Zim, Rwanda operations boost PPC profit

PPC ZIM2

LOWER finance costs helped PPC increase profit more than fivefold on flat revenue for the six months to end-September, it reported yesterday morning.

The cement maker compensated for lower sales in its domestic market with robust volume growth in Rwanda and Zimbabwe.

The cement maker’s interim revenue grew by a percentage to R5.19bn from R5.16bn while after-tax profit jumped to R304m from R58m.

PPC, which was forced to raise R4bn in October 2016 by offering shares at R4 each to redeem bonds after S&P Global Ratings cut its rating to junk, said it managed to reduce finance costs by 44 percent to R285m from R509m in the matching period. The rights issue doubled the shares in issue to 1.5-billion from 758-million, slowing headline earnings per share growth to 36 percent.

“The decrease [in finance costs] was due to the benefits of the rights issue, and the liquidity and guarantee facility agreement fees incurred in the previous reporting period,” the results statement said.

The group said it managed to compensate for lower sales in its domestic market with robust volume growth in Rwanda and Zimbabwe. Its sales volumes in Rwanda grew by more than 30 percent and in Zimbabwe by more than 25 percent.

PPC is in the process of commissioning a new factory in the Democratic Republic of Congo, which is expected to be completed by the end of its financial year in March.

“Our new plant in Ethiopia has also been completed and is in the process of being tested and commissioned, which process will likely be fully completed by the end of the current financial year,” CEO Johan Claassen said in the results statement.

“Revenue in southern Africa cement, which includes Botswana, was marginally down, with higher realised average selling prices of two percent,” the results statement said.

“PPC increased prices in February and August 2017. Volumes reduced by one percentage point to four percent for this segment, noting that the current reporting period had two less trading days.”

Suitors LafargeHolcim and CRH both said they would announce firm offers for PPC this week. Dublin-based CRH said on November 13 it was “considering submitting an all-cash proposal to acquire a controlling stake in PPC”.

Swiss building materials group LafargeHolcim said on October 27 it “contemplates a combination of certain African assets, a partial cash offer and a special dividend”. On Wednesday, PPC said its independent board advised shareholders to reject Canadian financier Fairfax’s R5.75 offer, which is a 13 percent discount to PPC’s current share price of about R6.60. — Business Day.

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