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Operational Update for the First Quarter Ended 30 June 2017
PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
ISIN: ZAE000170049
JSE & ZSE Share Code: PPC
("PPC" or the "Company")
OPERATIONAL UPDATE FOR THE FIRST QUARTER ENDED 30 JUNE 2017
OPERATING UPDATE
Johan Claassen, interim CEO said: ”Our focus is firmly on delivering improved
profitability and liquidity in the shorter term while our longer term strategy
remains unchanged. More specifically, we will focus our management effort on the
new operations in the DRC and Ethiopia, ensuring that they deliver to expectations,
whilst further optimising efficiency in our other businesses. We are committed to
unlocking long term sustainable shareholder value both through operational
excellence and opportunities to achieve this through corporate action. To bolster
the management team we have made key executive appointments and changes in Finance,
SA Cement, Materials and Rest of Africa Cement”.
Note: The period ended 30 June 2017 is compared with information as published in
the financial statements for the quarter ended 30 June 2016. A copy of the
financial statements for the quarter ended 30 June 2016 is available on our website
(http://www.ppc.co.za/investors/presentations/financials.aspx).
Trading Overview
PPC group revenue has tracked ahead of the previous comparative period ended 30
June 2016, whilst group EBITDA is in line with the previous year. Good cost
management has prevailed in the period.
The South African business environment remains challenging with continued lower
levels of fixed investment and consumer spend. In the Rest of Africa the robust
growth in Rwanda has continued. Cement sales volumes in the DRC are improving
notably following a slow start although market conditions in the DRC remain
challenging. Our Zimbabwe operations continue to exceed expectations, with the
investment in the Harare mill contributing to volume growth.
Group Liquidity
The group’s net debt position in June 2017 has improved further on March 2017.
Capex has significantly reduced when compared to the same period last year as we
come to the end of the high capex phase. Furthermore, the group has started
generating positive free cash flow (before financing activities) compared to the
previous period.
In June and July 2017, we made our first payments totalling US$32m towards funding
commitments in the DRC. We continue to monitor cash requirements in the DRC
closely, and have achieved some success in reducing the need for additional
deficiency funding from the centre. Notwithstanding this, we continue to look at
alternatives to further mitigate exposure to the DRC.
Management will continue with initiatives to generate and preserve cash on a
sustainable basis. We are progressing well in advancing the refinancing and
restructuring of the group debt maturing in June 2018.
Southern Africa Cement
PPC estimates that growth in overall cement demand in South Africa improved during
the first half of calendar 2017 after a dampened first quarter of 2017. PPC also
estimates that the industry is operating at relatively high utilisation levels of
efficient capacity which could result in reaching full capacity by calendar year
2020.
We realised an effective overall selling price increase of between one and two
percent compared to the prior period, following a price increase in February 2017.
A further price increase was implemented in August 2017.
Our cement sales volumes in South Africa declined marginally when compared to the
same period in the previous year, which, however, had two less trading days. On a
like-for-like basis, volumes were up 0.5% driven by solid performances in both the
Coastal and Inland areas. Imports have declined by 27% compared with the same
period last year. Botswana continues to deliver steady results. Variable delivered
cost per ton is not significantly different when compared with last year.
We have commenced with an Environmental Impact Assessment and feasibility study for
a new kiln line at our Riebeeck plant in the Western Cape. The current plant will
not be environmentally compliant in its current state beyond 2020.
Revenue for the segment has tracked ahead of last year, whilst EBITDA is in line
with the previous period.
Rest of Africa Cement
Rest of Africa cement volumes have seen double digit growth compared to the prior
period. Segment revenue and EBITDA are growing ahead of last year.
Rwanda continues to deliver robust volume growth, with our capacity utilisation now
reaching 60%. Monthly volumes have realised their highest level since commissioning
two years ago. Pricing has remained relatively stable. We have launched bulk
cement, the first offering of its kind in the Rwandan market.
PPC Zimbabwe also saw double digit volume growth compared with last year, and in
June 2017 recorded the highest monthly volumes since June 1999. Pricing in US
dollars is flat compared with the previous period. The country continues to
experience liquidity constraints.
In the DRC, monthly sales have tracked progressively better. We have doubled our
sales volumes in each successive month despite a muted trading environment. While
imports from Angola have reduced significantly, competition from local producers
has increased. Pricing remains depressed due to excess capacity. However,
management continues to implement strategies to reduce fixed overheads.
Although cement production in Ethiopia only started in June 2017, more than 100 000
tonnes of cement had been pre-sold since February 2017, due to high demand. This is
equivalent to annualised capacity utilisation of more than 60%. Cement prices in
the market have remained stable.
Materials Business
Performance in the Lime division has reduced mainly due to an adhoc supply
agreement not continuing in the current period. We are establishing a depot in
Mpumalanga to improve our service delivery to existing customers, increase the
customer base and optimise our distribution network.
Volumes in the Aggregates and Readymix divisions are under pressure due to strong
competition and limited new contracts in Gauteng which have also impacted prices.
3Q Mahuma Concrete has contributed favourably to EBITDA for the quarter. Revenue
and EBITDA for the Materials business has, however, contracted when compared with
the prior year due to a tough competitive environment.
Slurry Kiln 9 (SK9)
The SK9 project is progressing well, on time and on budget and is approximately 68%
complete. Commissioning remains on schedule for the first calendar half of 2018.
The new kiln will enhance our competitive position in the Inland area through cost,
technical and environmental efficiencies.
Proposed merger of PPC and AfriSam
Management is committed to unlocking long term sustainable shareholder value. In
light of this, we continue to evaluate a potential merger between PPC and AfriSam.
Update on Broad-Based Black Economic Empowerment Transaction
We continue to engage with the Department of Mineral Resources (DMR) on aspects of
our proposed BEE III transaction. Details relating to the proposed BEE III
transaction will be communicated to shareholders at the appropriate time.
Executive management changes to bolster achievement of the short and long term
priorities
As a result of the appointment of Johan Claassen as interim CEO, a number of
changes to the executive team have been made. PPC is fortunate to be in a position
of having experienced executives available to make these appointments.
Managing Director Southern Africa Cement (SA Cement)
Mr Njombo Lekula, previously the MD of Rest of Africa Cement has been appointed as
MD of SA Cement. He has been at PPC for 27 years, holding a number of cement
manufacturing and executive management roles.
Before taking on the role of MD for Rest of Africa Cement in December 2015, he was
appointed MD of the PPC Zimbabwe business in 2013, where he steered a positive
turnaround of the business. This led to the division increasing volumes and
profitability through the optimisation and streamlining of their operations and
developing robust business and route-to-market strategies. He has amassed extensive
knowledge in the management of cement plants and complex, multi-million dollar
projects such as the construction of our US$82 million milling plant in Harare,
Zimbabwe. He has also been instrumental in providing leadership and direction on
the operational readiness of other projects leading up to the completion and
commissioning of the integrated cement plants in DRC and Ethiopia.
Njombo is an engineer by profession; he studied Chemical Engineering and holds a
Masters in Business Administration from the University of Stellenbosch Business
School.
Managing Director Rest of Africa Cement
Mr Mokate Ramafoko has been appointed as the MD of Rest of Africa Cement. He is a
chemist by profession with over 23 years of experience in the cement manufacturing,
quality assurance and cement process optimisation industries. He has held various
leadership positions in PPC as well as in Holcim South Africa (now AfriSam).
He has extensive knowledge in overseeing and managing complex, multi-million dollar
operations where he has been instrumental in driving business growth. Most
recently, Mokate was instrumental in driving and guiding the CIMERWA business in
Rwanda to realise an improvement in its processes and ultimately driving
operational efficiencies.
He holds a Masters in Business Administration (Unisa), a BSc (UCT) and BSc (Hons)
Metallurgy (UP).
Group Technical and Materials business
Mr Hardie de Beer, Group Executive Technical will now also assume responsibility
for the Materials business. He has more than 21 years’ experience in the cement
industry in various technical and leadership roles and previous experience in the
aluminium and aerospace industries.
He joined PPC in 1996 as an engineer at PPC De Hoek, and subsequently held various
management and executive roles in PPC. In 2016, he was promoted to Executive,
Technical - responsible for core technical functions, projects and health & safety
for the group.
He holds a B Eng. (Mechanical) from University of Stellenbosch and a Masters in
Business Leadership from Unisa.
Group Finance
As part of the new structure of the finance, tax and treasury business unit, a new
role - group executive finance and business support, has been introduced, reporting
to the CFO. The incumbent will support the CFO in ensuring that the financial
strategy of the business is well executed.
PPC is pleased to announce the appointment of Mr Matodzi Mukwevho to this new role
effective 1 August 2017. He has held various positions including that of CFO at
Sasol International Energy responsible for South Africa, Nigeria, Qatar, India and
Uzbekistan. He also held the position of CFO at Sasol Polymers in South Africa,
Iran, Malaysia, China, Hong Kong and United Arab Emirates.
Matodzi holds a Masters of Business Administration and is a CA (SA).
Any forecast or financial information on which this trading update is based has not
been reviewed by the company´s auditors.
Sandton
17 August 2017
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
PPC:
Anashrin Pillay
Head Investor Relations
Tel: +27 (0) 11 386 9000
Siobhan McCarthy
Group Manager Corporate Affairs
Tel: +27 (0) 11 386 9000
Financial Communications Advisor:
Instinctif Partners
Louise Fortuin
Mobile: +27 (0) 71 605 4294
Louise.Fortuin@instinctif.com
Date: 17/08/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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