Wrap Text
Trading Update
PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE Code: PPC
ISIN: ZAE 000170049
("PPC" or the "Company")
TRADING UPDATE FOR THE NINE MONTHS ENDING DECEMBER 2016 AND SITE VISIT
PRESENTATION
TRADING UPDATE
PPC’s balance sheet, which showed significant de-gearing to September 2016,
has improved further following conclusion of the first empowerment
transaction. This resulted in a cash inflow of R1 billion in December 2016
which will be used to further reduce the Company’s debt and fund capital
expenditure, in particular, the Slurry kiln 9 project. The Company’s
balance sheet has been strengthened significantly against the cyclical
nature of the business.
In terms of the Broad-Based Black Economic Empowerment (“B-BBEE”) Codes of
Good Practice, PPC’s contributor level improved from Level 8 to Level 4 in
December 2016.
Details relating to the proposed new B-BBEE III transaction will be
communicated to shareholders during the first half of the 2017 calendar
year.
Following selling price increases implemented in the Gauteng and Inland
regions in October 2016, these areas have experienced high single digit
declines in cement sales volumes for the quarter ending December 2016 when
compared to the quarter ending December 2015. Despite strong volume growth
in the Western Cape region, PPC’s overall cement sales volumes in South
Africa declined marginally when compared to the same quarter in the
previous year. However, for the nine month period to December 2016, PPC’s
overall cement sales volumes in South Africa increased by 4% and the
average selling prices decreased by 4%. The Company has implemented further
price increases in selected regions effective 1 February 2017, the impact
of which will begin to reflect on the average selling price in the next few
months.
The business units of Zimbabwe, Rwanda and Botswana, collectively recorded
cement sales volume increases of 9% for the nine month period to December
2016.
Following the commissioning of the mill in Harare, cement sales volume
performance, which had been trending lower, has shown an improvement when
compared to the previous quarter ending December 2016. There are however
liquidity challenges in Zimbabwe which make it difficult to import key
inputs; management is exploring various solutions to overcome these
challenges. The steady ramp-up in Rwanda continues with 81 000 tonnes of
cement sales volumes recorded in the quarter ending December 2016, with
230 000 tonnes of cement sales recorded for the nine month period to
December 2016. On the back of increased sales promotions, cement sales
volumes in Botswana, have shown a 12% growth for the quarter ending
December 2016. Pricing in all the territories does, however, remain under
some pressure.
For the first nine months of the trading period ending December 2016, PPC’s
group cement sales volumes were up 4% when compared to the previous nine
month period ending December 2015.
Performance in the lime division continues to be negatively affected by the
local steel and alloys industries while volumes in the aggregates and
readymix division continued to show growth on the back of the recent
acquisition of 3Q Mahuma Concrete.
The US$82 million Harare Msasa mill was completed on time and US$3 million
below budget without a single lost time injury over the entire project
construction period. The project debt was initially anticipated to be US$75
million however, the use of own-cash resources reduced debt drawdowns by
US$20 million. All the performance tests have now been successfully
concluded with final handover achieved late in January 2017. The first bi-
annual debt and interest repayment was made in December 2016.
As at January 2017, overall project construction in the Democratic Republic
of the Congo is at 95%. Construction of the cement factory is complete and
is ready for commissioning. Village construction is now at 80% complete and
handover of houses to the operation is in progress. Construction of the
13km overhead transmission line to supply power to the plant, line testing
and commissioning with SNEL is complete. Full power to the factory and
village was available from the end of January 2017. Factory cold
commissioning is complete and hot commissioning will commence in February
2017. Saleable cement production will only commence at the end of March
2017.
Project construction in Ethiopia is at an advanced stage. Electrical
installation work from the limestone crusher to the cement proportioning
station, including the general substation has been completed. The national
utility company will shortly commence with the requisite tests and
energising of the substation is anticipated early in February 2017. Once
power is available on site, the kiln will be fired and hot commissioning
will commence. Saleable cement production is expected in the second
calendar quarter of 2017.
The Slurry SK9 new kiln line project is progressing well with overall
progress at 54%. Commissioning and ramp-up remains scheduled for the first
calendar half of 2018.
The company remains focused on delivering its expansion projects timeously
and cost effectively. As the international projects are at advanced stages,
the focus has largely shifted to operational performance and achieving
maximum ramp-up without disrupting the market. Management also continues to
give special attention to the cash generating units; specifically managing
costs within management’s control while maximising efficiencies. Work is
also underway to further optimise the company’s capital structure while
also exploring ways to de-risk the project in the DRC.
SITE VISIT PRESENTATION
PPC will be hosting an investor site visit at its Slurry factory in the
North West province on 3 February 2017 and has, in preparation for this
event, posted an investor presentation on PPC`s website: www.ppc.co.za
This investor presentation provides information about the history of the
Slurry factory, its trading footprint as well as details about the SK9
project.
2 February 2017
Sandton
Sponsor:
Merrill Lynch South Africa (Pty) Limited
PPC:
Siobhan McCarthy
Tel: +27 (0) 11 386 9000
siobhan.mccarthy@ppc.co.za
Financial Communications Advisor:
Instinctif Partners
Louise Fortuin
Mobile: +27 (0) 71 605 4294
Louise.Fortuin@instinctif.com
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