Year ahead is unpredictable, says PPC

Posted On Thursday, 12 November 2009 02:00 Published by eProp Commercial Property News
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PPC expects regional demand to pick up, but more expensive fuel and electricity will affect input costs.

Paul StuiverPRETORIA Portland Cement (PPC), SA’s largest cement manufacturer, said yesterday that although it expected an improvement in regional cement demand as a result of an anticipated recovery in the residential property sector, the outlook for next year was unpredictable.

Releasing the group’s results, CEO Paul Stuiver warned that after some softening of input costs this year, local and international fuel prices were beginning to turn upwards and this would be aggravated by the electricity price hikes that had been proposed.

“We are very pleased with the new Dwaalboom kiln and its efficiencies will to some extent offset rising energy costs.

“We expect to maintain strong operating cash flows in the year ahead,” he said.

The group’s capital expenditure amounted to R921m from R797m a year ago, with R370m spent on the Hercules mill project and R126m on finalising the Dwaalboom kiln project. The balance related to equipment replacement and environmental improvement projects.

PPC is in for a tough year ahead, with regional cement demand having declined 11% and the company’s sales down 10% for the year ended September.

But cement demand in the construction sector grew 11%, reflecting the positive effect of the many infrastructure projects. This was offset by lower demand from the residential sector, which declined significantly in the larger metropolitan areas.

Stuiver said the group planned to invest R100m next year to upgrade its plant in Zimbabwe. “The situation in Zimbabwe remains difficult to predict. Should utilisation levels remain as they are currently, we can look forward to a positive contribution from our Zimbabwean operations in future.”

He said that since Zimbabwe’s economy had adopted the dollar and rand, the group had seen an upsurge in sales.

Revenue rose 9% to R6,8bn for the year ended September.

But the accounting treatment of a R490m charge from the broad-based black economic empowerment transaction and the consolidation of Portland Holdings in Zimbabwe’s R213m gain led to the group’s operating profit dropping 8% to R2,1bn, and net profit sliding 25% to R1,1bn.

On a comparable basis, excluding the empowerment transaction and Porthold, group operating profit rose 4% to R2,4bn and net profit fell 8% to R1,4bn. Headline earnings per share including the transaction fell 40% to 170c per share. Excluding the transaction, headline earnings per share fell 9% to 257c.

The group declared total dividends of 200c per share, from 225c previously.

The good news for the group was that cash flows remained strong, despite lower demand and pressure from input costs.

Stuiver said signs that the world economy was recovering were encouraging, especially given recent statements by the Treasury on the government’s commitment to job creation, rural development, social services and infrastructure development.



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