
COMPETITION COMMISSION
On the 6 February 2001 the Pretoria High Court granted the company leave to
appeal against the validity of the search warrant obtained by the Competition
Commission and the manner of its execution in August 2000. The appeal hearing
will only take place late this year or early next year.
PROSPECTS
Domestic cement demand should show modest growth for the remainder of the year.
Lime demand is mainly dependent on the level of steel output and therefore
could decline in the second half in the face of the softer steel demand in
local and international markets.
Profits in the Logistics and Packaging Division should also continue their
improving trend.
The company is therefore expecting to report increased earnings for the full
year, but the rate of increase will not be at the same level achieved in the
first half. Continued strong operational cash flows should be achieved and,
other than the proposed acquisition of Porthold, no major investments or
capital expenditure are planned.
On behalf of the Board
W A M Clewlow J E Gomersall
Chairman Chief Executive Officer
3 May 2001
CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited Audited
Restated %
Rm Rm Change Rm
Revenue 954,7 824,2 16 1 778,4
Operating profit 187,6 123,3 52 312,3
Finance costs (22,7) (24,0) 5 (44,4)
Income from investments 28,1 20,1 40 41,7
Profit before exceptional
items 193,0 119,4 62 309,6
Exceptional items 0,8 - 9,9
Profit before tax 193,8 119,4 62 319,5
Tax 63,3 38,4 71,3
Net profit after tax 130,5 81,0 61 248,2
Share of associate
companies' retained
profit 5,0 2,6 11,1
Net profit attributable to
shareholders 135,5 83,6 62 259,3
Exceptional items
after tax (0,6) - (9,2)
Earnings per share before
exceptional items (cents)
- basic 269,8 167,3 61 500,2
- fully diluted 269,8 167,3 61 500,1
Earnings per share after
exceptional items (cents)
- basic 270,9 167,3 62 518,6
- fully diluted 270,9 167,3 62 518,5
Ordinary shares of
R1 each fully paid
in issue (000) 50 013 50 001 50 006
Weighted average number of
shares in issue during the
period (000) 50 010 49 996 49 998
Dividends per share (cents) 120 90 33 315
CONSOLIDATED BALANCE SHEET
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited Audited
Restated
Rm Rm Rm
Assets
Non-current assets 1 877,6 1 842,6 1 896,6
Property, plant and equipment,
intangibles, investments
and loans 1 864,8 1 829,8 1 883,4
Deferred tax assets 12,8 12,8 13,2
Current assets 691,8 496,3 652,0
Inventories and receivables 530,9 496,3 503,4
Cash and cash equivalents 160,9 - 148,6
Total assets 2 569,4 2 338,9 2 548,6
Equity and liabilities
Capital and reserves
Share capital and premium 614,9 614,6 614,8
Non-distributable reserves
and retained profit 1 130,0 974,1 1 106,9
Shareholders' interest 1 744,9 1 588,7 1 721,7
Non-current liabilities 567,1 517,1 556,2
Interest-bearing 277,4 267,2 277,4
Non-interest-bearing 40,7 39,7 42,6
Deferred tax liabilities 249,0 210,2 236,2
Current liabilities 257,4 233,1 270,7
Short-term borrowings - 27,1 18,7
Accounts payable and
provisions 257,4 206,0 252,0
Total equity and
liabilities 2 569,4 2 338,9 2 548,6
STATEMENT OF CHANGES IN SHAREHOLDERS' INTEREST
Six months ended Year ended
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited Audited
Restated
Rm Rm Rm
Shareholders' interest at
beginning of period 1 721,7 1 596,6 1 596,6
Increase in share capital
and premium 0,3 0,7 0,9
Other movements - 0,3 2,4
Net profit attributable
to shareholders 135,5 83,6 259,3
Dividends (112,6) (92,5) (137,5)
Shareholders' interest at
end of period 1 744,9 1 588,7 1 721,7
CONSOLIDATED ABRIDGED CASH FLOW STATEMENT
Six months ended Year ended
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited Audited
Restated
Rm Rm Rm
Profit before exceptional
items 193,0 119,4 309,6
Add depreciation and other 81,8 73,4 155,0
Net (increase)/decrease in
working capital (74,3) (63,2) 7,5
Tax paid (9,2) (41,3) (72,9)
Dividends paid (112,6) (92,5) (137,5)
Net cash inflow/(outflow)
from operating activities 78,7 (4,2) 261,7
Replacement capital
expenditure (34,5) (76,3) (136,0)
Investment in future
operations (0,9) (15,7) (25,9)
Acquisition of subsidiary (25,0) - -
Proceeds on disposal of
property, plant and
equipment 2,8 19,5 15,9
Investments and loans 8,6 0,4 (45,4)
Net cash outflow from
investing activities (49,0) (72,1) (191,4)
Net cash (outflow)/inflow from
financing activities (17,4) 2,8 4,8
Net cash generated/(utilised) 12,3 (73,5) 75,1
SEGMENTAL ANALYSIS OF THE GROUP
Six months ended Year ended
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited % Audited
Restated Change
Revenue
Rm
Cement 727,1 625,1 16 1 372,7
Lime 181,0 150,9 20 322,0
Logistics and Packaging 139,2 126,4 10 255,3
1 047,3 902,4 16 1 950,0
Less: Inter-group sales* 92,6 78,2 18 171,6
954,7 824,2 16 1 778,4
* Primarily Logistics and Packaging
Operating profit including income
from associate companies
Rm
Cement 162,3 110,4 47 279,1
Lime 26,2 16,0 64 43,0
Logistics and Packaging 7,6 2,0 280 5,0
196,1 128,4 53 327,1
Operating profit including income
from associate companies is
arrived at as follows:
Rm
Operating profit 187,6 123,3 52 312,3
Dividends from associate
companies 3,5 2,5 40 3,7
Share of associate companies'
retained profit 5,0 2,6 92 11,1
196,1 128,4 53 327,1
Operating margin
Cement 22,3 17,7 20,3
Lime 14,5 10,6 13,4
Logistics and Packaging 5,5 1,6 2,0
20,5* 15,6* 18,4*
* Based on revenue net of inter-group sales
Net operating assets
Rm
Cement 1 224,3 1 215,6 1 1 221,3
Lime 377,7 388,7 (3) 381,2
Logistics and Packaging 158,2 188,3 (16) 148,7
1 760,2 1 792,6 (2) 1 751,2
NOTES
Six months ended Year ended
31 March 31 March 30 Sept.
2001 2000 2000
Unaudited Unaudited Audited
Restated
Rm Rm Rm
1. Profit before tax
Included in profit before tax is:
Cost of sales 654,9 607,2 1 213,8
Depreciation 82,0 74,2 151,2
2. Net profit before exceptional
items
Net profit attributable to
shareholders 135,5 83,6 259,3
Impairment reversal - - (0,7)
Purchase consideration of
subsidiary recovered - - (7,2)
Profit on disposal of
properties (0,8) - (2,0)
Tax on exceptional items 0,2 - 0,7
Net profit before exceptional
items 134,9 83,6 250,1
3. Investments
Unlisted at cost 254,6 204,9 254,6
Unlisted associate companies at
carrying value including
loans 58,6 52,1 62,5
Directors' valuation of investments
- unlisted 263,7 209,2 261,4
- unlisted associate companies 166,1 116,1 168,1
4. Borrowings
The company's borrowing powers
are not restricted
Borrowings 277,4 294,3 296,1
5. Commitments
Capital commitments 50,5 53,2 30,5
Contracted 35,2 38,1 12,6
Approved 15,3 15,1 17,9
Lease commitments 10,2 4,9 7,5
60,7 58,1 38,0
6. Contingent liabilities
There are contingent liabilities
in respect of guarantees
covering loans, banking facilities
and other obligations of
subsidiaries and other
parties limited to (Rm): 5,3 5,5 5,1
7. Change in accounting policy
The Group adopted International Accounting Standards (IAS) for the first time
during the year ended 30 September 2000 and accordingly the results for the
half-year ended 31 March 2000 have been restated to recognise this change.
The effect of the changes in accounting policy resulted in a decrease in the
net profit attributable to shareholders for the half-year ended 31 March 2000
of R7.0 million (13.9 cents per share).
DECLARATION OF DIVIDEND NO. 188
Interim dividend No. 188 of 120 cents per share has been declared payable to
shareholders registered in the share register of the company at the close of
business on 1 June 2001.
The transfer books and the register of members of the company will be closed
from 2 June 2001 to 10 June 2001, both days inclusive, for the purpose of
determining those shareholders to whom a dividend will be paid.
Dividend warrants will be posted on or about 2 July 2001 to shareholders at
their registered addresses or in accordance with their written instructions
received up to and including 1 June 2001. The dividend is declared and payable
in the currency of the Republic of South Africa.
By order of the Board
Barloworld Trust Company Limited
Secretaries 3 May 2001
Directors:
WAM Clewlow (Chairman), J E Gomersall* (Chief Executive Officer), D C Arnold, P
J Blackbeard, R J Burn, R K J Chambers,
R H Dent, A J Lamprecht, P G Nelson, AJ Phillips*, P Stuiver ,
EP Theron.
* British Dutch
Registered Office:
Katherine Street, Sandton,
South Africa
(P.O. Box 782248, Sandton 2146,
South Africa)
Transfer Secretaries:
Mercantile Registrars Limited
11 Diagonal Street,
Johannesburg 2001, South Africa
(P.O. Box 1053, Johannesburg 2000,
South Africa)
These results and other information is available on the PPC Internet website
www.ppc.co.za
MEDIA RELEASE
PPC posts a 61% growth in earnings
A recovery in building activity and the continued benefit of cost reductions
propelled PPC to a 61% earnings growth in the six months to March.
South Africa's number one cement and lime producer reports headline earnings
per share of 269,5 cents (2000 : 167,3 cents) per share. An interim dividend
of 120 cents (2000 : 90 cents) per share has been declared.
Commenting on the results, PPC's CEO, John Gomersall says: "A recovery in
building activity in the inland markets after the effects of the abnormal rains
last year, pushed cement sales volumes 4% higher. This recovery together with
an improved customer mix, increased activity at PPC Saldanha, and improved
selling prices in all Divisions, contributed to the 16% rise in Group revenue
to R954.7 million."
"The Group also benefited from reduced operating costs and improved
efficiencies as a result of the Kambuku and Value Based Management initiatives
commenced during 1999 and 2000," he continues.
With cement, lime, logistics and packaging all realising improved operating
profits, the group operating profit surged by 52% to R187,6-million.
Lower finance costs, a 40% increase in investment income and an exceptional
item of R0.8 million left pre-tax profit up 62% at R193,8-million.
The number of shares in issue was virtually unchanged, so that earnings per
share after exceptional items also rose by 62% to 270,9 cents (2000: 167,3
cents) per share.
"All divisions achieved improved operating margins and cash flow returns. It is
pleasing how the entire PPC Team are rising to the challenge of VBM to create
greater value for all stakeholders," said Gomersall.
The group reveals a significant improvement on an already-strong balance sheet.
Total debt of R318,1-million was only 18% (2000 : 21%) of equity and cash
balances of R160,9-million mean that net debt has been reduced to
R157,2-million compared to R334-million last year.
On prospects for the rest of the year, John Gomersall says: "We should see
continued modest growth in cement demand for the rest of the year, but lime
demand may decline in line with softer international steel markets. The Group
expects to report increased earnings for the full year, but not at the same
rate of increase achieved during this first half. Other than the proposed
acquisition of Porthold, we are planning no other major investments or capital
expenditure during the next six months and so cash generation should remain
strong."
ends
Prepared by : David Carte
Issued by : Andrea Visser
Meropa Communications
Tel : (011) 784-1008
On behalf of : PPC
Contact : John Gomersall
Tel : (011) 488-1700
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