PPC LIMITED - Operational Update for the four months ended 30 July 2019

Operational Update for the four months ended 30 July 2019

PPC Ltd (Incorporated in the Republic of South Africa)
Company registration number: 1892/000667/06
JSE / ZSE code: PPC
JSE ISIN: ZAE 000170049
JSE code: PPC003
JSE ISIN: ZAG000117524
(“PPC” or “Company”)

OPERATIONAL UPDATE FOR THE FOUR MONTHS ENDED 30 JULY 2019

GROUP PERFORMANCE

Group EBITDA increased by between 5 – 10% for the four months ended 30 July 2019
(“period”), on the back of continued selling price momentum in South Africa and
ongoing cost optimisation in terms of R70/tonne savings initiative. The group
incurred once-off restructuring costs as part of its operational and head office
optimisation, which detracted from the EBITDA performance. The restructuring of the
group will position the business to take advantage of future growth. The Southern
Africa cement business continues to optimise its route to market strategy by
focusing on its most profitable market segments. In the Rest of Africa, the focus
is on cash preservation and maximising US$ EBITDA per tonne. The group balance
sheet remains strong, with group gross debt at similar levels to those reported for
March 2019.

SOUTHERN AFRICA CEMENT

Despite a challenging operating environment, average cement prices in Southern
African (including Botswana), increased by 7.0 - 8.0% for the period. Aligned with
the objective of focusing on EBITDA enhancing volume growth, cement sales declined
by 10 - 15% compared to the corresponding period in FY’19 (“comparable period”), in
line with the estimated decline in domestic demand. Domestic cement demand remains
constrained due to a subdued demand environment. Importer and blender activity have
also contributed to a competitive operating environment. EBITDA increased by 5 -
10% supported the R70/tonne cost saving initiative. Total cement imports increased
by 22% for January 2019 - June 2019 compared to the same period in 2018, amounting
to ~640,000 tonnes. The Concrete Institute (TCI) on behalf of the domestic cement
industry submitted an application to ITAC highlighting the impact of imports on
domestic cement production. The industry is also engaging with the relevant
authorities to ensure that blended cement meets the requisite standards.

MATERIAL BUSINESS

LIME

Lime revenue increased by 5 – 10%, supported by higher selling pricing and volumes.
EBITDA was marginally lower than the comparable period, due to higher input and
maintenance costs.

AGGREAGATES AND READYMIX

Aggregates and readymix revenue decreased by 5 – 10%, due to constrained demand and
challenging pricing environment. This has also resulted in a decline in EBITDA
compared to the prior comparable period.

REST OF AFRICA CEMENT

ZIMBABWE

Trading conditions in Zimbabwe remain challenging, due to liquidity constraints and
inflationary pressures. PPC remains focused on optimising its local operations and
implementing its cash preservation strategy to ensure the business is self-
sufficient. The devaluation of the Real Time Gross Settlement (RTGS) dollar versus
the US$ impacted revenue, which declined by 30 – 35% in rands. Overall cement sales
volumes contracted by 25 – 30% due to a weaker economic climate. Cement pricing,
which was aligned with input cost inflation, was higher than the previous
comparable period. EBITDA declined by 10 - 15%, while EBITDA margins remained
within the guided range of 30 – 35%.

Rwanda

In Rwanda, Cimerwa continues to benefit from increased construction activity and
high economic growth. The successful completion of 1 st phase debottlenecking of the
plant has resulted in higher cement sales. Overall volumes for the period increased
by 35 - 40%, coupled with stable pricing. Pleasingly, EBITDA increased by more than
200%, compared to the prior period.

Democratic Republic of Congo (DRC)

Demand remained subdued in the DRC. The EBITDA performance of the business has
tracked below last year, mainly as a result of a competitive pricing environment
during the first two months of the financial year. Pricing has subsequently
recovered, with the business executing strategic plans to maximise EBITDA and free
cash flow generation in order to minimise capital requirements from the centre. PPC
is currently engaging with its lenders to re-structure the debt in the DRC and put
in place a more sustainable capital structure.

Ethiopia

Habesha has not achieved targeted profitability levels for the period due to sub-
optimal plant performance and pricing challenges. PPC management is responding by
prioritising plant optimisation and route to market strategies.

OUTLOOK

PPC will continue to focus on stabilising the performance of its core operations
and positioning the group for future growth. The restructuring of the head office
will enable the alignment of the business to its operational requirements and
enable PPC to focus on maximising EBITDA in all markets it operates in and reducing
financial leverage.

The information in this operational update has not been reviewed or reported on by
the Company’s external auditors.

29 August 2019

Sponsor
Merrill Lynch South Africa (Pty) Limited

PPC:
Anashrin Pillay
Head Investor Relations
Tel: +27 (0) 11 386 9000

Financial Communications Advisor:
Instinctif Partners
Gift Dlamini
Mobile: +27 11 050 7536

Date: 29/08/2019 08:15:00
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
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
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.