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Pretoria Portland Cement Company Limited - Audited Preliminary Report for

Release Date: 08/11/2001 16:55
Code(s): PPC
Wrap Text
the year ended 30 September 2001
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
Company Registration number 1892/000667/06
JSE Code: PPC
ISIN Code: ZAE 000005559

Audited Preliminary Report for the year ended 30 September 2001 Highlights - 48% growth in operating profit - 45% growth in headline earnings per share
- 51% increase in final dividend plus a special dividend of R5,00 per share - VBM and Kambuku deliver improved results COMMENT
The pleasing results for the year are largely attributable to the Value Based Management (VBM) initiatives and the continued success of the global competitiveness drive. The Kambuku "people process" has fostered a culture of continuous improvement resulting in cost reductions and improved customer service in all divisions.
Headline earnings per share increased by 45% to 709,7 cents per share (2000: 490,4 cents) and earnings per share before exceptional items increased by 46% to 711,8 cents per share (2000: 487,7 cents). The effect of the
restatements detailed in note 8 has been to reduce earnings per share by 16,0 cents (2000: 12,4 cents).
Operating profit increased by 48% to R458,5 million. All divisions reported increased operating profits and margins.
Investment income increased by 52% reflecting the continued benefit of strong cash flows and higher levels of cash deposits and investments in preference shares.
Finance costs include additional provisions relating to quarrying
rehabilitation, plant decommissioning and retirement costs amounting to R8,9 million, that are accounted for on a discounted basis (2000: R8,6 million). Exceptional items include the R56,4 million profit on the sale of PPC Logistics (Pty) Limited.
Capital expenditure amounted to R90,6 million (2000: R161,9 million). CEMENT
National cement demand grew by a disappointing 2,3% and while PPC enjoyed volume growth in several provinces, excessive rains in the Western Cape restricted our overall sales volume growth. The continued focus on improving service levels and the quality of the customer base, the exiting of high cost-to-serve markets and products have once again improved margins and profitability. As a result of these factors, domestic sales volumes grew by only 0,7% and PPC's market share declined for the second year running. A renewed focus on increasing higher value cement exports rather than clinker exports, increased export margins by almost 50%.
Improved process efficiencies, better plant utilisation, innovative waste burning solutions and many employee generated cost savings have
significantly reduced costs. The improved performance of our aggregate and ready-mix operations together with the acquisition of the Mooiplaas quarry, have also contributed to the increase in Cement turnover and operating profits.
In Botswana, PPC Readymix and the 50% interest in the Kgale aggregate quarry produced acceptable returns.
Operating profit including associate companies increased by 44% to R399,8 million and the operating margin improved to 25,1% (2000: 20,2%). LIME
Weak international commodity prices and low market demand experienced by many of our customers, impacted negatively on our sales of lime. However overall volumes improved by 3% as a result of increased burnt dolomite sales.
Most of the business continued under long-term supply agreements and a number of these were re-negotiated at better prices during the year.
Coal costs were reduced following the commissioning of the retrofitted pre- heater on Kiln 7 and increased levels of waste burning. The introduction of 7-day, 24-hour mining operations contributed to mining efficiency improvements.
Operating profit increased by 38% to R59,0 million and the operating margin improved to 16,0% (2000: 13,3%). While the increase in operating profits is pleasing, the financial returns remain below the cost of capital and prices will have to improve. PACKAGING
The benefit of prior year restructuring, increased sales of self-opening bags and improvements in productivity, quality and working capital
management resulted in a significantly improved performance. Operating profit increased from last year's R0,5 million to R10,8 million and operating margins improved to 6,7% (2000: 0,3%). ASSOCIATE COMPANIES
The share of associate companies' profits improved as a result of a stronger performance from Natal Portland Cement Co. (Pty) Limited and Ash Resources (Pty) Limited. In addition, Slagment (Pty) Limited reported profits for the first time in a number of years.
The rationale for retaining investments in the above-mentioned associates is currently being reviewed. LOGISTICS: DISCONTINUING OPERATION
During the year PPC Logistics grew market share in both transport and logistics management. The benefit of prior year restructuring, the
acquisition of new vehicles with full maintenance contracts and a continued focus on VBM contributed to a significant improvement in operating profit from R4,3 million to R12,5 million and operating margins improved to 9,2% (2000: 3,9%).
PPC Logistics was sold to Barloworld Limited for R168,7 million effective from 30 September 2001. This included R23,7 million in respect of cash balances at year-end. This business will form part of the new Barloworld Logistics company. POST BALANCE SHEET EVENT: ACQUISITION
Pursuant to a scheme of arrangement approved on 22 August 2001 and
sanctioned by the High Court of Harare on 26 September 2001, PPC acquired 100% of Portland Holdings Limited Zimbabwe (Porthold) with effect from 18 October 2001. The purchase consideration of R432,4 million was settled by way of a cash payment of R186,1 million and an issue of 3 656 119 shares in Pretoria Portland Cement Company Limited. The shares were issued at R67,35 per share and listed on the JSE Securities Exchange South Africa and on the Zimbabwe Stock Exchange by way of a secondary listing. Consequent to the above, the issued share capital of the company will increase in the new financial year to 53 668 831 shares of R1 each and the share premium will increase to R807,5 million.
The acquisition of Porthold is a strategic long-term investment in the southern African region. It presents a unique opportunity to benefit from regional growth and to extend operational and marketing expertise. The enlarged group will be more cost competitive and better positioned to meet international competition and add value. SPECIAL DIVIDEND
Following a period of strong cash flows and the sale of PPC Logistics, PPC has substantial cash reserves in excess of its requirements. Consequently, a special dividend of R5,00 per share will be paid to all shareholders. PROSPECTS
The current year's results reflect the benefits of the focus on cash flow returns and improved operating efficiences. Further improvements are targeted in all our businesses in the year ahead.
It is difficult to predict what effect the current global economic
contraction may have on the South African economy and the company's
prospects for the forthcoming year with confidence. Currently we feel that demand for our products is likely to remain static and at best may show some modest growth.
In 2002 Portland Holdings Limited should generate positive cash flows but is unlikely to meaningfully contribute to earnings.
In 2002 interest income will fall and tax charges will increase as a result of the special dividend. However, modest growth in operating profits and continued strong cash flows are expected. The company is well poised to benefit from any improvement in market conditions and opportunities that arise. On behalf of the Board W A M Clewlow J E Gomersall Chairman Chief Executive Officer 8 November 2001 Consolidated Income Statement Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated %
Rm Rm Change
Revenue 2 071,2 1 778,4 16
- continuing operations 2 047,9 1 761,1 16
- discontinuing operation+ 23,3 17,3 35
Operating profit 458,5 310,4 48
- continuing operations 446,0 306,1 46
- discontinuing operation 12,5 4,3 191
Finance costs 51,4 51,1 (1)
Income from investments 64,4 42,3 52
Profit before exceptional items 471,5 301,6 56
Exceptional items 57,7 9,9
Profit before tax 529,2 311,5 70
Tax 134,6 69,5
Net profit after tax 394,6 242,0 63 Share of associate companies'
retained profit 18,6 11,1 68 Net profit attributable to
shareholders 413,2 253,1 63 Earnings per share before exceptional items (cents)
- basic 711,8 487,7 46
- fully diluted 711,8 487,7 46 Earnings per share after exceptional items (cents)
- basic 826,3 506,2 63
- fully diluted 826,2 506,1 63 Ordinary shares of R1 each fully
paid in issue (000) 50 013 50 006 Weighted average number of shares in issue during
the year (000) 50 011 49 999 Dividends per share (cents) - special 500 -
- final 340 225 51
- interim 120 90 33
960 315 205
+Excluding inter-group sales of R112,1 million (2000: R94,1 million) Consolidated Balance Sheet
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
Non-current assets 1 748,6 1 891,4 Property, plant and equipment, intangibles,
investments and loans 1 736,3 1 878,2
Deferred tax assets 12,3 13,2
Current assets 1 186,1 660,5
Inventories and receivables 510,2 503,4 Proceeds receivable - discontinuing operation 168,7 -
Cash and cash equivalents 507,2 157,1
Total assets 2 934,7 2 551,9 Capital and reserves
Share capital and premium 614,9 614,8 Non-distributable reserves and
retained profit 1 324,3 1 061,9
Shareholders' interest 1 939,2 1 676,7
Non-current liabilities 615,9 604,4
Interest-bearing 287,6 277,4
Non-interest bearing 120,1 107,3
Deferred tax liabilities 208,2 219,7
Current liabilities 379,6 270,8
Short-term borrowings - 18,7
Accounts payable and provisions 379,6 252,1
Total equity and liabilities 2 934,7 2 551,9 Statement of Changes in Shareholders' Interest Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm Shareholders' interest at
beginning of year 1 676,7 1 557,8 Increase in share capital
and premium 0,1 0,9 Non-distributable reserve
movements 21,7 2,4 Net profit attributable to
shareholders 413,2 253,1
Dividends (172,5) (137,5) Shareholders' interest at
end of year 1 939,2 1 676,7 Segmental Analysis of the Group Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited %
Restated Change Revenue from continuing operations Rm
Cement 1 593,8 1 372,7 16
Lime 368,2 322,0 14
Packaging 161,6 143,9 12
2 123,6 1 838,6 16
Less: Inter-group sales 75,7 77,5 (2)
2 047,9 1 761,1 16 Operating profit including income from associate companies Rm
Cement 399,8 277,6 44
Lime 59,0 42,8 38
Packaging 10,8 0,5 2 060
469,6 320,9 46 Operating profit including income from associate companies is arrived at as follows: Rm Operating profit from
continuing operations 446,0 306,1 46 Dividends from associate
companies 5,0 3,7 35 Share of associate companies'
retained profit 18,6 11,1 68
469,6 320,9 46 Operating margin - continuing operations %
Cement 25,1 20,2
Lime 16,0 13,3
Packaging 6,7 0,3
22,9* 18,2* * Based on revenue net of inter-group sales Net operating assets Rm
Cement 1 008,7 1 166,9 (14)
Lime 364,8 368,9 (1)
Packaging 31,6 52,3 (40)
Logistics# - 100,8 Proceeds receivable - discontinuing operation 168,7 -
1 573,8 1 688,9 (7)
# Logistics net operating assets of R104,4 million were disposed in 2001. Consolidated Abridged Cash Flow Statement Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
Profit before exceptional items 471,5 301,6
Add depreciation and other 175,2 163,6 Net (increase)/decrease in
working capital (5,6) 7,5
Tax paid (9,2) (72,9)
Dividends paid (172,5) (137,5) Net cash inflow from operating
activities 459,4 262,3
Replacement capital expenditure (80,6) (136,0)
Investment in future operations (10,0) (25,9) Acquisition of subsidiary (24,1) - Cash surrendered on disposal of subsidiary (23,7) - Proceeds on disposal of property,
plant and equipment 16,8 15,9
Investments and loans 19,3 (42,6) Net cash outflow from investing
activities (102,3) (188,6) Net cash (outflow)/inflow from
financing activities (8,4) 4,8 Effects of exchange rates on cash 1,4 - Net increase in cash and cash
equivalents 350,1 78,5 Notes Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm 1. Profit before tax Included in profit before tax is:
Cost of sales 1 345,9 1 213,9
Depreciation 165,0 151,2 2. Net profit before exceptional items Net profit attributable to
shareholders 413,2 253,1 Profit on disposal of subsidiary (56,4) - Profit on disposal of
properties (1,7) (2,0)
Impairment losses/(reversal) 0,4 (0,7) Purchase consideration of
subsidiary recovered - (7,2)
Tax on exceptional items 0,5 0,7 Net profit before exceptional
items 356,0 243,9 3. Headline earnings Net profit before exceptional
items 356,0 243,9 (Profit)/loss on disposal of plant and
equipment net of tax (1,6) 0,9
Amortisation of intangibles 0,5 0,4
Headline earnings 354,9 245,2 4. Investments
Unlisted at cost 246,9 246,9 Unlisted associate companies including loans
at carrying value 74,7 62,5 Directors' valuation of investments
- unlisted 256,0 253,7 - unlisted associate companies
including loans 227,2 171,5
5. Borrowings 287,6 296,1 The Company's borrowing powers are not restricted 6. Commitments
Capital commitments 444,5 30,5 Acquisition of Portland Holdings Limited Zimbabwe 432,4 -
Contracted 11,9 12,6
Approved 0,2 17,9
Lease commitments 15,0 17,4
459,5 47,9 7. Contingent liabilities There are contingent liabilities in respect of guarantees covering loans, banking facilities and other obligations of subsidiaries and other third
parties limited to 5,1 5,1 8. Prior year restatement
During the year under review it has been established that the Group has further constructive obligations in respect of plant closure decommissioning costs and certain employee related costs at retirement. Prior year results have been restated accordingly. The effect of providing for these additional obligations was to reduce current year earnings by R8,0 million and to reduce 2000 earnings by R6,2 million. Dividend Announcement
The directors of Pretoria Portland Cement Company Limited ("PPC") have resolved to declare the following dividends to all shareholders:
- number 189 (final dividend) of 340 cents per share
- number 190 (special dividend) of 500 cents per share.
The following schedule pertains to shareholders trading on the JSE Securities Exchange South Africa:
Last date to trade "CUM" the dividends: Friday, 4 January 2002
Date on which PPC will trade "EX"the dividends:Monday, 7 January 2002 Record date: Friday, 11 January 2002 Payment date: Monday, 14 January 2002
Note that share certificates may not be dematerialised/rematerialised between Friday, 28 December 2001 and Friday, 11 January 2002, both days inclusive.
The following schedule pertains to shareholders trading on the Zimbabwe Stock Exchange:
Last date to register to receive the dividends: Friday, 4 January 2002 Currency conversion date*: Monday, 7 January 2002 Date on which PPC will trade "EX"the dividends: Monday, 7 January 2002 Payment date: Monday, 14 January 2002 The register of members in Zimbabwe will be closed from 5 January 2002 to 7 January 2002 inclusive, for the purpose of determining those shareholders to whom the dividends will be paid.
* The dividends will be paid in Zimbabwe Dollars at the rate quoted by Stanbic Bank Zimbabwe Limited as the market buying rate of the SA Rand against the Zimbabwe Dollar at or about 11:00 on Monday, 7 January 2002 or the first business day thereafter on which foreign currency dealings are transacted. The dividends will be paid in part through the Dividend Access Trust (DAT). By order of the Board Barloworld Trust Company Limited Secretaries 8 November 2001 Directors:
W A M 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, A J Phillips*, P Stuiver+, M J Shaw, E P Theron. * British +Dutch Registered Office: 180 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 are available on the PPC Internet website www.ppc.co.za
PPC charges ahead with a 45% increase in headline earnings Media Release 8 November 2001
Sharply increased profits in all divisions helped PPC to increase headline earnings per share by 45% to 709,7 cents (2000: 490,4 cents) in the year to September 2001.
A final dividend of 340 cents has been declared, making a total of 460 cents declared for the year, an improvement of 46%. In addition, a special
dividend of R5.00 per share has been declared in view of the excess cash that has arisen from strong operational cash flows and the sale of PPC Logistics.
"We have seen a remarkable recovery in line with our 2000 forecast, however, we are cautious on the Group's prospects for 2002 as we are unable to predict the effect of the current global economic situation. Currently we feel that demand for our products is likely to remain static," said John Gomersall, Chief Executive Officer of PPC.
Cement operating profit increased by 44% to R399,8-million (2000: R277,6- million), due to a continued focus on improving service levels, the quality of the customer base and the withdrawal from markets which are costly to service. Profit margins on exports increased by almost 50%, reflecting the continued focus on cement rather than clinker exports. The aggregate and ready-mix operations improved their performance and the acquisition of the Mooiplaas quarry also boosted revenue and profits.
An increase of 38% in the Lime operating profits to R59-million (2000: R42,8- million) and improved operating margins of 16% (2000: 13.3%) are pleasing, however, cash flow returns remain below the cost of capital.
"Although lime volumes improved by three percent thanks to increased sales of burnt dolomite, lime prices will have to improve as the business cannot be sustained at current price levels. Domestic prices are about 40% lower than international prices," continued Gomersall.
Group turnover rose by 16% to R2,1-billion (2000: R1,7-billion) and
operating profits increased by 48% to R459-million (2000: R310-million). The Group operating margin from continuing operations increased to 22,9% (2000:18,2%) and finance costs were virtually constant at R51,4-million (2000: R51,1-million).
Income from investments rose 52% to R64,4-million (2000: R42,3-million). The sale of PPC Logistics to Barloworld resulted in an exceptional profit of R56,4-million.
Pre-tax income of R471,5-million resulted in a tax charge of R134,6-million (2000: R69,5-million) which represents an effective rate of 28,5%. Net profit attributable to shareholders rose 63% to R413,2-million (2000: R253,1- million).
PPC's acquisition of 100% of Portland Holdings Limited Zimbabwe (Porthold) effective from 18 October 2001 at a purchase consideration of R432,4- million, was settled by way of a cash payment of R186,1-million and an issue of 3 656 119 shares in Pretoria Portland Cement Company Limited.
Said Gomersall: "The acquisition of Porthold is a strategic long-term investment in the southern African region. It presents a unique opportunity to benefit from regional growth, and extended operational and marketing expertise. We believe that our enlarged group will be able to add further value, be more cost competitive and better positioned to meet international competition."
"These pleasing results are attributable to the Value Based Management (VBM) initiatives and the continued success of our global competitiveness drive. In addition, the Kambuku `people process' has fostered a culture of
continuous improvement resulting in significant cost reductions and improved customer service in all divisions," concluded Gomersall. Ends

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