Wrap Text
Condensed Consolidated Financial Statements for the six-month period ended 30 September 2019
PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE Code: PPC
ISIN: ZAE000170049
JSE code: PPC003
JSE ISIN: ZAG000117524
("PPC" or the "Company")
SHORT FORM ANNOUNCEMENT
PPC LTD – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD
ENDED 30 SEPTEMBER 2019
SALIENT FEATURES:
- Group revenue R4 948 million (Sept 2018: R5 597 million)
- Group EBITDA R868 million (Sept 2018: R1 039 million)
- Loss per share of 0,4 cents (Sept 2018: Earnings per share 21 cents)
- Headline earnings per share 6 cents (Sept 2018: 21 cents)
Group results were adversely affected by the devaluation between the Zimbabwean
Dollar (“ZWL”) and the South African Rand and the application of the provisions of
IAS 29 – Financial Reporting in Hyperinflationary Economies. Excluding PPC Zimbabwe
Group revenue declined 1% to R4 502 million and Group EBITDA decreased by 3% to
R667 million.
Roland Van Wijnen, CEO said:
”The positive operational results in Rwanda and the DRC have partially offset
difficult and competitive market conditions in South Africa and Zimbabwe. PPC has
continued its efforts to implement necessary price increases to lay the basis for
a sustainable domestic cement industry in RSA. We remain focused on cost
reductions and we have achieved cost savings of R65/tonne in South Africa as part
of our R70 per tonne saving program announced in 2017. Whilst the profitability of
the Group has declined, PPC continues to generate positive free cash flow.
Our focus in Zimbabwe remains to deliver our customers premium products and
solutions at stable or improved EBITDA margins, as well as to ensure financial
self-sufficiency of the business against the backdrop of a challenging macro-
economic environment. The PPC Zimbabwe team has delivered on both these strategic
imperatives.”
GROUP PERFORMANCE
Group revenue declined by 12% to R4 948 million (Sept 2018: R5 597 million)
attributable to a 17% decline in overall cement volumes to 2,6 million tonnes.
Southern Africa cement and PPC Zimbabwe were the main contributors to the decline.
Cost of sales reduced by 10% to R4 023 million (Sept 2018: R4 494 million)
compared with the previous year. Overheads reduced by 4% to R555 million (Sept
2018: R580 million). Excluding once-off restructuring costs of R83 million
incurred during the period, overheads reduced by 19%.
PPC reported cost savings of R60/tonne at the end of March 2019, and achieved
additional cost savings of R5/tonne for the period towards PPC’s saving target of
R70/tonne.
Group EBITDA declined by 17% to R868 million (Sept 2018: R1 039 million),
resulting in an EBITDA margin of 17,5% (Sept 2018: 18,6%). Excluding the impact of
the once-off restructuring costs EBITDA margin was 19,3%.
The Group results are impacted by the significant currency devaluation between the
ZWL and the South African Rand (“ZAR”) and the application of the provisions of
IAS 29 that complicates comparability at a Group level. PPC Zimbabwe has applied
hyperinflationary accounting from 1 April 2019 to 30 September 2019. The results,
net assets and cash flows were then translated from ZWL into rand at a closing
rate of 1 ZWL to 0.99 ZAR compared to 1 ZWL to 4.80 ZAR at March 2019, which had a
material impact on the results.
Excluding PPC Zimbabwe, Group revenue declined by 1% and cost of sales were
maintained at R3 783 million. EBITDA declined by 3% to R668 million (Sept 2018:
R687 million), with margins maintained at 15%.
The application of IAS 29 resulted in a net monetary gain amounting to
R543 million (before tax).
Included in the fair value adjustment loss of R270 million is an estimated credit
loss of R307 million relating to Zimbabwe financial assets, R76 million of which
was raised against the PPC Zimbabwe financial asset arising as a result of the PPC
Zimbabwe debt being settled by the Reserve Bank of Zimbabwe on a 1:1 basis as
legacy debt. The remainder of the expected credit loss provision was raised
against the PPC Limited blocked funds held by the Reserve Bank of Zimbabwe and
cash deposited in a non-resident account with Stanbic in Zimbabwe. The balance of
the fair value adjustment relates to the translation into Rands of foreign assets
and liabilities.
Finance costs decreased by 3% to R327 million (Sept 2018: R336 million). Southern
Africa finance costs increased by 13% to R125 million (Sept 2018: R111 million)
due to the application of IFRS 16 - Leases. International finance costs declined
by 10% to R202 million (Sept 2018: R225 million).
Taxation expense of R186 million (Sept 2018: R9 million credit), resulted in an
effective tax rate of 114%. Excluding the impact of provisions, expected credit
losses, hyperinflation, the impairment and other non-deductible expenses, the
effective tax rate is 33%.
The equity investment in the integrated cement plant in Ethiopia was fully
impaired, resulting in an impairment loss of R93 million.
Basic earnings per share was reduced to a 0,4 cents loss (Sept 2018: Earnings per
share 21 cents) and headline earnings per share was 6 cents (Sept 2018: 21 cents).
Cash available from operations decreased from R581 million to R223 million, mainly
as a result of an increase in working capital absorption of R342 million, which is
significantly higher than the comparative period at R110 million due to the
manufacturing cycle in the DRC, cash preservation strategies in Zimbabwe,
increasing inventory levels and accounts payable.
Capital investments in property, plant and equipment decreased by 40% to
R225 million (Sept 2018: R377 million).
Gross debt increased marginally from R5 002 million in March 2019 to
R5 131 million at the end of September 2019. The currency impact on the
international debt is R193 million. On a constant currency basis the gross debt
was approximately R4 938 million as at 30 September 2019. The Southern African
debt remained constant at R1 700 million.
CEMENT SOUTHERN AFRICA (INCLUDING BOTSWANA)
Realised average selling prices for Southern Africa increased by 8% - 10%, as the
business continued with its drive of increasing cement prices to recover
operational costs and improve returns. PPC Southern Africa cement volumes declined
by 15% - 20%, where declines were less significant in the coastal regions. PPC
estimated the South African cement industry declined by between 10% - 15% for the
period, with consumer and construction sector demand still under severe pressure.
The competitive environment was exacerbated by imports and blender activity.
Cement imports increased by 5% to 849,000 tonnes for calendar year August 2019.
The Concrete Institute (“TCI”) on behalf of the domestic cement industry submitted
an application to the International Trade Administration Commission (“ITAC”)
highlighting the impact of imports on domestic cement production. The industry is
continuously engaging with the relevant authorities to ensure that blended cement
meets the requisite standards.
Revenue for Cement Southern Africa declined by 8% to R2 555 million (Sept 2018: R2
772 million). 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% - 7%
range.
The reduction in revenue coupled with an increase in costs resulted in EBITDA
contracting by 24% to R367 million (Sept 2018: R481 million) and margins declining
from 17,4% to 14,4%.
MATERIALS BUSINESS
Aggregates, ready-mix and ash
Revenue decreased by 8% to R645 million (Sept 2018: R698 million), as a result of
decreased volumes across all segments, as the market remained competitive due to a
muted construction industry. EBITDA contracted to R35 million (Sept 2018: R40
million), due to higher fuel and maintenance costs.
Lime
The lime division grew revenue by 6% to R434 million (Sept 2018: R409 million),
with higher prices in certain products compensating for volume declines of 5%.
EBITDA contracted by 17% to R50 million (Sept 2018: R60 million), due to lower
fixed cost absorptions, higher coal costs and refractory costs.
INTERNATIONAL
Zimbabwe
Volumes declined by 30 - 35%, in-line with the decrease in the overall market,
whilst cement pricing was adjusted on a weekly basis to contend with the rapid
increase in inflation and the devaluation in currency. Revenue declined by 54% to
R497 million (Sept 2018: R1 076 million) against the backdrop of a hyper-
inflationary environment, severe weakening of the ZWL, regular power outages and a
weaker cement market. EBITDA contracted by 43% to R201 million (Sept 2018: R352
million), with EBITDA margins showing a marked improvement to 40% versus 32% in
September 2018. PPC Zimbabwe is financially self-sufficient and is preserving cash
by investing in inventory and accelerating capital expenditure.
Rwanda
CIMERWA achieved revenue growth of 28% to R514 million (Sept 2018: R402 million)
due to a 20% increase in volumes. EBITDA increased by 70% to R156 million (Sept
2018: R92 million), benefiting from increased volume output and an improved cost
per tonne performance.
DRC
PPC Barnet DRC achieved revenue growth of 26% to R303 million in the period (Sept
2018: R240 million), driven by stable pricing and production output in an
oversupplied market. The business generated EBITDA of R81 million (March 2018: R
60 million), with corresponding margins of 27%. EBITDA benefited from stringent
cost control and entrenchment of route to market strategies. The business is in
the process of restructuring its debt.
OUTLOOK
Overall, PPC will remain focused on optimising operational cash generation through
price and cost management in order to reduce financial leverage and strengthen the
balance sheet. In Southern Africa there are further opportunities to optimize the
delivery network and related fixed and variable costs. However, the cement
industry in South Africa needs to be protected from unfair competition in the form
of imports and substandard products. Unfair competition contributes to an
unsustainable pricing environment that threatens the financial viability of the
local cement industry that is of strategic relevance to the country.
In Zimbabwe, the business is self-sufficient and will continue to focus on
delivering to the market at stable EBITDA margins whilst managing cash and
implementing strategies to preserve the longer term value of the business. Despite
the challenging trading conditions, the business remains well capitalised and is
well positioned to benefit from local infrastructure projects and growth in the
region.
In Rwanda, CIMERWA is expected to benefit from the improved growth in output
following the progress of the debottlenecking project and the strong economic
climate. The DRC business will focus on maximising EBITDA and restructuring its
debt to reduce reliance on the Group.
PPC has initiated a comprehensive strategic review and certain initiatives
necessary for sustainable value creation are underway. The outcomes of our
strategic review will be communicated in due course.
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/PPC20112019. The results presentation and a copy of this
announcement will be available on the company’s website:
https://ppc.africa/corporate/investors-media/financial-presentations-reports.
SHORT FORM STATEMENT
This short form announcement is the responsibility of the directors. It is only a
summary of the information contained in the full announcement and does not contain
full or complete details. Any investment decision should be based on the full
announcement accessible from Wednesday, 20 November 2019, via the JSE link and
also available on the Company's website at https://ppc.africa/corporate/investors-
media/financial-presentations-reports.
The full announcement is available for inspection, at no charge, at the Company's
registered office 148 Katherine Street, Sandton and the office of the sponsor
during standard office hours.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2019/JSE/ISSE/PPC/PPC30Sept.pdf
Sandton
20 November 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: 20/11/2019 07:05:00
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.
Sharenet Sites 
