Wrap Text
Reviewed Condensed Consolidated Financial Statements
PPC Ltd
(Incorporated in the Republic of South Africa)
(PPC or company or group)
Company registration number: 1892/000667/06
JSE code: PPC
JSE ISIN: ZAE 000170049
ZSE code: PPC
JSE code: PPC003
JSE ISIN: ZAG000117524
REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
- Headline earnings per share increased 33% to 20 cents
- Basic earnings per share up 60% at 16 cents
- Group revenue increased 1% to R10,4 billion
- Group reported EBITDA increased by 4% to R1,9 billion
- Group overheads reduced by 19% or R260 million
COMMENTARY
Johan Claassen, CEO, said: "PPC has been able to produce a solid set of results, by delivering on its strategic
priorities. The group has been successful in executing on its FOH-FOUR strategic priorities, with key focus areas being
financial, operational, human capital and customers. This has resulted in significant cost savings, as part of our R70/tonne
savings initiatives. These actions will position the group well for the future. In the Rest of Africa (RoA), the Zimbabwe
results were impacted by the change in functional currency, which reduced revenue and EBITDA contributions. Pleasingly,
the Democratic Republic of Congo (DRC) business achieved positive EBITDA in a challenging market. In Rwanda, the
business achieved increased output benefiting from the debottlenecking in the first half of the financial year. Positive free
cash flow generated was used to repay debt obligations, which remained within targeted levels. The group's liquidity
position was well managed with a smoother debt maturity profile".
Johannes Theodorus Claassen
Chief executive officer
MAJOR ACHIEVEMENTS IN THE year
- Group overheads reduced by 19% or R260 million
- Group EBITDA increased by 4% to R1,9 billion
- DRC contributed EBITDA of R108 million
- EBITDA cash conversion ratio 1,0 times
GROUP PERFORMANCE
Group revenue increased by 1% to R10 409 million (March 2018: R10 271 million) supported by a 1% increase in overall
cement volumes to 5,9 million tonnes.
Cost of sales increased by 6% to R8 399 million (March 2018: R7 924 million) compared with the previous year. The
higher cost of sales is attributed to DRC, southern Africa cement and the materials division. The southern African cement
and materials businesses experienced above inflation input cost pressures, as well as once-off unplanned maintenance
costs. The DRC was fully accounted for in the period for the first time. The business benefited from the restructuring
of the PPC head office and the R70/tonne cost savings initiatives in southern Africa. Group overheads decreased significantly
by 19%, resulting in a cost reduction of R260 million. As a result, group EBITDA increased by 4% to R1 946 million
(March 2018: R1 880 million) at an EBITDA margin of 18,7% (March 2018: 18,3%). In addition, the DRC business made a
positive EBITDA contribution of R108 million.
Finance costs increased marginally by 1% to R681 million (March 2018: R675 million). Lower finance charges in South
Africa were offset by higher finance costs in RoA. South Africa's finance costs decreased by 31% to R234 million (March
2018: R337 million), while RoA's finance costs increased by 33% to R447 million (March 2018: R338 million). The DRC
accounted for the majority of the increase in RoA finance charges.
Taxation declined by 97% to R6 million in the current year (March 2018: R205 million).
The basic earnings per share of 16 cents per share was outside the previously published range as reported on 21 June 2019,
due to the fair value loss on the Zimbabwe government bonds.
Net movement in cash and cash equivalents excluding the investment in government bonds and the stock market of
R324 million in Zimbabwe, was an inflow of R126 million (March 2018: outflow of R59 million). This was aided by improved
working capital management which resulted in a release of R63 million, and a 54% reduction in cash taxation paid of
R151 million (March 2018: R330 million). Capital investments in property, plant and equipment decreased by 16% to
R773 million (March 2018: R921 million).
Gross debt increased from R4 682 million in March 2018 to R5 002 million at the end of March 2019. Rand weakness
increased gross debt by R630 million. Net debt to EBITDA for March 2019 was 2,3 times (March 2018: 2,0 times). Excluding
the investment of R324 million in government bonds and the Zimbabwe Stock Market, net debt to EBITDA would have been
2,2 times, which is within target range.
CEMENT SOUTHERN AFRICA
In southern Africa (including Botswana), cement volumes declined by 2% to 3%. Volume declines were experienced in
South Africa against the backdrop of a challenging market, where both the consumer segment and construction industry came
under pressure. Cement imports increased by 84% to 1,0 million tonnes for calendar year 2018, albeit off a relatively low
base. Imports received via Durban increased by 89% to more than 600 000 tonnes, while imports received in the Cape rose
by 48% to 209 000 tonnes. Continued increase in the production of blended product contributed to a more competitive
inland market.
Realised average selling prices for southern Africa increased by 1% to 2%, as the business continued with its drive of
increasing cement prices to recover operational costs. Selling prices were increased by 8 to 12% in January 2019. The
full benefit is expected to be realised in the new financial year.
Overall, revenue for Cement southern Africa declined by 1% to R5 431 million (March 2018: R5 499 million).
Cost of sales rose by 6%, driven primarily by a 10% increase in distribution costs on a per tonne basis. This was a
result of a 30% increase in fuel prices for the period under review. All other production costs were well controlled
within the 5% to 7% range.
The combination of lower revenue growth and an increase in costs resulted in EBITDA contracting by 20% to R957 million
(March 2018: R1 200 million) and margins declining from 21,8% to 17,6%. Non-recurring items relating to commissioning
of SK9 and the unplanned Dwaalboom shutdown amounted to R78 million. Excluding these non-recurring items the
like-for-like EBITDA margins were 19%.
The business has made good progress in terms of the R70/tonne saving initiatives. Cumulatively, the business has
achieved R60/tonne in savings since October 2017. This comprises R40/tonne in cost efficiencies and R20/tonne in
overhead reduction. PPC will continue to drive operational cost efficiencies in order to achieve targeted savings.
MATERIALS BUSINESS
The materials business remains an integral part of the cement route-to-market strategy. Revenue increased by 7% to
R2 152 million (March 2018: R2 010 million) and the business generated EBITDA of R140 million (March 2018: R192 million).
Lime
The lime division grew revenue by 4% to R834 million (March 2018: R801 million), with higher prices in certain
products compensating for volume declines of 6%. Lime has significant exposure to the steel and allied sectors, where
volumes remain constrained. EBITDA contracted by 9% to R123 million (March 2018: R135 million), due to lower volumes,
higher input costs and higher maintenance costs.
Aggregates and readymix
Revenue increased by 9% to R1 318 million (March 2018: R1 209 million), supported by higher prices and marginally
improved volumes in all segments. EBITDA contracted to R17 million (March 2018: R57 million), due to higher fuel and
maintenance costs. The market remains competitive due to a muted construction industry.
REST OF AFRICA CEMENT
Revenue increased by 2% to R2 826 million (March 2018: R2 762 million) on volume growth of 10%. Volumes were supported
by ramp up of DRC and positive contribution from Rwanda post the debottlenecking in the first half of the financial
year. The difficult trading conditions in Zimbabwe had an adverse impact on overall volume growth and price realisation.
EBITDA increased by 10% to R810 million (March 2018: R736 million), and EBITDA margins improved from 26,7% to 28,7%.
Non-recurring items relating to the CIMERWA debottlenecking amounted to R100 million. Excluding this amount, EBITDA
margins are within the guidance range of 30% to 35%.
Zimbabwe
The published results for PPC Zimbabwe for the first half of the 2019 financial year were based on an exchange rate of
1RTGS$:1US$. The reported results of PPC Zimbabwe being consolidated in PPC group from 1 October 2018 to March 2019,
were based on the commercial exchange rate of 3,5RTGS$:1US$.
Revenue declined by 20% to R1 447 million (March 2018: R1 813 million) against the backdrop of a weaker cement market,
clinker shortages and a depreciation in the functional currency in the second half of the financial year. The
successful implementation of our route-to-market strategy has enabled PPC to offset some of these headwinds, with
volumes declining by 5%.
EBITDA contracted by 20% to R461 million (March 2018: R573 million), however, margins were maintained at 32%. PPC
Zimbabwe is operationally self-sufficient and continues to drive local procurement and exports to reduce forex
requirements.
PPC Zimbabwe continues to service its debt obligations with in-country cash resources. Legacy debt has been registered
with the Reserve Bank of Zimbabwe and will be settled on a 1:1 basis. Management has implemented contingency measures
to mitigate the impact of the liquidity challenges.
Rwanda
CIMERWA achieved revenue growth of 10% to R885 million (March 2018: R804 million) on the back of a 5% increase in
volumes. Revenues were supported by higher realised cement prices in US dollar. EBITDA declined by 9% to R246 million
(March 2018: R270 million). EBITDA was impacted by the planned shutdown as a result of the debottlenecking, and additional
costs related to clinker imports during the shutdown period. This resulted in a non-recurring EBITDA impact of
approximately R100 million. Clinker production returned to normalised levels following the completion of phase 1 of
the project, and the debottlenecking will allow for higher capacity utilisation going forward.
The outlook for economic growth remains positive, with forecast GDP growth of more than 7% in 2019, supported by all
major economic sectors. CIMERWA remains well positioned to benefit from growth in the region.
DRC
PPC Barnet achieved revenue of R494 million in the period (March 2018: R144 million), driven by a ramp up in
production output. Route-to-market initiatives supported the company in achieving a market share of 25% to 30% for the
period. Pricing remains constrained due to overcapacity and muted demand. The company achieved an EBITDA of R108 million
(March 2018: R(105) million), at a margin of 22%. EBITDA benefited from stringent cost control and entrenchment of
route-to-market strategies.
The post-election backdrop should create a platform to unlock latent cement demand. Economic GDP growth in the DRC is
projected to increase by 4,3% in 2019, primarily supported by mining activity.
Ethiopia
Habesha, which is still in the ramp-up phase, reported an equity-accounted loss of R67 million for the period. While
Habesha achieved volumes of more than 500 000 tonnes, the business performance was constrained by sub-optimal plant
performance and pricing challenges. A quick results action plan is being implemented to resolve the operational challenges.
Ethiopia remains a compelling investment proposition for PPC in the long term, supported by low cement per capita
consumption and higher projected GDP growth rates of above 7%.
OUTLOOK
The operating environment in South Africa remains challenging, given weak demand and competitive pressures. PPC is
committed to achieving sustainable price increases, optimising operational efficiencies and a reduction in financial
leverage. In addition, PPC will continue to focus on achieving its R70/tonne profitability initiatives and continue to
assess opportunities to refine our network and optimise our support structure.
In Zimbabwe, the business continues to focus on cash preservation, self-sufficiency and optimising operations. In
Rwanda, CIMERWA is expected to capitalise on the investment to expand capacity, with an anticipated growth in output.
The ramp up in the DRC continues, with a focus on maximising EBITDA. PPC Barnet remains well positioned to take advantage
of growth in that market.
DIVIDEND
The board has decided not to declare a dividend to shareholders.
RESULTS PRESENTATION
PPC will be hosting an analyst's results presentation today in Johannesburg at the JSE Auditorium, 1 Exchange Square,
2 Gwen Lane, Sandown at 10:00 SAST. The presentation will be webcast live and can be accessed via
https://www.corpcam.com/PPC28062019. The results presentation and a copy of this announcement will be
available on the company's website www.ppc.africa.
Sandton
27 June 2019
Sponsor
Merrill Lynch South Africa (Pty) Ltd
PPC
Anashrin Pillay
Head investor relations
Tel: +27 (0) 11 386 9000
Financial communications adviser
Instinctif Partners
Gift Dlamini
Tel: +27 (0) 11 050 7536
REVIEWED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2019
Year ended Year ended
31 March 31 March
2019 2018
Reviewed Audited %
Notes Rm Rm change
Revenue 2 10 409 10 271 1
Cost of sales 8 399 7 924 6
Gross profit 2 010 2 347 (14)
Administrative and other operating expenditure 1 083 1 343 (19)
Operating profit before item listed below: 927 1 004 (8)
Empowerment transactions IFRS 2 charges 33 48
Operating profit 894 956 (6)
Fair value and foreign exchange (loss)/gains 3.1 (9) 143
Finance costs 4 681 675 1
Investment income 95 52
Profit before equity-accounted earnings 299 476 (37)
Loss from equity-accounted investments (67) (60)
Impairments 5 (82) (174)
Profit before taxation 150 242 (38)
Taxation 6 6 205 (97)
Profit for the year 144 37 289
Attributable to:
Shareholders of PPC Ltd 235 149 58
Non-controlling interests (91) (112) 19
Other comprehensive profit/(loss), net of taxation
Items that will be reclassified to profit or loss 1 304 (598) 318
Translation of foreign operations 3.2 1 304 (598) 318
Total comprehensive profit/(loss) 1 448 (561)
Attributable to:
Shareholders of PPC Ltd 1 453 (347) 519
Non-controlling interests (5) (214) 98
EARNINGS PER SHARE (CENTS) 7
Basic 16 10 60
Diluted 16 10 60
REVIEWED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2019
31 March 31 March
2019 2018*
Reviewed Audited
Notes Rm Rm
ASSETS
Non-current assets 14 776 12 910
Property, plant and equipment 8 12 587 11 393
Goodwill 9 236 230
Other intangible assets 10 558 557
Equity-accounted investments 149 182
Other non-current assets* 11 333 297
Financial assets* 11 582 6
Deferred taxation assets 17 331 245
Non-current assets held for sale 12 92 34
Current assets 3 071 3 262
Inventories 1 276 1 182
Trade and other receivables* 13 1 166 1 151
Taxation receivable* 177 93
Cash and cash equivalents 14 452 836
Total assets 17 939 16 206
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 15 3 943 3 984
Other reserves 2 251 967
Retained profit 3 031 2 817
Equity attributable to shareholders of PPC Ltd 9 225 7 768
Non-controlling interests 115 120
Total equity 9 340 7 888
Non-current liabilities 5 739 5 909
Provisions 16 427 526
Deferred taxation liabilities 17 955 1 042
Long-term borrowings 18 4 064 4 079
Other non-current liabilities 19 293 262
Current liabilities 2 860 2 409
Short-term borrowings 18 938 603
Trade and other payables* 20 1 919 1 735
Taxation payable* 3 71
Total equity and liabilities 17 939 16 206
* Represented for enhanced disclosure.
REVIEWED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2019
Year ended Year ended
31 March 31 March
2019 2018
Reviewed Audited
Notes Rm Rm
Cash flow from operating activities
Operating cash flows before movements in working capital 1 917 1 889
Working capital movements 63 411
Cash generated from operations 1 980 2 300
Finance costs paid (618) (592)
Investment income received 46 52
Taxation paid (151) (330)
Cash available from operations 1 257 1 430
Dividends paid (4) -
Net cash inflow from operating activities 1 253 1 430
Cash flow from investing activities
Acquisition of additional shares in an equity-accounted investment - (42)
Investment in Zimbabwe government bonds (310) -
Investment in Zimbabwe Stock Market (14) -
Investment in intangible assets (24) (6)
Investment in property, plant and equipment
(adjusted for capital expenditure accruals) (773) (921)
Proceeds from disposal of property, plant and equipment 9 29
Other investing activities 12 28
Net cash outflow from investing activities (1 100) (912)
Cash flow from financing activities(a)
Net borrowings repaid before repayment of the notes 18 (290) (597)
Proceeds from the sale of shares held by consolidated BBBEE entity - 36
Purchase of PPC Ltd shares in terms of the FSP share incentive sche 15 (41) (16)
Repayment of notes (20) -
Net cash outflow from financing activities (351) (577)
Net movement in cash and cash equivalents (198) (59)
Cash and cash equivalents at the beginning of the year 836 990
Exchange rate movements on opening cash and cash equivalents (186) (95)
Cash and cash equivalents at the end of the year 452 836
(a) In 2019, the non-cash changes on borrowings amounted to R621 million arising from unfavourable
unrealised foreign exchange differences. Refer note 24 for the relevant currency conversions.
REVIEWED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Other reserves
Foreign Equity
currency Movement in Equity attributable to Non-
Stated translation financial compensation Retained shareholders controlling Total
capital reserve asset reserve profit of PPC Ltd interests equity
Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 31 March 2017
(audited) 3 919 891 14 559 2 668 8 051 334 8 385
IFRS 2 charges - - - 72 - 72 - 72
Sale of shares, treated
as treasury shares, by
consolidated BBBEE entity 64 - - - - 64 - 64
Shares purchased in terms of
FSP incentive scheme treated
as treasury shares (72) - - - - (72) - (72)
Total comprehensive
(loss)/income - (496) - - 149 (347) (214) (561)
Vesting of shares held
by certain BBBEE 1 entities 73 - - (73) - - - -
Balance at 31 March 2018
(audited) 3 984 395 14 558 2 817 7 768 120 7 888
Adjustment as a result of
new standards adopted during
the year (note 1) - - - - (17) (17) - (17)
Balance at 1 April 2018 3 984 395 14 558 2 800 7 751 120 7 871
Dividends declared - - - - (4) (4) - (4)
IFRS 2 charges - - - 72 - 72 - 72
Shares distributed to
BBBEE 1 beneficiaries - - - (6) - (6) - (6)
Shares purchased in terms
of FSP incentive scheme
treated as treasury shares (41) - - - - (41) - (41)
Total comprehensive
income/(loss) - 1 218 - - 235 1 453 (5) 1 448
Balance at 31 March 2019
(reviewed) 3 943 1 613 14 624 3 031 9 225 115 9 340
SEGMENTAL INFORMATION
for the year ended 31 March 2019
The group discloses its operating segments according to the business units which are reviewed by the group
executive committee who are also the chief operating decision-makers for the group. The group executive committee
comprises executive directors. The operating segments are initially identified based on the products produced and
sold and then per geographical location. The key operating segments are southern Africa cement,
Rest of Africa cement, lime, aggregates and readymix and group shared services.
Cement
Consolidated Southern Africa(a) Rest of Africa(b)
31 March 31 March 31 March 31 March 31 March 31 March
2019 2018 2019 2018 2019 2018
Reviewed Audited Reviewed Audited Reviewed Audited
Rm Rm Rm Rm Rm Rm
Revenue
Gross revenue 10 683 10 524 5 643 5 704 2 826 2 762
Intersegment revenue(d) (274) (253) (212) (205) -
Total revenue(e) 10 409 10 271 5 431 5 499 2 826 2 762
Operating profit before item listed below 927 1 004 570 827 331 389
Empowerment transactions
IFRS 2 charges 33 48 - - 2 2
Operating profit 894 956 570 827 329 387
Fair value and foreign exchange (loss)/gains (9) 143 10 (19) (6) (69)
Finance costs 681 675 222 265 447 338
Investment income 95 52 61 42 64 18
Profit before equity-accounted earnings 299 476 419 585 (60) (2)
Earnings from equity-accounted investments (67) (60) - - (67) (61)
Impairments (82) (174) (82) 11 - (168)
Profit before taxation 150 242 337 596 (127) (231)
Taxation 6 205 (122) 202 7 34
Profit/(loss) for the year 144 37 459 394 (134) (265)
Attributable to:
Shareholders of PPC Ltd 235 149 459 394 (43) (153)
Non-controlling interests (91) (112) - - (91) (112)
144 37 459 394 (134) (265)
Basic earnings per share (cents) 16 10 30 26 (3) (10)
Depreciation and amortisation 1 019 876 387 373 479 347
EBITDA(f) 1 946 1 880 957 1 200 810 736
EBITDA margin (%) 18,7 18,3 17,6 21,8 28,7 26,7
Assets
Non-current assets 14 776 12 910 4 405 4 272 8 427 6 817
Non-current assets held for sale 92 34 - - 92 34
Current assets 3 071 3 262 1 371 1 235 1 109 1 375
Total assets 17 939 16 206 5 776 5 507 9 628 8 226
Investments in property, plant and equipment 817 801 572 460 143 235
Liabilities
Non-current liabilities 5 739 5 909 2 137 2 181 6 032 5 608
Current liabilities 2 860 2 409 1 069 796 1 330 1 186
Total liabilities 8 599 8 318 3 206 2 977 7 362 6 794
Capital commitments (refer note 21) 321 596 262 482 17 49
(a) Southern Africa comprises South Africa and Botswana.
(b) Rest of Africa comprises Zimbabwe, Rwanda, DRC, Mozambique and cross-border sales from Southern Africa.
(c) Group services and other comprises group shared services, BEE and group eliminations.
(d) All sales are concluded at an arm's length. Segments are disclosed net of intersegment revenue.
(e) Revenue from external customers generated by the group's material foreign operations is as follows:
Botswana R516 million (2018: R438 million)
DRC R494 million (2018: R144 million)
Rwanda R885 million (2018: R804 million)
Zimbabwe R1 447 million (2018: R1 813 million).
(f) EBITDA is defined as operating profit before empowerment transactions IFRS 2 charges, depreciation, amortisation,
financial charges and taxation.
Materials business
Lime Aggregates and readymix Group services and other(c)
31 March 31 March 31 March 31 March 31 March 31 March
2019 2018 2019 2018 2019 2018
Reviewed Audited Reviewed Audited Reviewed Audited
Rm Rm Rm Rm Rm Rm
Revenue
Gross revenue 896 849 1 318 1 209 - -
Intersegment revenue(d) (62) (48) - - - -
Total revenue(e) 834 801 1 318 1 209 - -
Operating profit before item listed below 86 95 (63) (22) 3 (285)
Empowerment transactions
IFRS 2 charges - - - - 31 46
Operating profit 86 95 (63) (22) (28) (331)
Fair value and foreign exchange (loss)/gains - 1 3 (1) (16) 231
Finance costs 38 24 27 20 (53) 28
Investment income 22 18 17 15 (69) (41)
Profit before equity-accounted earnings 70 90 (70) (28) (60) (169)
Earnings from equity-accounted investments - - - - - 1
Impairments - - - (17) - -
Profit before taxation 70 90 (70) (45) (60) (168)
Taxation 17 24 (9) 18 113 (73)
Profit/(loss) for the year 53 66 (61) (63) (173) (95)
Attributable to:
Shareholders of PPC Ltd 53 66 (61) (63) (173) (95)
Non-controlling interests - - - - - -
53 66 (61) (63) (141) (95)
Basic earnings per share (cents) 4 4 (4) (4) (11) (6)
Depreciation and amortisation 37 40 80 79 36 37
EBITDA(f) 123 135 17 57 39 (248)
EBITDA margin (%) 14,8 16,8 1,3 4,7
Assets
Non-current assets 309 309 629 672 1 006 840
Non-current assets held for sale - - - - - -
Current assets 245 214 324 327 (22) 111
Total assets 554 523 953 999 1 028 951
Investments in property, plant and equipment 46 41 37 48 19 17
Liabilities
Non-current liabilities 11 32 345 264 (2 786) (2 176)
Current liabilities 129 83 164 170 168 174
Total liabilities 140 115 509 434 (2 618) (2 002)
Capital commitments (refer note 21) 1 2 3 38 38 25
(a) Southern Africa comprises South Africa and Botswana.
(b) Rest of Africa comprises Zimbabwe, Rwanda, DRC, Mozambique and cross-border sales from Southern Africa.
(c) Group services and other comprises group shared services, BEE and group eliminations.
(d) All sales are concluded at an arm's length. Segments are disclosed net of intersegment revenue.
(e) Revenue from external customers generated by the group's material foreign operations is as follows:
Botswana R516 million (2018: R438 million)
DRC R494 million (2018: R144 million)
Rwanda R885 million (2018: R804 million)
Zimbabwe R1 447 million (2018: R1 813 million).
(f) EBITDA is defined as operating profit before empowerment transactions IFRS 2 charges, depreciation, amortisation,
financial charges and taxation.
NOTES TO THE REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 March 2019
1. BASIS OF PREPARATION
The reviewed condensed consolidated financial statements are prepared in accordance with the provisions
of the JSE Limited Listings Requirements for provisional reports, and the Companies Act of South Africa.
The Listings Requirements require the provisional reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS)
and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements
as issued by Financial Reporting Standards Council, and contain at a minimum the requirements of IAS 34: Interim
Financial Reporting. The accounting policies applied in the preparation of the reviewed condensed consolidated
financial statements were derived in terms of IFRS. These reviewed condensed consolidated financial statements
do not include all the information required for the full consolidated annual financial statements.
The accounting policies and methods of computation used are consistent with those used in the preparation
of the consolidated annual financial statements for the year ended 31 March 2018, except where the group
has adopted new or revised accounting standards, amendments and interpretations, including the consequential
amendment of those standards to other standards, which became effective during the period under review.
New standards, amendments to standards and interpretations adopted in the current financial period
IFRS 9 Financial Instruments
The standard became effective in the current reporting year requiring the group to make adjustments to
retained earnings as a result of adopting the standard.
The impact of the adoption of this standard and the new accounting policy is disclosed below.
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for
the annual periods beginning on or after 1 January 2018, bringing together all three aspects of the
accounting for financial instruments: classification and measurement, impairment and hedge accounting.
The Group has applied IFRS 9 modified retrospective approach, with the initial application date of
1 April 2018 with no adjustments to comparative information for the period beginning 1 April 2017.
The effect of adopting IFRS 9 resulted in a R17 million net decrease in opening equity balances.
The change did not have a material impact on the group's operating, investing and financing cash flows.
(a) Classification and measurement
Under IFRS 9, debt instruments are subsequently measured at fair value through profit or loss, amortised
cost, or fair value through other comprehensive income. The classification is based on two criteria: the
group's business model for managing the assets; and whether the instruments' contractual cash flows
represent "solely payments of principal and interest" on the principal amount outstanding.
The assessment of the group's business model was made as of the date of initial application,
1 April 2018, and then applied retrospectively to those financial assets that were not derecognised
before 1 April 2018. The assessment of whether contractual cash flows on debt instruments which solely
comprised principal and interest was made based on the facts and circumstances as at the initial
recognition of the assets. Investment in government bonds, trade receivables and other loan receivables
previously classified as loans and receivables are held to collect contractual cash flows and give rise
to cash flows representing solely payments of principal and interest. These are now classified and
measured as debt instruments at amortised cost.
There are no changes in classification and measurement for the group's financial liabilities.
(b) Impairment
The adoption of IFRS 9 has fundamentally changed the group's accounting for impairment losses for
financial assets by replacing IAS 39's incurred loss approach with a forward looking expected credit loss
(ECL) approach. IFRS 9 requires the group to recognise an allowance for ECLs for all debt instruments not
held at fair value through profit or loss and contract assets.
Upon the adoption of IFRS 9, on 1 April 2018, the group recognised additional impairment of R23 million,
predominately relating to the ECL on trade receivables. This resulted in a net decrease in equity of
R17 million (post-tax) as at 1 April 2018.
Refer note 11, 13 and 14 for ECL assessment performed as at 31 March 2019.
IFRS 15 Revenue from Contracts with Customers
On 1 April 2018 the group implemented IFRS 15 Revenue from Contracts with Customers which replaced
IAS 18 Revenue. Revenue comprises the consideration received or receivable on contracts entered into with
customers in the ordinary course of the entity's activities. Revenue is shown net of taxes, cash discounts,
settlement discounts and rebates given to customers. Revenue is recognised as the amount of the transaction
prices allocated to each performance obligation and this is determined by the amount that depicts the
consideration to which the entity expects to be entitled in exchange for transferring the goods and
services promised to the customer.
Revenue is recognised on the sale of goods when control is transferred to the customer. Revenue from
providing services is recognised when the service has been performed.
The group aligned its measurement and recognition principles of revenue with that of IFRS 15 upon adoption.
There is no material impact on the measurement and recognition of revenue.
New standards, amendments to standards and interpretations to be adopted in the next financial period
IFRS16 Leases is effective for years commencing on or after 1 January 2019. The standard will be adopted
by the PPC group for the financial reporting period commencing 1 April 2019. The group has completed an
initial assessment of the potential impact of the adoption of IFRS 16 on its consolidated financial
statements.
IFRS 16 requires a lessee to recognise a right-of-use asset and lease obligations for all leases except
for short-term leases, or leases of low-value assets which the leases may be treated similarly to
operating leases under the current standard IAS 17 if the exceptions are applied. A lessee measures
its lease obligation at the present value of future lease payments, and recognises a right-of-use asset
initially measured at the same amount as the lease obligation including costs directly related to entering
into the lease. Right-of-use assets are subsequently treated in a similar way to other assets such as
property, plant and equipment or intangible assets dependent on the nature of the underlying item.
PPC group has various rental agreements in place. In accordance with the above, right-of-use assets and
lease obligations (liabilities) associated to these rentals would be recognised in the statement of
financial position.
The group currently recognises the rental expense of the properties on a straight-line basis over the
lease term. Upon the adoption of IFRS 16, the group's operating lease charge in profit or loss will be
replaced by a depreciation charge in respect of the corresponding right-of-use assets, as well as an
interest charge relating to the respective lease liabilities, which may in aggregate be different to
the current operating lease charge.
PPC group will account for all leases under a single on-balance sheet model in a similar manner to
finance leases under IAS 17, with the exception of the short-term and low-value leases. The group has
prepared an impact assessment on each subsidiary.
Based on the assessment performed, the estimated impact of IFRS 16 on the group's 2020 financial year-end
will be the following:
- The group will recognise a potential right-of-use asset of R92 million and a corresponding lease liability
of R92 million
- The group will be required to separately recognise the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. PPC group will potentially recognise depreciation of
R22 million and an interest expense of R10 million. The depreciation of the asset is based on the lower
of the remaining lease period or the useful life of the asset
Management continues to assess the implications of the remaining insignificant individual leases in which
the group is the lessee, which may cause the final impact to differ from the estimates provided above.
Change in accounting estimate
During the year, the group reassessed the useful lives of its property, plant and equipment as required
by IAS 16 Property, Plant and Equipment. The useful lives of the assets were adjusted to reflect more
appropriately the pattern of the consumption of the future economic benefits embodied in the assets
concerned. In accordance with IAS 16 Property, Plant and Equipment, this reassessment represents a change
in an accounting estimate and is therefore applied prospectively in terms of IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors. The impact of the change in applying the adjusted useful
lives for the year ended 31 March 2019 is a decrease in the depreciation expense of R17 million.
All monetary information and figures presented in these financial statements are stated in rand, unless
otherwise indicated.
Going concern
At year-end, current assets of R3 071 million (2018: R3[ 262 million) exceeded current liabilities of
R2 860 million (2018: R2 409 million) by R211 million (2018: R853 million).
PPC's cash flows are under pressure due to the economic environment PPC operates in as well as pricing
pressures in the South African market.
Group debt position has increased since the beginning of the financial year mainly due to the weaker
rand/dollar closing exchange rate which was R14,42 (March 2018: R11,82).
To mitigate the liquidity risk, management has adopted the following risk management plan:
- Refinancing maturing debt and increasing loan facilities from R2,4 billion to R3,1 billion. The loan
facility of R700 million has been approved by the lenders. At the end of this report the group had
committed borrowing facilities of R2,4 billion and 70% (2018: 72%) of these facilities were
utilised. In total, R731 million of the committed borrowing facilities were unutilised at the
reporting date. These numbers exclude project funding in Rwanda, DRC and Zimbabwe
- The R3 billion facility, as well as the cost saving measures that the group is currently exploring
provides additional headroom
- Negotiation of the DRC debt to reschedule the capital repayments for a further two years are in
progress with the lenders
- The covenant ratio target for group debt to EBITDA has been favourably amended and confirmed by a
revised agreement between PPC and the lenders
- Improved debtors collection measures have been implemented in order to increase cash inflows
- Dividends due from PPC Zimbabwe and the outstanding rights offer proceeds have been invested in
government bonds
Furthermore, despite the deteriorating economic environment and the challenges being faced with processing
of foreign payments by the banks in Zimbabwe. Directors believe that PPC Zimbabwe has the ability to continue
in operation as a going concern for the foreseeable future. The change in the Zimbabwe functional currency
resulted in the reduction of EBITDA by R108 million. PPC Zimbabwe has set out action plans to help ensure
that operations are not interrupted due to difficulties in remitting payments to foreign suppliers.
Through the action plans, PPC Zimbabwe is exploring various mitigation methods such as increasing export
sales and obtaining a trade financing mechanism facility.
In addition to the group's current trading position and forecasts and facilities in place, the directors believe
that the group will be able to comply with its financial covenants and be able to meet its obligations as they
fall due, and accordingly have formed a judgement that it is appropriate to prepare the reviewed condensed
financial statements on a going concern basis.
Change of the Zimbabwe functional currency
Due to the deteriorating United States dollar (US$) liquidity issues in Zimbabwe the government created the
real time gross settlement (RTGS) as an alternative method of payment which was fixed on a 1:1 parity policy.
A rising black-market currency trade has resulted in the value of RTGS quickly deteriorating. On 1 October 2018
the Reserve Bank of Zimbabwe announced that banks must separate foreign accounts from RTGS accounts with
effect from 15 October 2018, thus officially recognising that actual foreign currency is different to RTGS.
The result of the change was a reassessment of the functional currency of the entity. In determining the
functional currency the entity assessed the currencies that influenced sales and expenses which revealed a
mix between RTGS and US$. Management then concluded that the functional currency of PPC Zimbabwe is the RTGS$.
On 20 February 2019 the Reserve Bank of Zimbabwe announced that the RTGS would be recognised as an official
currency and that an interbank foreign exchange market would be established to formalise trading in RTGS
balances with other currencies.
The effect of the change meant that the US$ statement of financial position, as at 30 September 2018 needed
to be fair valued to RTGS$. Further analysis on the currency movement between the US$/RTGS$ rate was
performed at 31 March 2019, and the exchange differences were recorded in profit or loss in accordance
with IAS 21.
The application of the change in functional currency has been applied prospectively in our financial results
for the 2019 reporting period. For inclusion in the condensed consolidated income statement of the group,
results in respect of Zimbabwe have been translated at the average US$ exchange rate for the period up to
30 September 2018 and at the estimated RTGS$ rate for the remaining six months of the financial year.
For inclusion in the consolidated statement of financial position, results have been translated at the
estimated closing RTGS$ rate of 3,01 to US$ and an average rate of 3,5. On 1 October 2018, an opening
RTGS$ rate of 3,5 to the US$ was applied. The inputs considered in this estimate include the recent
announcement to increase the fuel price for those settling in RTGS$, global relative fuel prices and
the official inflation rate.
Financial impact of the change in functional currency (FC) on the group's key performance indicators
FY2019
Before FY2019 FY2019 FY2018
FC change* Impact Reported Reported
EBITDA 2 054 (108) 1 946 1 880
Profit attributable to shareholders of PPC Ltd 287 (52) 235 149
EPS 19 (3) 16 10
HEPS 23 (3) 20 15
* Assumes no change in functional currency and 1:1 conversion between RTGS$ and US$, below are the
sensitivities performed on the RTGS$ rate.
RTGS$3,5 to RTGS$6 RTGS$10
US$ - Reported to US$ to US$
Group impact
EBITDA 1 946 1 867 1 844
Profit attributable to shareholders of PPC Ltd 235 163 144
EPS 16 11 10
HEPS 20 15 14
These reviewed condensed consolidated financial statements have been prepared under the supervision of
MMT Ramano CA(SA), chief financial officer, and were approved by the board of directors on Monday,
24 June 2019. The directors take full responsibility for the preparation of these reviewed condensed
consolidated financial statements.
2. REVENUE
Adoption of IFRS 15 Revenue from Contracts with Customers
IFRS 15 replaces IAS 11 Construction Contracts and IAS 18 Revenue. The standard requires entities to
identify the separate performance obligations and allocate the transaction price to the performance
obligations in the contract by reference to their relative stand-alone selling prices. The group's primary
revenue is derived from the sale of cementitious goods and as a result the group also earns incidental
transport revenue from delivering these goods to customers. The incidental transport revenue has always
been included as part of revenue earned, however, due to the adoption of IFRS 15, the aforementioned
streams of revenue are two separate performance obligations, which are always met at the same time.
The group has the following revenue streams, which are all recognised at a point in time:
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
Disaggregation of revenue
Revenue from the sale of cementitious goods(a) 9 071 9 095
Revenue from transportation services 1 338 1 176
Total revenue 10 409 10 271
Major goods and services per primary geographical markets
Cementitious goods 9 071 9 095
Southern Africa 6 376 6 462
Rest of Africa 2 695 2 633
Transport revenue 1 338 1 176
Southern Africa 1 207 1 047
Rest of Africa 131 129
(a) Cementitious goods include the sale of cement, readymix, limestone, clinker, ash and aggregates.
Timing of revenue recognition
Revenue from the sale of cementitious goods and transport is recognised at the same time, upon delivery,
as management considers it as the point the control of the goods is transferred to the customers and the
delivery obligation is fulfilled. Payment of the transaction price is also payable immediately at
this point.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
3. FAIR VALUE AND FOREIGN EXCHANGE movements
3.1 Fair value and foreign exchange gains
Movements in the fair value and foreign exchange gains are recognised in
the income statement and comprise the following:
Gain on remeasurement of put option liability (refer note 22) - 238
(Loss)/gain on unlisted collective investments (1) 5
ECL on Zimbabwe government bonds (40) -
Gain/(loss) on translation of foreign currency denominated monetary items 32 (100)
(9) 143
The fair value adjustment on the Zimbabwe government bonds was determined by applying an ECL of
12,7% against the total asset recognised which resulted in an ECL of R40 million.
Included in the gain/(loss) on translation of foreign currency denominated monetary items, is a gain of
R8 million arising from the remeasurement of the Zimbabwe assets and liabilities following the change in
functional currency, and a loss of R13 million (2018: R80 million) comprising the remeasurement following
the devaluations of the Congolese franc against the US dollar and a fair value adjustment relating to the
discounting of the non-current VAT receivable in the DRC. Furthermore, a remeasurement loss of R16 million
(2018: R12 million) has been recorded against the US dollar denominated project funding in Rwanda. Also
included in the loss on translation of foreign currency monetary items is losses and gains made on an
open forward exchange contract held for capital purchases and working capital requirements.
Details on foreign exchange rates can be found in note 24.
3.2 Translation of foreign operations
Movements in the translation of foreign operations are recognised in the
statement of comprehensive income. The group's foreign currency translation
reserve arises from the following foreign subsidiaries:
PPC Zimbabwe* 886 (219)
CIMERWA Limitada 144 (168)
PPC DRC Barnet 269 (213)
PPC Botswana 4 -
PPC Mozambique 1 2
1 304 (598)
* Included in PPC Zimbabwe is a gain of R488 million arising from the change in the functional currency.
The gain recorded in the current year is due to the weakening of the rand against the functional currencies
of the group's subsidiaries (refer note 24).
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
4. FINANCE COSTS
Bank and other short-term borrowings 32 305
Notes 10 8
Long-term loans and project funding 569 303
611 616
Capitalised to plant and equipment - (23)
Finance costs before time value of money adjustments 611 593
Interest on penalties 3 -
Time value of money adjustments on rehabilitation and
decommissioning provisions and put option liability 67 82
681 675
Southern Africa 234 337
Rest of Africa 447 338
The total finance costs excluding time value of money adjustments, relate to borrowings held at amortised
cost. For details of borrowings refer note 18.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
5. IMPAIRMENTS
Impairment of property, plant, equipment and intangible assets (82) (182)
Impairment of the VAT receivable in the DRC - (3)
Profit on disposal of property, plant and equipment - 11
Gross impairments (82) (174)
Taxation impact 23 56
Net impairments (59) (118)
Impairment of property, plant, equipment and intangible assets
IAS 36 states that an entity shall assess at the end of each reporting period whether there is any indication
that an asset may be impaired. When there are indications that an asset is impaired, a recoverable amount is
calculated and compared to the carrying value. During the year, an impairment of R82 million, relating to
property, plant and equipment was recognised (refer note 8).
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
6. TAXATION
The taxation charge comprises:
Current taxation 3 332
Current year 93 347
Prior years (90) (15)
Deferred taxation (30) (127)
Current year (84) (119)
Prior years 12 (8)
Change in taxation rate 42 -
In specie dividend 1 -
Withholding taxation 32 -
6 205
Year ended Year ended
2019 2018
Reviewed Audited
% %
Taxation rate reconciliation
A reconciliation of the standard South African
normal taxation rate is shown below:
Profit before taxation (excluding loss from equity-accounted investments) 3 68
Prior years' taxation impact 36 (7)
Profit before taxation, including prior years' taxation adjustments 39 61
Effective rate of taxation
Income taxation effect of: (11) (33)
Expenditure not deductible in terms of legislation (15) (14)
Expenditure attributable to non-taxable income (5) (16)
Empowerment transactions and IFRS 2 charges not taxation deductible (4) (3)
Fair value adjustments on financial instruments not subject to taxation (4) 22
Impact of income tax incentives 58 -
DRC investment code ANAPI 6 -
Prior year adjustment for forfeitable share plan movement (9) -
Foreign taxation rate differential 7 16
Deferred taxation not raised (6) (23)
Change in taxation rate (19) -
ZIMRA interest reversal 5 -
Transfer pricing adjustment (10) (12)
Withholding taxation (15) (3)
South African normal taxation rate 28 28
Year ended Year ended
2019 2018
Reviewed Audited
Cents Cents
7. EARNINGS AND HEADLINE EARNINGS
Earnings per share
Basic 16 10
Diluted 16 10
Headline earnings per share
Basic 20 15
Diluted 20 15
Determination of headline earnings per share
Earnings per share 16 10
Adjusted for items below, net of taxation:
Impairment of property, plant, equipment and intangible assets 3 6
Loss/(profit) on sale of property, plant and equipment 1 (1)
Headline earnings per share 20 15
Headline earnings Rm Rm
Net profit for the year 144 37
Impairment of property, plant, equipment and intangible assets 82 182
Taxation on impairment of property, plant, equipment and intangible assets (23) (58)
Loss/(profit) on sale of property, plant and equipment 14 (11)
Taxation on profit/(loss) on sale of property, plant and equipment (4) 2
Headline earnings 213 152
Attributable to:
Shareholders of PPC Ltd 304 231
Non-controlling interests (91) (79)
Cash earnings per share (cents) 83 95
Cash earnings per share is calculated using cash available from operations
divided by the total weighted average number of shares in issue for the period.
Cash conversion ratio 1,0 1,2
Cash conversion ratio is calculated using cash generated from operations divided by EBITDA.
The cash earnings per share (cents) and the cash conversion ratio are non IFRS measures as described in the
accounting policies of the company, which will be included in the annual financial statements for the year
ended 31 March 2019.
The difference between the number of shares in the determination of earnings and diluted earnings per share
relates to shares held under the forfeitable share incentive scheme that have not vested.
For the weighted average number of shares used in the calculation, refer note 15.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
8. PROPERTY, PLANT AND EQUIPMENT
Net carrying value at the beginning of the period 11 393 12 531
Additions 793 795
Depreciation (952) (798)
Disposals (23) (18)
Other movements (127) (24)
Impairments (refer note 5) (82) (165)
Translation differences 1 585 (928)
Net carrying value at the end of the year 12 587 11 393
Comprising:
Freehold and leasehold land, buildings and mineral right 2 233 1 567
Decommissioning assets 68 133
Plant, vehicles, furniture and equipment 10 286 9 693
12 587 11 393
Property, plant and equipment pledged as security:
DRC 3 475 3 111
Rwanda 1 492 1 321
Zimbabwe 2 372 2 028
7 339 6 460
For details on capital commitments, refer note 21.
Cost capitalisation
Significant judgement is required in identifying costs to be capitalised to a project during the construction,
testing and ramp-up phases. Judgement is further required to identify indirect costs that could be capitalised.
Revenue and the related cost of sales generated during the pre-commissioning phase are capitalised to the plant.
The cost of an item of property, plant and equipment is recognised as an asset if it meets the following
requirements:
- It is probable that future economic benefits associated with the item will flow to the entity; and
- The cost of the item can be measured reliably
The cost of an item of PPE comprises:
- Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discount
and rebates
- Any costs directly attributable to bringing the asset to the location and condition necessary for it to
be capable of operating in the manner intended by management
- The initial estimate of the costs of dismantling and removing the item and restoring the site on which it
is located, the obligation for which an entity incurs either when the item is acquired or as a consequence
of having used the item during a particular period for purposes other than to produce inventories during
that year (IAS 16.16)
During the current year, the Slurry Kiln 9 (SK9) was commissioned. The total costs capitalised into the
project amounted to R1,4 billion. In accordance with IAS 16, profits of R18 million earned during the
testing phase, comprising revenue (R74 million) less cost of sales (R56 million), has been written off
against the capitalised cost of the project.
Impairment assessment - PPC Cement SA
IAS 36 provides that if there is an indication that an asset may be impaired, the recoverable amount of the
asset (or, if appropriate, the cash-generating unit (CGU)) is determined. The recoverable amount of the CGU
was determined to exceed the carrying amount. As the cement industry is a cyclical environment, manufacturers
will go through troughs where some of the assets (kilns) will be idle when demand is down, however, maintenance
on these assets will continue to ensure that when the market conditions improve they are in a position to take
advantage. As a result it is quite key in this industry to review individual assets that form part of a CGU
separately.
As at the end of the March 2019 financial year, a few of the PPC cement kilns were not in use due to market
constraints. The cement industry is, however, a cyclical environment and the demand can pick up at any time
when the market conditions become favourable.
PPC Cement SA identified the assets that are no longer in use but still have a carrying amount. In applying
the requirements of IAS 36, PPC Cement SA decided to impair these assets. They will be derecognised from the
fixed assets registers once a decision to scrap the assets has been taken. The total impairment recognised on
these assets is R82 million and is reflected under the Cement southern Africa segment in the segmental
analysis.
Impairment assessment - Zimbabwe
As a result of the current economic environment, liquidity challenges and the change in functional currency
in Zimbabwe, an impairment assessment was undertaken. In spite of the economic challenges, the financial
performance of the business has been above our internal forecasts and prior year before the impact of the
change in functional currency. The inclusion of the Harare mill has improved cash flows.
In performing the impairment review, a value-in-use methodology was applied. Cash flow projections were
based on financial forecasts approved by management applying a 19% (2018: 16%) US dollar discount rate.
The cash flow projections during the forecast period are based on similar pricing and margins to those
currently being achieved by the business and takes into consideration the future trends within the
industry, geographical location and expected growth in neighbouring countries. The values used reflect
past experiences while the economic growth rates of approximately 3% per annum (2018: 2% per annum) are
management's best estimates that have been prepared using leading financial institutions' forecasts.
Following the impairment assessment review, the recoverable amount of PPC Zimbabwe was calculated to
be higher than its carrying amount resulting in no impairment. There are no indications that any
reasonable possible change in the key assumptions on which the recoverable amount has been calculated
would cause the carrying amount to exceed the recoverable amount of this CGU.
Impairment assessment - DRC
PPC, in partnership with the Barnet group and International Finance Corporation (IFC), completed the
construction of a 1,2 million tonnes per annum integrated cement plant for approximately US$300 million in
the DRC, near Kimpese in Kongo Central province in western DRC, 230km south-west of the capital Kinshasa.
Following impairment indicators being identified, management performed an impairment assessment. IAS 36
Impairment of Assets provides two options for assessing recoverable amounts and states that the
recoverable amount is the higher of the fair value less cost to sell or value in use.
In performing the impairment review, a value-in-use methodology was applied. Cash flow projections
were based on financial forecasts approved by management applying a 17% (2018: 17%) US dollar discount
rate. The cash flow projections during the forecast period are based on similar pricing and margins to
those currently being achieved by the business and takes into consideration the future trends within
the industry, geographical location and expected growth in neighbouring countries. The values used
reflect current industry performance and experiences while the economic growth rates of approximately
5% per annum (2018: 4% per annum) are management's best estimates that have been prepared using leading
financial institutions' forecasts.
The DRC general elections were successfully held in December 2018, thereby improving the political
stability, market confidence and subsequently the economic prospects.
Cement consumption grew by 43% to 539 000 tonnes from 378 000 tonnes. The country currently has a
cement import ban in place and no exports have been recorded by the BCC since mid-2015. There is also
a new 0,6 million tonne plant being constructed by Diamond cement in the DRC (Brazzaville). The IFC
suggests that the country will reach a cement supply deficit by 2022.
Sales volumes have been softer than expected due to a number of external factors (economic, political,
market activities of competitors some of whom are new entrants in the market). However, PPC Barnet DRC
has in the past few months slowly improved the sales volume and subsequently revenue.
Real GDP growth was an estimated 4,0% in 2018, up from 3,7% in 2017, due to higher commodity prices
and greater mining production. The primary sector continued to be the key driver of growth, sustained
by a dynamic extraction sector.
Following the impairment assessment review, no further impairment was recognised as the calculated
recoverable amount approximates the carrying amount.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
9. GOODWILL
Net carrying value at the beginning of the year 230 237
Translation differences 6 (7)
Net carrying value at the end of the year 236 230
Goodwill, net of impairments, is allocated to the following CGUs:
CIMERWA Limitada (Rest of Africa cement segment) 31 25
Cement SA (Pty) Limited (Southern Africa cement segment) 78 78
Readymix (Aggregates and readymix segment) 127 127
236 230
Refer to note 22 for fair value hierarchy on goodwill.
CIMERWA Limitada (CIMERWA)
The recoverable amount for this CGU of R2 557 million (2018: R1 094 million) was determined based on a
value-in-use calculation, using cash flow projections based on financial forecasts approved by management
and covering an initial seven-year period and a post-forecast period of 13 years, bringing the total period
of the cash flows to 20 years from the report date. The company's budgeting cycle time horizon is seven years
and management believes this should provide a more accurate base for the value-in-use calculation. A Rwandan
franc discount rate of 17% (2018: 18%) was used in the valuation.
Cash flow projections during the forecast period of seven years were based on improved margins and profitability,
following the commissioning of the new plant in September 2015, taking cognisance of an appropriate ramp-up period.
Selling prices and cost of sales were forecast to increase at applicable inflation rates varying between 5,1% and
5,4% (2018: 5% and 6%), impacted by anticipated competitor activity in the earlier phase of the planning horizon.
The cash flows post the forecast period had been extrapolated using specific growth rates of 7,3% (2018: 6,7%) per
annum which is in line with the real inflation rate in Rwanda. The forecast period was limited to the life of mine,
currently estimated at 20 years.
The forecast takes into consideration the future trends within the industry, geographical location and expected
growth in neighbouring countries. The values used reflect past experiences while the economic growth rates are
management's best estimates that have been prepared using leading financial institutions' forecasts.
In both the current and prior reporting periods, the recoverable amount was deemed to be higher than the current
carrying value, resulting in no impairment being charged against profit and loss. CIMERWA is included under
Cement Rest of Africa in the segmental analysis.
There are no indications that any reasonable possible change in the key assumptions on which the recoverable amount
has been calculated would cause the carrying amount to exceed the recoverable amount of this CGU.
PPC Cement SA (Pty) Ltd
During the year PPC Cement SA (Pty) Ltd and Safika were integrated into one entity PPC Cement SA (Pty) Ltd. Therefore,
for purposes of impairment testing, the goodwill is allocated to the integrated Cement SA entity.
The recoverable amount of R7 495 million (2018: R11 114 million) for the combined Cement SA CGUs was determined based
on value-in-use calculations, using cash flow projections based on financial forecasts approved by management and
covering an initial seven-year period. The company's budgeting cycle time horizon is seven years and management
believes this should provide a more accurate base for the value-in-use calculation. A discount rate of 13%
(2018: 13%) and terminal growth rate of 5,6% (2018: 5,5%) have been used in the valuation.
Cash flow projections during the forecast period are based on similar pricing and margins to those currently being
achieved by the businesses. Selling prices and cost of sales are forecast to increase at rates linked to local
inflation forecasts varying between 6% and 10% (2018: 6% and 10%). The values used reflect past experiences
while the economic growth rates of approximately 2% (2018: 2%) per annum are management's best estimates that
have been prepared using leading financial institutions' forecasts.
In both the current and prior reporting periods, the recoverable amount was deemed higher than the current carrying
value, resulting in no impairment being charged against profit and loss. The Cement SA CGU is included under
Cement Southern Africa in the segmental analysis.
There are no indications that any reasonable possible change in the key assumptions on which the recoverable
amount has been calculated would cause the carrying amount to exceed the recoverable amount of this CGU.
Readymix
During the 2017 reporting period the PPC group undertook to re-organise the manner in which it discloses its
operating segments according to the business units which are reviewed by the group executive committee. One
of these key segments is aggregates and readymix. Included in the readymix segment is the Pronto, 3Q Mahuma
and Ulula Ash.
Applying judgement, management was of the opinion that the natural synergy between the operations of Pronto,
3Q Mahuma and Ulula Ash, will result in a greater total competitive advantage for the group and should
therefore be considered as one CGU. Assessed as its own group of assets, the readymix business operation can
be seen to generate revenue and incur expenses which are independent of other groups of assets within the
PPC group. This can also be substantiated further by the manner in which the group discloses the performance
of its different business units in its segmental information.
Therefore, for purposes of impairment testing, the goodwill is allocated to the combined readymix CGU.
They represent the lowest level within the entity at which goodwill is monitored for internal
management purposes.
The recoverable amount of R816 million (2018: R453 million) for the CGU was determined based on value-in-use
calculations, using cash flow projections based on financial forecasts approved by management and covering an
initial seven-year period, which is in line with the company's budgeting cycle time horizon as management
believes this should provide a more accurate base for the value-in-use calculation. A discount rate of 14%
(2018: 16%) and terminal growth rate of 2% (2018: 5,5%) have been used in the valuation.
Cash flow projections during the forecast period are based on similar pricing and margins to those currently
being achieved by the business, noting that selling prices achieved during the year are below last year.
Selling prices and cost of sales are forecast to increase at rates linked to local inflation forecasts and
vary between 6% and 10% (2018: 5% and 9%). The values used reflect past experiences while the economic
growth rates of approximately 2% (2018: 2%) per annum are management's best estimates that have been
prepared using leading financial institutions' forecasts.
Following the goodwill impairment assessment review, the recoverable amount of readymix was calculated to
be higher than its carrying amount resulting in no impairment to goodwill.
It is estimated that a decrease in net cash flows by 45% (2018: 4%) would result in the carrying amount
exceeding the recoverable amount.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
10. OTHER INTANGIBLE ASSETS
Balance at the beginning of the year 557 677
Disposals - -
Additions 24 6
Amortisation (67) (78)
Impairments (refer note 5) - (17)
Translation differences 44 (31)
Balance at the end of the year 558 557
Comprising:
Right of use of mineral assets 193 166
ERP development and other software 106 105
Brand and trademarks and customer relationships 259 286
558 557
11. FINANCIAL AND OTHER NON-CURRENT ASSETS
Investment in Zimbabwe government bonds 279 6
Investment in the Zimbabwe Stock Market 14 -
PPC Zimbabwe financial asset 289 -
Financial assets 582 6
Unlisted collective investment 141 134
VAT receivable 101 104
Long-term receivable 91 59
Other non-current assets 333 297
Investment in Zimbabwe government bonds
The investment in government bonds of R277 million relates to the dividends declared by PPC Zimbabwe,
a subsidiary of PPC Ltd, to PPC Ltd for R232 million (2018: R66 million) and the rights issue proceeds
of R85 million (2018: R82 million) which is invested in the 7% Zimbabwe government bonds for a period of
one year. Per the Zimbabwe exchange control guidelines, these are treated as legacy debts and dividends
pre-20 February 2019 (date of publication of Statutory Instrument 33). The investment was registered with
the Zimbabwean authorities in accordance with Statutory Instrument 33 and therefore qualify for the 1:1
conversion of US$ to RTGS$. The remaining R2 million represents treasury bills issued in exchange for the
funds previously expropriated by the Reserve Bank of Zimbabwe.
In accordance with the requirements of IFRS 9, an ECL assessment was performed on the Zimbabwe government
bonds taking into account a range of expected default rates on government bonds with similar credit
profiles, which resulted in an ECL of R40 million.
In assessing the ECL default rate, the following was considered:
- The historical average recovery rate for sovereign bonds measured by Moody's in their Sovereign
Default and Recovery Rates Study 1983 ? 2016 is 65%
- The recovery rate is measured by the ratio of the present value of cash flows received as a result of
the distressed exchange versus those initially promised, discounted using yield to maturity immediately
prior to default
- This methodology closer reflects IFRS 9
- Sub-Saharan African countries comprise a significant portion of sovereign defaults. The most recent
at time of publication of the report was the 2016 by Mozambique where there was a loss of
approximately 12%
Based on the above it was determined that an ECL of 12,7% was deemed appropriate.
As a result of the uncertainty around the expatriation of funds from Zimbabwe, the investment in government
bonds has been classified as non-current.
Investment in the Zimbabwe Stock Market
The investment in the stock market relates to the investment in PPC Ltd and Old Mutual shares in Zimbabwe
on the Zimbabwe Stock Exchange. This investment is held in RTGS$. The market value as at 31 March 2019 was
RTGS$2,9 million (R14 million). As a result of the uncertainty around the expatriation of funds from Zimbabwe,
the investment in the Zimbabwe Stock Market has been classified as non-current.
PPC Zimbabwe financial asset
The PPC Zimbabwe financial asset arose as a result of the US$ denominated Zimbabwe loan (refer note 18).
The loan was registered with the Zimbabwean authorities in accordance with Statutory Instrument 33
and therefore qualify for the 1:1 conversion of US$ to RTGS$. The financial asset recognised represents
the difference between the closing RTGS$ rate of 3,01 and the rate of 1, being the rate approved by the
Zimbabwean authorities for the settlement of this loan. Fair value disclosure with regards to this
financial instrument has been disclosed in note 22.
Unlisted collective investment
This comprises an investment by the PPC Environmental Trust in the Old Mutual Capital Builder Portfolio,
with the fair value being calculated using the ruling prices on 31 March 2019. Put options are also held
over the value of the investments in order to protect the capital of the portfolio. At 31 March 2019, the
value of the put options were not material. During the year, a further R9 million (2018: R7 million) was
reinvested into the unit trusts. These funds are held to fund PPC's South African environmental obligations.
Refer note 14 for the restricted cash.
VAT receivable
The group incurred VAT during the construction of the plant in the DRC. In the 2017 financial year,
management received a letter from the DRC Finance Department which indicates that the VAT needs to be paid
to PPC Barnet DRC on condition that the money is utilised for discharge of local suppliers and local
salary obligations. The letter did not, however, state when the payments will be initiated. As a result
of the uncertainty around the timing of receipt of the funds, the VAT receivable has been classified as
non-current.
During the year, a loss of R13 million (2018: R80 million) comprising the remeasurement following
devaluations of the Congolese franc against the US dollar and a fair value adjustment relating to the
non-current VAT receivable was recorded and is reflected in fair value and foreign exchange gains/(losses)
in the income statement (refer note 3). Refunds amounting to R12 million (2018: R11 million) were received
during the year. An amount of Rnil (2018: R3 million) assessed to be irrecoverable was impaired during
the year.
Long-term receivable
When the plant in the DRC was being constructed, PPC Barnet DRC entered into an agreement whereby PPC and
the local power corporation would build the necessary power facility to supply electricity. In terms of
this agreement, the portion initially contributed by PPC would be repaid through electrical usage of the
plant. When PPC pays the power corporation, a portion of the amount owing is withheld and offset against
this non-current asset.
Refer note 22 for classification of the financial assets and liabilities.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
12. NON-CURRENT ASSETS HELD FOR SALE
Assets classified as held for sale 92 34
In September 2015, the PPC Zimbabwe board approved the disposal of houses at its Colleen Bawn and Bulawayo
factories which was anticipated to be finalised in 12 months. The disposal has been delayed due to the
government processing of the sectional title deeds and is now anticipated to be completed during the 2020
financial year. The houses have already been allocated to the employees through a systematic process and
the agreements of sale have been drafted and are with the lawyers. It is management's view that the
outstanding processes will be completed by September 2019. In the current year, a valuation of the houses
was performed by an independent valuator and a fair value gain of R48 million was recognised for the houses.
The fair value was estimated based on the market prices of similar properties. The movement from prior
year was also impacted by the exchange rate movements (refer note 24).
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
13. TRADE AND OTHER RECEIVABLES
Trade receivables 960 958
Allowance for doubtful debts (43) (58)
Expected credit losses (6) -
Net trade receivables 911 900
Mark-to-market adjustments 9 1
Other financial receivables 97 115
Proceeds due from the sale of PPC shares held by consolidated BBBEE entities - 7
Trade and other financial receivables 1 017 1 023
Prepayments 149 115
VAT receivable - 13
1 166 1 151
Net trade receivables comprise 911 900
Trade receivables that are neither past due nor impaired 685 704
Trade receivables that are past due but not impaired 226 196
In accordance with IFRS 9, an ECL assessment was performed on trade receivables and resulted in a provision
of R6 million being raised at year-end.
Refer note 22 for fair value of trade and other receivables.
Please note that the tax receivable has been disclosed separately on the face of the statement of
financial position.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
14. CASH AND CASH EQUIVALENTS
Balance at the end of the year 452 836
Currency analysis:
Botswana pula 66 51
Mozambican metical 2 7
RTGS dollar (Zimbabwe) 123 -
Rwandan franc 42 45
South African rand 62 124
United States dollar 157 609
452 836
Cash and cash equivalents are recognised less of ECLs. During the current year, in line with the requirements
of IFRS 9, cash and cash equivalents were assessed for ECLs by analysing the credit rating of each financial
institution where PPC Ltd and its subsidiaries have invested cash. This resulted in an ECL of R6 million
being recognised in the current year, of which R5 million relates to cash deposits held in Zimbabwe banks.
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three
months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately
equal to their fair value. Cash and cash equivalents at the end of the year, as shown in the consolidated
statement of cash flows, can be reconciled to the related items in the consolidated reporting position
as shown above.
Cash and cash equivalents include cash on hand and cash on deposit. Amounts denominated in foreign
currencies have been translated at ruling exchange rates at year-end (refer note 24).
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
14. CASH AND CASH EQUIVALENTS continued
Included in cash and cash equivalents is restricted cash:
PPC Environmental Trust 9 8
PPC Zimbabwe 44 49
53 57
Cash and cash equivalents held by the PPC Environmental Trust can only be utilised for environmental
obligations in South Africa and are therefore not freely available.
In accordance with the requirements of lenders to PPC Zimbabwe, PPC Zimbabwe is required to deposit funds
in an escrow account which can only be used for the purposes of making capital and interest repayments
on the loan.
PPC Zimbabwe
The rand value of the gross cash balances in Zimbabwe significantly reduced to R206 million (comprising
RTGS$, US$, pula and rand) compared to R515 million at the end of March 2018 due to the introduction of
the RTGS$ with a closing exchange rate of 3,01 to the US$. The introduction of the RTGS$ as the functional
currency in Zimbabwe resulted in a 67% devaluation against the US$ at year-end using the official interbank
year end rate of US$1:RTGS$3,01. Furthermore, the decrease was also caused by the settlement of foreign
creditors which improved over the period and the transfer of the dividend amounts owing to PPC Ltd which
was invested in the Zimbabwe government bonds and listed shares in the Zimbabwe stock market.
Please refer to the table below for analysis of the Zimbabwe cash:
US$ Rand
Cash on hand - 31 March 2018 44 515
Cash on hand - 31 March 2019 14 206
Restricted cash 3 44
Percentage of cash restricted 7% 8%
Cash transferred - trading 9 118
Cash transferred - PPC Ltd non-resident account 16 220
Cash transferred rate 57% 66%
Comparatives not presented as changes in functional currency has been applied prospectively.
Year ended Year ended
2019 2018
Reviewed Audited
Shares Shares
000 000
15. STATED CAPITAL
Authorised shares
Ordinary shares 10 000 000 10 000 000
Preference shares 20 000 20 000
Number of ordinary shares and weighted average number of shares
Total shares in issue at the beginning of the year 1 591 760 1 591 760
Shares issued during the year 1 354 -
Total shares in issue before adjustments for treasury shares 1 593 114 1 591 760
Shares issued in terms of the second BBBEE transaction (37 382) (37 382)
Shares held by consolidated BBBEE trusts and trust funding SPVs (20 144) (20 144)
Shares held by consolidated Porthold Trust (Pvt) Limited (1 285) (1 285)
Shares purchased in terms of the FSP share incentive scheme (27 146) (19 955)
Shares held by the consolidated Safika Trust (1 354) -
Total shares in issue (net of treasury shares) 1 505 803 1 512 994
Weighted average number of shares, used for:
Earnings and headline earnings per share 1 511 971 1 510 163
Dilutive earnings and headline earnings per share 1 532 949 1 531 802
Cash earnings per share 1 511 971 1 510 163
Shares are weighted for the period in which they are entitled to participate in the profits of the group.
Shares held by consolidated participants of the second BBBEE transaction
Shares issued in terms of the second BBBEE transaction were facilitated by means of a notional vendor funding
(NVF) mechanism, with the transaction concluding on 30 September 2019. These shares participate in 20% of the
dividends declared by PPC during the NVF period. With the exception of the Bafati Investment Trust, entities
participating in this transaction are consolidated into the PPC group in terms of IFRS 10 Consolidated
Financial Statements.
Shares held by consolidated BBBEE trusts and trust funding SPVs
In terms of IFRS 10 Consolidated Financial Statements, certain of the BBBEE trusts and trust funding SPVs from
PPC's first BBBEE transaction are consolidated, and as a result, shares owned by these entities are carried as
treasury shares on consolidation.
Shares held by consolidated Porthold Trust Pvt Limited
Shares owned by a Zimbabwe employee trust company are treated as treasury shares.
FSP share incentive scheme
In terms of the forfeitable share plan (FSP) long-term incentive scheme, 27 134 235 shares (2018: 19 955 207)
are held in total for participants of this long-term incentive scheme. The shares are treated as treasury shares
during the vesting periods of the awards. During the year, nil shares (2018: 3 832 250 shares) vested.
In terms of IFRS requirements, 5% (2018: 5%) of the total shares in issue are treated as treasury shares
following the consolidation of the various BBBEE entities, employee trusts and incentive share schemes.
Shares held by the consolidated Safika Consolidated Management Trust
Shares issued during the year in order to retain and incentivise the Safika key management employees. This
transaction was also facilitated through a NVF mechanism.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
Stated capital
Balance at the beginning of the year 3 984 3 919
Sale of shares, treated as treasury shares, by
consolidated BBBEE entity - 62
Shares purchased in terms of FSP share incentive
scheme treated as treasury shares (41) (72)
Vesting of shares held by certain BBBEE 1 entities - 2
Vesting of shares held in terms of the FSP share
incentive scheme - 73
Balance at the end of the year 3 943 3 984
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
16. PROVISIONS
Decommissioning and rehabilitation 395 495
Post-retirement healthcare benefits 32 31
427 526
Decommissioning and rehabilitation
Group companies are required to restore mining and processing sites at the end of their productive lives
to an acceptable condition consistent with local regulations, and in line with group policy. PPC has set
up an environmental trust in South Africa to administer the local funding requirements of its decommissioning
and rehabilitation obligations. Currently, there are no such regulations in the other jurisdictions in which
the group operates for the creation of a rehabilitation trust fund. The investments in the trust fund are
carried at fair value through profit or loss and amount to R140 million (2018: R134 million) at year-end
(refer note 11).
Management have assessed the discount rate applied in determining the decommissioning and
rehabilitation provision for Cement southern Africa. In the current year there was a change in estimate,
which is applied prospectively. The impact of the change in discount rate applied amounted to an R89 million
reduction to the provision for rehabilitation and decommissioning, with a R59 million reduction to cost
of sales and a R30 million reduction to the decommissioning asset.
Post-retirement healthcare benefits (defined benefit plan)
Historically, qualifying employees were granted certain post-retirement healthcare benefits. The obligation
for the employer to pay medical aid contributions after retirement is no longer part of the conditions of
employment for new employees. A number of pensioners remain entitled to this benefit, the cost of which has
been fully provided.
17. DEFERRED TAXATION
Net liability at the end of the year comprises: 624 797
Deferred taxation asset 331 245
Deferred taxation liability 955 1 042
Analysis of deferred taxation
Property, plant, equipment and intangible assets 1 284 1 189
Other non-current assets 50 134
Current assets (6) (10)
Non-current liabilities (111) (124)
Current liabilities (65) (75)
Reserves 4 1
Taxation losses (532) (318)
624 797
Deferred taxation assets
Deferred taxation assets are recognised to the extent it is probable that taxable profits will be available
in future periods, based on approved business plans, against which deductible temporary differences can be
utilised. The recognition of deferred tax assets is assessed at subsidiary level taking into account the
applicable legal provisions of the country in which the PPC subsidiary recognising the deferred tax asset
is registered. Further, the recognition of deferred tax assets take into account applicable tax rates, which
may vary between reporting periods.
CIMERWA has accumulated tax losses over the last four years with a significant amount arising in 2015 from
claiming a 50% investment deduction on the new plant. Article 29 of law no 16/2005 capped the utilisation
of tax losses to a five-year period following the tax loss. A new income tax law, law no 016/2018 has been
gazetted repealing law no 16/2005 of 18/08/2005 on direct income tax. This new law is applicable to CIMERWA.
Article 32 of law no 016/2018, which came into force on 13 April 2018, states that the Rwandan Revenue
Authority (RRA) may authorise the taxpayer who duly applies, for their loss carried forward of more than
five tax periods if the tax payer fulfils requirements determined by an order of the Minister. The
Ministerial order was published in the official gazette on 6 May 2018 indicating that a taxpayer may apply
for losses to be carried forward more than five tax periods, subject to fulfilment of certain conditions.
The deferred taxation asset recognised in CIMERWA is also affected by the maintenance of the existing
shareholders. Any disposal of shares by the existing shareholders equal to or higher than 25% will result
in the loss of the deferred taxation asset. The government of Rwanda have indicated a proposed sale of
their 49% interest in CIMERWA. There has been no finalisation of the matter. An assessment of the conditions
indicates that the CIMERWA deferred tax of R199 million (2018: R242 million) is recoverable.
The PPC Barnet DRC Manufacturing deferred tax asset was assessed based on the DRC's tax laws applicable at
2019 year-end close. The assessment of the deferred tax recoverability was based on the subsidiary's approved
business plans and compliance with DRC's tax laws and regulations, the recognised deferred taxation asset was
assessed to be recoverable.
PPC Aggregates Quarries Botswana's deferred tax asset recoverability assessment has taken into account the
approved business plan and Botswana's applicable tax laws and regulations and based on the assessment, no
impairment was recognised during the year.
Pronto Building Materials' deferred tax assets recoverability assessment was based on applicable
South African tax laws and the approved business plans and the assessment, no impairment was recognised
during the year.
18. LONG-TERM BORROWINGS
Year ended Year ended
31 March 2019 31 March 2018
Reviewed Audited
Notes Terms Security Interest rate Rm Rm
PPC 002: Unsecured notes, issued Unsecured Three-month - 20
five years under the company's JIBAR plus 1,5%
R6 billion domestic
medium-term note programme,
and are recognised net of
capitalised transaction
costs
PPC 003: Unsecured Three-month 111 111
five years JIBAR plus 1,48%
South Africa R700 million amortising Unsecured Variable rates at 523 696
long-term loan facility, maturing 270 basis points
funding in 2021 with capital above three-
repayments of month JIBAR
R175 million in 2019
and 2020 and R350 million
in 2021
R800 million general Unsecured Variable rates at 796 696
banking facility expiring 305 basis points
in 2022 above three-
month JIBAR
Project 3 201 2 889
funding
US dollar denominated, Secured by CIMERWA's Variable at 725 353 347
repayable in monthly property, plant and basis points above
instalments over a 10-year equipment six-month US
period, starting March dollar LIBOR
2016
Rwanda franc Secured by CIMERWA's Fixed rate of 16% 408 300
denominated, repayable property, plant and
in monthly instalments equipment
over a 10-year period,
starting March 2016
US dollar denominated, Secured by PPC Barnet Six-month US 2 150 1 763
capital and interest DRC's property, plant dollar LIBOR plus
payable biannually and equipment 975 basis points
starting July 2017 ending
January 2027, with a
capital repayment holiday
until January 2020
US dollar denominated, Secured by PPC Six-month US 290 479
interest payable Zimbabwe's property, dollar LIBOR plus
biannually. Biannual plant and equipment, 700 basis points
repayments in equal inventory and trade
instalments over five years and other receivables
starting December 2016
4 631 4 412
Less: short-term portion of (567) (333)
long-term borrowings
Long-term borrowings 4 064 4 079
Add: short-term 938 603
borrowings, bank
overdrafts and short-term
portion of long-term
borrowings
Total borrowings 5 002 4 682
Maturity analysis of
total borrowings:
One year 938 603
Two years 943 764
Three years 1 406 836
Four years 483 1 192
Five and more years 1 232 1 287
5 002 4 682
Assets encumbered are
as follows:
Property, plant and 7 339 6 460
equipment (refer note 8)
The group had committed borrowing facilities of R2,4 billion and utilised 70% (2018: 72%) of these facilities
at the date of this report. At reporting date, R731 million of borrowing facilities remain unutilised.
These numbers exclude project funding in Rwanda, DRC and Zimbabwe.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
19. OTHER NON-CURRENT LIABILITIES
Cash-settled share-based payment liability - 2
Put option liability 274 245
Finance lease liabilities 2 5
Liability to non-controlling shareholder in subsidiary company 17 14
293 266
Less: Short-term portion of other non-current liabilities - (4)
293 262
Put option liability
The IFC was issued a put option in September 2015 in terms of which PPC Ltd is required to purchase all or
part of the shares held by the IFC in PPC Barnet DRC Holdings. The put option may be exercised after six
years from when the IFC subscribed for the shares but only for a five-year period. The put option value
was calculated using the DRC's forecast EBITDA applying an earning's multiple less net debt and then
present valued.
Following the valuation of the put option, no fair value adjustment has been recognised as the fair value is
the same as the current carrying amount.
Forecast EBITDA is based on financial forecasts approved by management, with pricing and margins similar to those
currently being achieved by the business unit, albeit lower than in the prior year, while selling prices and costs
are forecast to increase at local inflation projections and extrapolated using local GDP growth rates averaging 5%
per annum (2018: 5%) taking cognisance of the plant production ramp-up and adjusted for the impact of competitor
activity and political environment within the country and neighbouring countries. An EBITDA multiple of 7 times
(2018: 7 times) was determined using comparison of publicly available information on other cement businesses
operating in similar territories. The present value of the put option was calculated at R274 million
(2018: R245 million). The increase in the liability follows the time value of money adjustments.
Refer note 22 for sensitivity analysis.
Liability to non-controlling shareholder in subsidiary company
Relates to US dollar denominated interest payable on initial equity contribution into the DRC group of companies
by a non-controlling shareholder. The accruing of interest ceased in September 2015 and the amount payable will
be repaid once the external funding of the DRC has been settled.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
20. TRADE AND OTHER PAYABLES
Accrued finance charges 4 8
Cash-settled share-based payment liability (short-term portion) - 2
Capital expenditure payables 64 45
Finance lease liabilities - 1
Other financial payables 141 156
Retentions held for plant and equipment 316 259
Trade payables and accruals 1 260 991
Trade and other financial payables 1 785 1 462
Payroll accruals 138 248
VAT payable (4) 25
1 919 1 735
Trade and other payables, payroll accruals and regulatory obligations are payable within a 30 to 60-day period.
Please note that the tax payable has been disclosed separately on the face of the statement of
financial position.
21. COMMITMENTS
Contracted capital commitments 176 339
Approved capital commitments 145 257
Capital commitments 321 596
Operating lease commitments 121 128
442 724
Capital commitments
Southern Africa 304 546
Rest of Africa 17 50
321 596
Capital commitments are anticipated to be incurred:
- Within one year 321 500
- Between one and two years - 96
321 596
The decrease in commitments follows the successful commissioning of Slurry expansion project (SK9).
Capital expenditure commitments are stated in current values which, together with expected price escalations,
will be financed from surplus cash generated and borrowing facilities available to the group.
22. FINANCIAL RISK MANAGEMENT
Fair value of assets and liabilities
Year ended Year ended
31 March 2019 31 March 2018
Reviewed Audited
Notes Level* Rm Rm
Financial assets
The financial assets carried at fair value are classified
into three categories as reflected below:
At amortised cost
Investment in Zimbabwe government bonds 11 2 279 6
Trade and other financial receivables 13 2 1 017 1 023
Cash and cash equivalents 14 1 452 836
At fair value through other comprehensive income
Investment in the Zimbabwe Stock Market 11 1 14 -
At fair value through profit or loss
Unlisted collective investments at fair
value (held for trading) 11 2 141 134
PPC Zimbabwe financial asset 11 2 289 -
Total financial assets 2 192 1 999
Level 1 466 836
Level 2 1 726 1 163
Non-financial assets
Assets held for sale 12 2 92 34
Goodwill# 9 3 236 230
Financial liabilities
At amortised cost
Long-term borrowings 18 2 4 064 4 079
Short-term borrowings 18 2 938 603
Finance lease liabilities 19 2 2 5
Liability to non-controlling shareholder
in subsidiary company 19 2 17 14
Trade and other financial payables 20 2 1 785 1 462
At fair value through profit or loss
Cash-settled share-based liability 19 2 - 2
Put option liability 19 3 274 245
Total financial liabilities 7 080 6 410
Level 2 6 806 6 165
Level 3 274 245
# The movement in the fair value of goodwill recognised relates to foreign currency exchange differences.
Methods and assumptions used by the group in determining fair values:
* Level 1 - financial assets and liabilities that are valued accordingly to unadjusted market prices
for similar assets and liabilities. Market prices in this instance are readily available
and the price represents regularly occurring transactions which have been concluded on an
arm's length transaction.
* Level 2 - financial assets and liabilities are valued using observable inputs, other than the market
prices noted in the level 1 methodology, and make reference to pricing of similar assets and
liabilities in an active market or by utilising observable prices and market-related data.
* Level 3 - financial assets and liabilities that are valued using unobservable data, and requires management
judgement in determining the fair value.
The estimated fair value of financial instruments is determined, at discrete points in time, by reference to
the mid price in an active market wherever possible. Where no such active market exists for the particular
asset or liability, the group uses valuation techniques to arrive at fair value, including the use of prices
obtained in recent arm's length transactions, discounted cash flow analysis and other valuation techniques
commonly used by market participants.
The fair value of cash and cash equivalents, trade and other financial receivables and trade and other financial
payables approximate their respective carrying amounts of these financial instruments because of the short period
to maturity. Where the short period to maturity is extended, the company then discounts the current carrying
amount using the latest available borrowing rates against the expected maturity period.
The PPC Zimbabwe financial asset (refer note 11) should be valued using RTGS forward curves, however, these are
not available. As a result of there being no other similar available market data, the financial asset has been
valued at the year-end US$:RTGS$ exchange rate and no further fair value adjustment has been recognised.
The put option liability has been calculated using EBITDA forecasts prepared by management and discounted to
present value.
The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined
with reference to valuation performed by third-party financial institutions at reporting date, using an actuarial
binomial pricing model.
This note has been refined from that reported in the prior period to only include financial instruments held at fair
value.
Level 3 sensitivity analysis
Increase/
Valuation Main decrease
Financial instrument technique assumptions Rm
Put option liabilities Earnings EBITDA and
multiple net debt 29
If the key unobservable inputs to the valuation model, being estimated EBITDA and net debt, were 1% higher/lower
while all the other variables were held constant, the carrying amount of the put option liabilities would
decrease/increase by R29 million.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
Movements in level 3 financial instruments
Financial liability
Balance at the beginning of the period 245 434
Remeasurements - (238)
Time value of money adjustments 29 49
Balance at the end of the year 274 245
Remeasurements are recorded in fair value adjustments on financial instruments in the income statement.
23. EVENTS AFTER THE REPORTING DATE
Business combination
On 4 May 2019, Habesha Cement Share Company (Habesha), a cement manufacturing company incorporated in Ethiopia
and currently accounted in the PPC group results as an investment in associate, granted PPC and Industrial
Development Corporation (IDC) a right to appoint an additional board member. PPC and IDC have a 38% and 20%
shareholding in Habesha respectively. PPC and IDC have signed a voting agreement, in terms of which they agreed
to vote as a block on key matters pertaining to Habesha. Given PPC's technical knowledge and experience in the
cement manufacturing industry and fact that PPC has significant shareholding in Habesha compared to IDC, it is
likely that PPC will be a key decision-maker in terms of the voting agreement.
Furthermore, PPC entered into an agreement with Habesha, in terms of which PPC is required to provide consulting
and technical services. These services, among other include:
- Consulting services - such as developing strategic direction and objectives, providing commercial guidance and
aligning the policies and procedures of Habesha to those of PPC
- Technical services - relating to finance, sales and marketing, treasury, human resources, legal and risk
management
Taking into account the two agreements, management believes that PPC has control over Habesha from 4 May 2019 and
has the exposure to variable returns and ability to affect those returns.
In terms of IAS 10, this is considered to be a non-adjusting post-balance sheet event as the meeting where the
resolution was passed to give IDC and PPC a right to appoint an additional board member took place after the
reporting period. The potential evidence of control therefore never existed at year-end.
Effective from 4 May 2019, being the acquisition date, PPC will account for Habesha as a subsidiary and the
financial results of Habesha will be consolidated into PPC group. PPC's share of profits will remain as 38%.
IFRS 3, sets out the extensive disclosure required for a post-balance sheet event resulting in business combination
but also allows non-disclosure in circumstances where certain financial information is not available.
It should be noted that at the date of this report, the financial impact of this transaction has not be finalised
as it is not practical to determine the amounts at the date of the report, and the applicable disclosure as
required by IFRS 3 B64 paragraph (e) - (k) are not yet available.
PPC will, within the next 12 months, as permitted by IFRS 3 finalise the financial impact of this transaction.
A further update on this transaction will be disclosed in the September 2019 half-year results.
Refinancing strategy
Due to the expected liquidity constraints, in April 2019, the investment committee approved the engagement with the
lenders for the funding facility package to be increased from R2,4 billion to R3.1 billion. This facility has been
approved by the lenders and is considered to be a non-adjusting subsequent event in accordance with IAS 10.
Movement in RTGS$:US$ rate
At 31 March 2019, an official inter-bank rate of 3.01 between the USD and RTGS has been used in the translation
of the Zimbabwe results following the change in functional currency. This rate has since deteriorated to 6,32 at
24 June 2019, the date of approval of the reviewed condensed consolidated financial statement. This rate was
obtained from http://www.marketwatch.co.zw. For the sensitivty analysis on the RTGS$ rate refer note 1.
There are no events that occurred after the reporting date, other than those listed above, that may have a
material impact on the group's reported financial position at 31 March 2019.
24. CURRENCY CONVERSION GUIDE
In preparing the financial statements of the subsidiary companies, transactions in currencies other than the
entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the
dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which
they arise except for exchange differences on foreign currency borrowings relating to assets under construction
for future productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings.
Approximate value of foreign currencies to the rand:
Average Closing
2019 2018 2019 2018
Botswana pula 1,32 1,28 1,34 1,22
US dollar 13,63 13,06 14,42 11,82
Rwandan franc 0,02 0,02 0,02 0,01
RTGS dollar (to the US dollar) 3,50 N/A 3,01 N/A
Mozambican metical 0,20 0,22 0,23 0,19
25. RELATED-PARTY TRANSACTIONS
Parties are considered to be related if one party directly or indirectly has the ability to control or
jointly control the other party or exercise significant influence over the other party or is a member of the
key management of PPC group. In particular, this relates to associates, as transactions with the consolidated
subsidiaries are eliminated. In the ordinary course of business, PPC Group Shared Services Pty Limited, a
subsidiary of PPC Ltd, entered into various transactions with Habesha Cement Share Company, an associate of
PPC Ltd. The effect of these transactions is included in the financial performance and results of the group.
Terms and conditions are determined on an arm's length basis. No impairment of receivables related to the
amount of outstanding balances is required.
Year ended Year ended
2019 2018
Reviewed Audited
Rm Rm
The following table shows transactions with the related parties that are included
in the group's annual financial statements.
Services rendered to a related party
Habesha Cement Share Company 2 -
Amounts receivable from a related party
Habesha Cement Share Company 2 -
Dividends received from a related party
Olegra Pty Limited 1 1
Refer note 23 for post-balance sheet events impacting the accounting treatment of the Habesha Cement Share
Company by the PPC group.
26. OTHER DISCLOSURES
Contingent liabilities and guarantees
A PPC group supplier has instigated legal proceedings against the group for the possible damages
relating to a contract. In terms of the contract, the supplier would provide certain services relating
to sales and marketing. The total claim is estimated at R3 million.
Management believes that the claim has no merit, and is currently contesting the matter in court. In accordance
with IAS 37, no provision has been made in these financial statements.
The total guarantees issued by the group, by means of a bank guarantee, in favour of the various suppliers was
R102 million (2018: R102 million). Included in this amount are financial guarantees for the environmental
rehabilitation and decommissioning obligations of the group to the DMR amounting to R76 million (2018: R76 million).
27. REVIEW CONCLUSION
The reviewed condensed consolidated financial statements for the year ended 31 March 2019 have been reviewed
by the company's external auditors, Deloitte & Touche, who expressed an unmodified review conclusion. A copy
of the auditor's review report on the condensed consolidated financial statements is available for inspection
at PPC's registered office. The auditor's report does not report necessarily on all the information in this
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature
of the auditor's engagement, they should obtain a copy of the auditor's report. Any reference to future
financial performance included in this announcement has not been reviewed or reported on by the company's
external auditors.
ADMINISTRATION
Directors
PJ Moleketi (Chairman), JT Claassen (CEO), AC Ball, N Gobodo, MF Gumbi, NL Mkhondo, T Moyo*, CH Naude,
MMT Ramano, MR Thompson
* Zimbabwean
Registered office
148 Katherine Street, Sandton, South Africa
(PO Box 787416, Sandton 2146, South Africa)
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank
(PO Box 61051, Marshalltown, 2107, South Africa)
Transfer secretaries Zimbabwe
Corpserve (Pvt) Ltd
4th Floor, Intermarket Centre, Corner 1st Street/Kwame Nkrumah Avenue, Harare Zimbabwe
(PO Box 2208, Harare, Zimbabwe)
Company secretary
K Holtzhausen
148 Katherine Street, Sandton, South Africa
(PO Box 787416, Sandton 2146, South Africa)
Sponsor
Merrill Lynch South Africa (Pty) Ltd
The Place, 1 Sandton Drive, Sandton, South Africa
(PO Box 651987, Benmore 2010, South Africa)
DISCLAIMER
This document including, without limitation, those statements concerning the demand outlook, PPC's expansion projects
and its capital resources and expenditure, contain certain forward looking views. By their nature, forward looking
statements involve risk and uncertainty and although PPC believes that the expectations reflected in such forward looking
statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly,
results could differ materially from those set out in the forward looking statements as a result of, among other factors,
changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory
environment and other government action, business and operational risk management. While PPC takes reasonable care to
ensure the accuracy of the information presented, PPC accepts no responsibility for any consequential, indirect, special or
incidental damages, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence
arising in connection with a forward looking statement. This document is not intended to contain any profit forecasts or
profit estimates.
Date: 27/06/2019 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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