Pretoria Portland Cement (PPC) reported a 38% jump in headline earnings per share to 1154 cents for the year ended September 30 from 838.3 cents a year ago.

The company declared a final dividend of 550 cents per share and a special dividend of 650 cents per share. This makes a total of 1375 cents for the year, up 21% from the 1135 cents a year ago.

The I-Net Bridge consensus forecast had been for HEPS of 1016.6 cents and a dividend of 655 cents.

PPC attributed the increase to using Kambuku - its Value-Based Management system - to turn a gratifying rise in cement demand into a 38% increase in earnings.

All units of the cash-flush cement and lime producer achieved record levels of profitability. Cement growth exceeded expectations and the margin drop to the bottom line gave profits a boost, PPC said.

The group reported a 20% increase in revenue to R3.016 billion from R2.505 billion before, while operating profit grew 40% to R866.2 million from R616.8 million.

Chief Executive John Gomersall emphasised the role that Value Based Management has played. "Obviously a superb operating environment has been a growth driver, But Kambuku encourages all employees to add value to the business. It boosted productivity in every unit. All PPC's units operated efficiently and several new kiln production records were set. Cement distribution logistics were also further optimised, leading to cost savings and better customer service."

Cement sales approximated 4-million tons for the first time, due mainly to increasing retail and infrastructure spending in South Africa.  The main areas of growth were Gauteng, Western and Southern Cape and the Eastern Cape, where the Coega harbour project is in full swing.

The group's cement operating profit rose 39% to R740.5 million. Porthold, the Zimbabwean operation, struggled under hyper inflation and foreign exchange shortages in that country, but managed to remain cash flow positive and returned a small operating profit.

Lime demand declined because of reduced activity in the steel sector but, thanks to the renegotiation of prices on long term contracts and partly to Kambuku, lime profits were up 48% to R98.8 million.

Strong volumes, reduced waste and improved efficiency helped Afripack's profits to soar by 53% to R26.9 million. This success should play a role in negotiations between PPC and Nozala Investments on the possible sale of PPC's stake in Afripack, the company said.

Capital spending for the year amounted to R169.2 million compared with R108.3 million a year ago. The major items included the purchase of several new quarry vehicles, the acquisition of land and mineral rights and the modernisation of coating and printing equipment at Afripack.

Looking ahead Gomersall said local cement demand is expected to show growth of 4% to 5% and PPC should maintain its market share at current levels. No growth is expected in lime and burnt dolomite sales as customers in the steel industry are expected to face difficult market conditions.

Cement export revenues and export margins are likely to be lower following the recovery of the Rand.

Porthold Zimbabwe is unlikely to meaningfully contribute to earnings in 2004 as hyperinflation, a shortage of railway rolling stock and the lack of foreign exchange are expected to continue for some time yet. In the medium term this business remains well positioned to benefit from any economic improvement in Zimbabwe and exports.

Notably the group's input costs are increasing at levels above those currently reported for the year-on-year Producer Price Index. In particular, there is an indication from Spoornet of their intention to increase cement and lime transport prices by more than 40%.

At the same time, the relatively stronger rand the continued prospects for lower inflation are likely to limit selling price increases with resultant pressure on margins.

The declining interest rates will affect the level of investment income earned on surplus cash deposits.

"Notwithstanding these developments, improved operating profits are expected although net profit to shareholders will be impacted by increased tax charges. The group remains well positioned to benefit from any opportunities that may arise. The strong cash flows are expected to continue and no major capital expenditure is planned in 2004," he concluded.