PPC kiln shutdown dents volumes

CEMENT maker, Pretoria Portland Cement (PPC), says extended kiln shutdown in the first half of its 2023 financial year, restricted clinker production and cement volumes uptake.

The kiln operations were halted as the company carried out routine maintenance works for the furnace.

According to PPC, the slowdown was exacerbated by the plant’s downtime, which stemmed from incessant power outages leading to a negative performance in the period.

The power situation has, however, been registering notable progress in the second quarter of 2023 owing to improved hydro electricity generation from Kariba and the coming online of two generators at Hwange Power Station.

Resultantly, the cement maker’s volumes declined by 16 percent year on year amidst strong cement demand mainly from ongoing government-funded infrastructure projects and demand from concrete products manufacturers.

In the period under review, the firm’s EBITDA slumped seven percent to R365 million, down from R393 million recorded in March 2022, but margins increased to 20,8 percent, due to price increases.

According to PPC, the main drivers for the decline in EBITDA, included the hyper inflationary environment experienced in the local economy during the period.

Given a myriad of factors plaguing PPC Zimbabwe’s operations, revenue inflows declined 19 percent to R1, 8 billion from R2, 2 billion in the prior financial year which closed in March 2022.

“The impact of the planned extended kiln shutdown in the first half of the year for special maintenance and the installation of the bag house and bucket elevator, resulted in limited clinker production and ultimately restricted the volumes of cement sold,” said PPC in its 2023 consolidated financial statements.

The firm, however, commended the government for reducing the number of cement import licenses at the beginning of 2023 which it stated: “would support the recovery of PPC’s market share”.

PPC had in recent years lamented a drop in business, where it cited growing cement imports, calling the Government to promulgate protective laws to promote competitiveness of local producers.

Furthermore, the cement maker said the fast-paced value erosion of the local currency and inefficient interbank market operations in terms of accessing funds for settling foreign obligations negatively affected the business in the period under review.

To counter the threat of input cost inflation in course of the year, PPC Zimbabwe said it was able to implement US dollar price increases.

Highlighting that PPC Zimbabwe continued to generate adequate sales in foreign currency to sustain its operational requirements and to pay dividends.

The cement maker received US$8, 9 million in dividends during the year compared to US$6,2 million in the prior year with a total of R147 million net of withholding tax.

Consistent with PPC, the group’s capital investments in the year remained suppressed at R415 million and this was largely attributable to South Africa and Botswana cement (R53 million reduction) and

Zimbabwe (R69 million reduction). According to PPC fair value and foreign exchange movements resulted in a gain of R69 million compared to R2 million recorded in March last year, due to the significant depreciation of the Zimbabwean dollar against the United States Dollar.

PPC operates a clinker plant at Colleen Bawn in Gwanda in the southern part of the country, as well as cement-milling plants outside Bulawayo and Harare.-ebusinessweekly