PPC Zim boosts group revenue earnings

PRETORIA Portland Cement (PPC) Zimbabwe operations experienced a robust recovery in the fiscal year ending on March 31, 2024, regaining lost market share due to demand from residential construction and Government-funded infrastructure projects significantly boosting the group’s revenue by 20,6 percent climbing from R8,339 million to R10,058 million, an official has said.

The local unit’s impressive performance was a result of overcoming the challenges faced during an extended maintenance shutdown of the kiln in the previous year’s first half.

In the annual and summarised consolidated financial statements for the year ending March 31, 2024, Group CEO Matias Cardarelli highlighted a revenue increase of 20,6 percent to R10,058 million, compared to FY23’s R8,339 million.

The growth, he said, was primarily driven by the strong performance of PPC’s operations in Zimbabwe.

“PPC’s operation in Zimbabwe delivered a strong recovery in the current year albeit off a low base following the extended maintenance shutdown of the kiln in the first half of the prior year. Zimbabwe won back the market share it had lost with demand across both residential construction and Government-funded infrastructure projects,” he said.

Experts have often described infrastructure projects as a panacea to Zimbabwe’s economic growth and development.

Therefore, under the National Development Strategy 1 (NDS1), the Government has committed to infrastructure development, supported by the private sector.

The NDS1 is the Government’s current five-year economic management master plan through to year 2025, which has a strong focus on building, expanding and restoring infrastructure.

The country has the capacity to produce 2,6 million tons of cement per annum with demand hovering around 1,5 to 1,6 million tons per annum.

PPC has three factories in the country in Harare, Bulawayo and Colleen Bawn with a milling capacity of over 1,4 million tons of cement per annum and has provided cement for the Kariba South Hydro-power Station expansion project, US$1,4 billion Hwange Thermal Power Expansion project, Kunzwi Dam construction, Beitbridge road rehabilitation, Robert Mugabe International Airport rehabilitation and the Lake Gwayi-Shangani investment.

In the period under review, cement sales volumes increased 36,6 percent when compared to the prior year (FY23: down 15,8 percent) although growth has softened as the effect of the stronger base in the H2 FY23 starts coming through.

Revenue for the year increased by 90,9 percent in rand terms to R3 346 million (FY23: R1 753 million) on strong cement volumes and price increases.

The full-year impact of the five percent selling price increase that was effected in August 2022 (the prior year) and the four percent sales price increase effected in January 2024 also contributed to the revenue increase.

EBITDA margins reduced marginally to 20,2 percent (FY23: 20,8 percent) for the full year, but significantly off the half-year margins of 24,6 percent due to high electricity costs resulting from a gradual tariff increase from October 2023.

Clinker purchases also continued in H2 FY24 and the full cost of purchased clinker was 169 percent higher than the prior year.

Dividends of US$11 million were paid during the year (FY23: US$10 million).

He said South Africa and Botswana group cement revenues increased only marginally by 5,2 percent, driven by price increases and increased sales of clinker to Zimbabwe, which positively offset the declining cement sales volumes.

Revenue from the materials businesses declined by six percent relative to the prior year. Group cost of sales increased 16,3 percent to R8 409 million (FY23: R7 231 million).

“All of the increase in the cost of sales is attributable to Zimbabwe, with the SA and Botswana group’s cost of sales declining marginally by 1,3 percent (R73 million), driven by lower sales volumes. Group administration and other operating expenditure increased by 5,5 percent,” he said.

The group EBITDA margin improved to 12,3 percent (FY23:10,7 percent), accordingly, trading profit increased by R502 million to R619 million (FY23: R117 million).

“Of the R502 million increase, R395 million was attributable to Zimbabwe. Depreciation for the group decreased by R155 million to R623 million (FY23: R778 million). The most material contributors to the decrease were PPC Zimbabwe and SA and Botswana cement.

“Due to the change in the functional currency for PPC Zimbabwe from the ZWL to the United States dollars (US$), hyperinflation accounting is no longer applicable, which resulted in a decrease in property, plant and equipment and an associated decrease in depreciation by R86 million.”

In the period under review, Mr Cardarelli said Zimbabwe remained debt-free and had unrestricted cash holdings at 31 March 2024 of R40 million (FY23: R118 million).

Approximately 80 percent of PPC Zimbabwe’s cash is held in hard currencies.

“Zimbabwe declared and paid a US$4 million dividend in H1 FY24 (H1 FY23: US$5 million) and a US$7 million dividend in H2: FY24 (H2: FY23 US$5 million) bringing the total dividends paid during the year to US$11 million (FY23: US$10 million).”-chroncile