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Pretoria Portland Cement Company Limited - Reviewed Interim

Release Date: 06/05/2004 07:00
Code(s): PPC
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Pretoria Portland Cement Company Limited - Reviewed Interim Results for the half-year ended 31 March 2004 Pretoria Portland Cement Company Limited (Incorporated in the Republic of South Africa) (Company registration number 1892/000667/06) JSE Code: PPC ISIN: ZAE 000005559 Reviewed Interim Results for the half-year ended 31 March 2004 - 15% growth in domestic cement volumes - 37% growth in operating profit - 26% growth in dividend - 33% growth in headline earnings per share Consolidated Income Statement Six months ended Year ended 31 March 31 March 30 Sept. 2004 2003 2003
Reviewed Reviewed % Audited Rm Rm Change Rm Revenue 1,630.0 1,400.1 16 3,015.9 Operating profit 517.4 376.8 37 866.2 Exceptional items (1.9) 3.6 4.1 Profit from operations 515.5 380.4 36 870.3 Fair value (loss)/profit (0.6) 13.6 6.5 on financial instruments Finance costs 25.6 42.8 40 56.1 Income from investments 53.2 68.7 (23) 126.4 Amortisation of goodwill (0.1) (0.1) (0.1) Profit before tax 542.6 420.0 29 947.2 Tax 158.9 118.6 (34) 256.9 STC on dividends paid 72.6 60.5 (20) 69.1 Net profit after tax 311.1 240.9 29 621.2 Share of associates" 3.7 1.2 5.9 retained profit Net profit attributable 314.8 242.1 30 627.1 to shareholders Net profit per share (cents) - basic 585.8 450.5 30 1,166.9 - fully diluted 585.7 450.5 30 1,166.8 Headline earnings per share (cents)* - basic 587.7 441.0 33 1,154.0 - fully diluted 587.6 441.0 33 1,153.9 Ordinary shares of R1 53,744 53,744 53,744 each fully paid in issue (000) Weighted average number of shares in issue during the 53,744 53,744 53,744 period (000) Increase in number of shares as a result of unexercised 4 - 2 options (000) Fully diluted weighted 53,748 53,744 53,746 average number of shares (000) Dividends per share (cents) - special - - 650 - final - - 550 - interim 220 175 26 175 220 175 26 1,375 Determination of headline earnings per share Net profit per share 585.8 450.5 1,166.9 (cents) Adjusted for (after tax): Profit on disposal of property, plant and equipment (3.2) (9.4) (12.6) Impairment of intangibles 5.2 - - Amortisation of goodwill (0.1) (0.1) (0.3) Headline earnings per 587.7 441.0 1,154.0 share (cents) *Refer notes 3 and 4 for a reconciliation of net profit attributable to shareholders to headline earnings. Consolidated Balance Sheet 31 March 31 March 30 Sept. 2004 2003 2003
Reviewed Reviewed Audited Rm Rm Rm ASSETS Non-current assets 1,973.0 2,101.5 1,935.4 Property, plant and equipment, 1,537.7 1,976.8 1,818.5 investments and loans Investment in subsidiary company 322.3 - - Intangible assets 7.2 10.3 10.4 Negative goodwill (1.0) (1.1) (1.1) Deferred tax assets 15.2 13.8 16.0 Long-term loan 91.6 101.7 91.6 Current assets 1,086.0 1,083.7 1,551.3 Investment in associate company 4.1 5.4 6.0 subject to sale Inventories and receivables 705.0 678.4 641.7 Cash and cash equivalents 376.9 399.9 903.6 Total assets 3,059.0 3,185.2 3,486.7 EQUITY AND LIABILITIES Capital and reserves Share capital and premium 865.8 865.8 865.8 Non-distributable reserves 47.0 13.7 (98.3) Retained profit 1,073.4 1,069.8 1,369.6 Interest of shareholders of PPC 1,986.2 1,949.3 2,137.1 Minority interest - 0.1 0.1 Interest of all shareholders 1,986.2 1,949.4 2,137.2 Non-current liabilities 680.3 826.2 751.2 Interest-bearing 366.6 387.5 366.6 Non-interest-bearing 119.3 125.9 118.5 Deferred tax liabilities 194.4 312.8 266.1 Current liabilities 392.5 409.6 598.3 Short-term borrowings 12.5 12.2 12.7 Accounts payable and provisions 380.0 397.4 585.6 Total equity and liabilities 3,059.0 3,185.2 3,486.7 Net asset value per share 3,695.7 3,627.2 3,998.1 (cents) Statement of Changes in Shareholders" Interest Six months ended Year ended 31 March 31 March 30 Sept. 2004 2003 2003 Reviewed Reviewed Audited
Rm Rm Rm Interest of shareholders of PPC Balance at beginning of 2,137.1 2,310.7 2,121.1 period Net movements not recognised 152.5 (96.1) (10.2) through the income statement Revaluation of investments - - 0.8 (net of deferred tax) Impact of deconsolidation of 7.2 - - Porthold on opening retained profit Foreign Currency Translation 145.3 (96.1) (11.0) Reserve and other movements* Net movements recognised (303.4) (265.3) 26.2 through the income statement Net profit attributable to 314.8 242.1 627.1 shareholders Dividends paid (618.2) (507.4) (600.9) Balance at end of period 1,986.2 1,949.3 2,137.1 * The FCTR movement relates principally to the deconsolidation of Porthold. Consolidated Abridged Cash Flow Statement Six months ended Year
ended 31 March 31 March 30 Sept. 2004 2003 2003 Reviewed Reviewed Audited
Rm Rm Rm Profit before tax and 544.5 416.4 943.1 exceptional items Depreciation and other non- 90.0 96.4 181.6 cash items Net increase in working (123.9) (139.7) (52.2) capital Tax paid (377.3) (235.1) (261.6) Dividends paid (618.2) (507.4) (600.9) - ordinary (268.9) (184.9) (278.4) - special (349.3) (322.5) (322.5) Net cash (outflow)/inflow from (484.9) (369.4) 210.0 operating activities Replacement capital (34.3) (85.5) (152.1) expenditure Investment in future - (14.0) (17.1) operations Movements in investments and 5.1 8.3 12.6 loans Proceeds from the disposal of 4.8 6.9 9.2 property, plant and equipment Receipt of instalment on long- - - 10.2 term loan Net cash outflow from (24.4) (84.3) (137.2) investing activities Net cash outflow from - (2.1) (21.2) financing activities Effects of exchange rates on (6.3) (15.9) (9.0) opening cash position Effects of deconsolidation of (11.1) - - Porthold Net (decrease)/increase in (526.7) (471.7) 42.6 cash and cash equivalents Notes Six months ended Year ended
31 March 31 March 30 Sept. 2004 2003 2003 Reviewed Reviewed Audited Rm Rm Rm
1. Profit before tax Included in profit before tax are: Cost of sales 981.7 899.3 1,907.8 Depreciation 76.6 90.3 170.0 Fair value (loss)/profit on (0.6) 13.6 6.5 financial instruments - translation of foreign (1.6) 16.4 9.1 currency monetary items - other instruments 1.0 (2.8) (2.6) 2. Finance costs Finance costs comprise: Bank and other borrowings 1.0 2.0 2.8 Financial lease interest 23.8 24.7 41.2 Monetary loss on hyperinflation - 12.3 9.5 Unwinding of discount on 0.8 3.8 2.6 rehabilitation provisions 25.6 42.8 56.1 3. Net profit before exceptional items Net profit attributable to 314.8 242.1 627.1 shareholders Profit on disposal of (0.9) (3.6) (4.1) properties Impairment of intangibles 2.8 - - Tax on exceptional items - 0.2 0.1 Net profit before exceptional 316.7 238.7 623.1 items 4. Headline earnings Net profit before exceptional 316.7 238.7 623.1 items Profit on disposal of plant and (0.8) (1.6) (2.8) equipment (after tax) Amortisation of goodwill (0.1) (0.1) (0.1) Headline earnings 315.8 237.0 620.2 5. Investments At fair value 259.9 259.1 259.9 Unlisted associates including 12.2 16.0 16.4 loans at carrying value - non-current 8.1 10.6 16.4 - current 4.1 5.4 - Directors" valuation of 280.9 284.7 287.9 unlisted shares 6. Borrowings 379.1 399.7 379.3 The company"s borrowing powers are not restricted. 7. Commitments Capital commitments 14.5 32.4 24.5 - contracted 12.7 28.3 18.4 - approved 1.8 4.1 6.1 Operating lease commitments 5.2 17.2 6.4 19.7 49.6 30.9
These commitments will be met from available resources. 8. Contingent liabilities Guarantees for loans, banking 6.8 9.2 6.7 facilities and other obligations to third parties. 9. Deconsolidation of Portland Holdings Limited (Porthold) The results of Porthold, a wholly owned Zimbabwean subsidiary, have in terms of the exclusion contained in IAS 27 (Consolidated Financial Statements and Accounting for Investments in Subsidiaries) not been consolidated into the Group results as at 31 March 2004. The circumstances in Zimbabwe are such that there are severe restrictions placed on our ability to access foreign currency and remit funds. This fact, together with the significant constraints impacting the normal operation of Porthold, have resulted in the PPC Board concluding that management does not have the ability to exercise control over the business. In view of the circumstances, the results of Porthold have been deconsolidated from the Group results in the current period and have been accounted for on a fair value investment basis, with earnings being recognised on a dividend basis. The summarised results of Porthold, adjusted for hyperinflation and converted back to Rands at the prevailing auction rate, were: Six months ended Year ended 31 March 31 March 30 Sept. 2004 2003 2003
Revenue 83.3 27.7 49.1 Operating profit/(loss) 2.5 (9.6) 0.6 Profit/(loss) before tax 6.4 (13.3) (0.4) Tax 2.2 (3.1) 3.0 Profit/(loss) after tax 4.2 (10.2) (3.4) Total assets 718.7 381.3 246.2 Total liabilities 227.5 121.1 81.6 The impact of the deconsolidation of Porthold was to reduce headline earnings per share in the period by 10.7 cents from 598.4 cents to 587.7 cents. 10. Comparative information The comparative results of the Group have not been restated for the effects of Porthold applying IAS 29 (Financial Reporting in Hyperinflationary Economies). This is in accordance with the revised IAS 21 (The Effects of Changes in Foreign Exchange Rates), which the Group has adopted in the period under review. This has no effect other than to no longer require the restatement of the Group"s 2003 results for the effect of hyperinflation in Porthold. 11. Basis of preparation The interim results have been prepared in accordance with IAS 34 (Interim Financial Reporting). Except for the items mentioned in notes 9 and 10 above, the accounting policies adopted are consistent with those applied in the annual financial results for the year ended 30 September 2003. 12. JSE Securities Exchange requirements The interim announcement has been prepared in accordance with the listings requirements of the JSE Securities Exchange South Africa. 13. Auditors" review The auditors, Deloitte & Touche, have reviewed these interim results. A copy of their unqualified review opinion is available for inspection at the company"s registered office. Segmental Analysis of the Group"s Operations Revenue Six months ended Year ended 31 March 31 March 30 Sept. 2004 2003 2003
Reviewed Reviewed % Audited Rm Rm Change Rm Cement 1,317.3 1,105.9 19 2,417.8 Lime 225.9 228.2 (1) 462.6 Packaging 137.5 117.6 17 239.5 1,680.7 1,451.7 16 3,119.9 Less: Inter-segment revenue 50.7 51.6 (2) 104.0 1,630.0 1,400.1 16 3,015.9 Operating profit Six months ended Year ended 31 March 31 March 30 Sept.
2004 2003 2003 Reviewed Reviewed % Audited Rm Rm Change Rm Cement 460.6 312.3 47 740.5 Lime 42.2 50.1 (16) 98.8 Packaging 14.6 14.4 1 26.9 517.4 376.8 37 866.2 Operating margin Six months ended Year ended 31 March 31 March 30 Sept. 2004 2003 2003 Reviewed Reviewed Audited
% % % Cement 35.0 28.3 30.6 Lime 18.7 22.0 21.4 Packaging 10.6 12.2 11.2 31.7* 27.0* 28.7* * Net of inter-segment revenue Commentary The strong performance in the first half is largely attributable to the continued growth in cement demand arising from improved levels of infrastructural spending and buoyant housing construction prompted by the lower interest rates. This combined with our ongoing Value Based Management (VBM) focus on value creation, resulted in an improvement in operating profit well ahead of revenue growth. Headline earnings per share increased 33% to 587.7 cents, this after an STC charge of 81.3 cents per share (2003: 75.0 cents per share) on the special dividend of R6.50 per share paid in January 2004. Group revenue increased 16% to R1.6 billion following 13% growth in industry cement volumes for the half year, with growth of over 20% in February and March 2004 over the same months last year. Cement export volumes were 28% lower than last year and despite this and the effect of the stronger Rand, they made the same contribution as last year mainly as a result of lower costs and better international US Dollar prices. Operating profit increased by 37% to R517.4 million in spite of the decline in the Lime division. Notwithstanding the very difficult conditions prevailing in Zimbabwe, Porthold managed to report a small operating profit (2003: small operating loss). Investment income and finance costs have been impacted by the deconsolidation of Porthold. Capital expenditure of R34.3 million (2003: R99.5 million) related mainly to items of a replacement nature. In view of the company"s strong results, favourable cash position and current low level of capital expenditure, the directors have proposed that an increased interim dividend of 220 cents per share (2003: 175 cents) be declared. CEMENT Domestic cement sales for the half-year increased by 15% over the comparable period last year and revenues increased accordingly by 27%. Gauteng, the Western, Southern and Eastern Cape continued to be the areas of greatest volume growth. The Coega Harbour project and associated development has been a major boost to construction activity in the Eastern Cape and sales in the Port Elizabeth area for the month of March 2004 were at an all time record. The Rand strength and Spoornet capacity problems continue to curtail exports both overland into Africa and to offshore markets. The situation in Zimbabwe continued to deteriorate with the economy struggling with both hyperinflation and continual shortages of foreign exchange. These conditions resulted in our Zimbabwe sales volumes declining to almost 50% of those achieved last year. Inflationary pressures on input costs, wages and coal have reduced margins, whilst unrealistic prices, particularly electricity have resulted in a temporary stoppage of the Colleen Bawn operations. The circumstances in Zimbabwe are such that there are severe restrictions placed on our ability to access foreign currency and remit funds. This fact, together with the significant constraints impacting management"s ability to exercise effective control over the business has resulted in the PPC Board concluding that the results of Porthold should no longer be consolidated. The results of Porthold have been deconsolidated from the Group results in the current period and have been accounted for on a fair value investment basis with earnings being recognised as dividends are received. Operating profit increased by 47% from R312.3 million to R460.6 million on revenue increases of 19%. LIME Sales volumes were 7% lower than last year and this is reflected in the revenue decline of 1%. Pricing in terms of long-term contracts with certain customers is still at a low level, negatively impacting on both revenues and margins. Operating profit was 16% lower than last year at R42.2 million. PACKAGING The sale of 75% of Afripack to a BEE and management consortium remains subject to certain suspensive conditions, including the approval of the Competition Commission. Strong demand for cement sacks and good growth in other product lines generated a 17% increase in revenue. Operating margins declined to 11% (2003: 12%) due to the impact of higher priced inputs as a result of the stronger Rand and as a consequence, the operating profit of R14.6 million was only 1% higher than last year. ASSOCIATES Share of associates" retained profit increased to R3.7 million from R1.2 million last year, mainly due to an improved contribution from Slagment. The sale of the one-third interest in Slagment is awaiting approval from the Competition Tribunal. BOARD AND MANAGEMENT Mr RKJ Chambers retired as a director with effect from 26 January 2004. His valuable contribution over the past 10 years is sincerely appreciated. Mr P Esterhuysen was appointed to the Board as Director Finance and Administration with effect from 1 December 2003. Mr PJ Blackbeard will leave the Board on 30 June 2004 to head up the Scientific Division of Barloworld Limited in the United Kingdom. Dr O Fenn was appointed Managing Director of the PPC Cement Division and was appointed to the Board on 5 March 2004. TRANSFER SECRETARIES The company changed its South African transfer secretaries from Computershare Investor Services Limited to Ultra Registrars (Pty) Limited with effect from 1 March 2004. PROSPECTS The first half reflected unexpected cement volume growth of 15% and arose largely from very high cement demand in the months of February and March 2004 in particular. Whilst it is unlikely that this level of growth can be maintained through the remainder of this year, local cement demand could grow by 8% to 10% for the financial year, which is double the original forecast. Lime and burnt dolomite volumes may increase marginally as South African steel producers are likely to increase their output to meet the surge in worldwide steel demand. The low Producer Price Index will place a restraint on lime contractual price increases in the short term. Porthold will continue to experience difficult conditions with the management focus being on maintaining a cash positive position. The disposal of the 75% interest in Afripack is expected to be completed before the end of the current quarter and Packaging will therefore reflect a reduced contribution in the second half. The balance sheet remains sound and the company is well positioned to take advantage of any opportunities that may arise. Strong cash flows are expected to continue, arising from the improved profitability and a lower level of capital expenditure. The current growth in cement demand should enable the company to report increased operating profits and cash flow for the full year. The year on year rate of increase in the second half is however likely to be lower than that achieved in the first half. On behalf of the Board W A M Clewlow J E Gomersall Chairman Chief Executive Officer 5 May 2004 Dividend Announcement Notice is hereby given that interim ordinary dividend No. 197 of 220 cents per share has been declared in respect of the six months ended 31 March 2004. This dividend will be paid out of profits as determined by the directors, to shareholders recorded as such in the register at the close of business on the record date, Friday, 4 June 2004. The last date to trade to participate in the dividend is Friday, 28 May 2004. Shares will commence trading ex-dividend from Monday, 31 May 2004. The important dates pertaining to this dividend for shareholders trading on the JSE Securities Exchange South Africa are as follows: Last day to trade "CUM" dividend Friday, 28 May 2004 Shares trade "EX" dividend Monday, 31 May 2004 Record date Friday, 4 June 2004 Payment date Monday, 7 June 2004 Share certificates may not be dematerialised or rematerialised between Monday, 31 May 2004 and Friday, 4 June 2004, both days inclusive. Zimbabwe The important dates pertaining to this dividend for shareholders trading on the Zimbabwe Stock Exchange are as follows: Currency conversion date* Monday, 31 May 2004 Shares trade "EX" dividend Monday, 31 May 2004 Last day to register to receive Friday, 4 June 2004 the dividend Payment date Monday, 7 June 2004 The register of members in Zimbabwe will be closed from Monday, 31 May 2004 to Friday, 4 June 2004, both days inclusive, for the purpose of determining those shareholders to whom the dividend will be paid. * The dividend will be paid in Zimbabwe Dollars at the rate quoted by Stanbic Bank Zimbabwe Limited as the official market buying rate of the SA Rand against the Zimbabwe Dollar at or about 11:00 am on Monday, 31 May 2004 or the first business day thereafter on which foreign currency dealings are transacted. By order of the Board Barloworld Trust Company Limited Secretaries Per AR Holt 5 May 2004 Directors: W A M Clewlow (Chairman), J E Gomersall* (Chief Executive Officer), P J Blackbeard (Chief Operating Officer), R J Burn, R H Dent, P Esterhuysen, O Fenn*, A J Lamprecht, A J Phillips*, M J Shaw, E P Theron *British Registered Office: 180 Katherine Street, Sandton, South Africa (P.O. Box 782248, Sandton 2146, South Africa) Transfer Secretaries: Ultra Registrars (Proprietary) Limited 11 Diagonal Street, Johannesburg, South Africa (P.O. Box 4844, Johannesburg 2000, South Africa) Transfer Secretaries Zimbabwe: Corpserve (Private) Limited 4th Floor, Intermarket Centre, Corner 1st Street/Kwame Nkrumah Avenue, Harare, Zimbabwe (P.O.Box 2208, Harare, Zimbabwe) These results and other information are available on the PPC Internet website www.ppc.co.za Date: 06/05/2004 07:00:41 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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