Power outages cost PPC US$1m
Cement manufacturer, Pretoria Portland Cement (PPC) Zimbabwe, has suffered over US$1 million in financial losses in the first half of the financial year ended September 30, 2024 due to power supply challenges at its factories.
The company, which operates two factories in Bulawayo and Harare with each plant having an installed capacity of 700 000 tonnes of cement annually, produces clinker — a critical raw material in cement manufacturing from Colleen Bawn.
PPC Zimbabwe is presently operating at 70 percent capacity utilisation and at an industry level, local cement manufacturers have an installed capacity of more than three million tonnes annually against demand estimated at about 1,8 million tonnes.
Speaking to journalists in Harare recently, PPC Zimbabwe managing director, Albert Sigei, said their Collen Bawn plant during the period under review had close to four electricity supply-related stoppages every month.
“While we have maintained uninterrupted supplies to the country from our Colleen Bawn, Bulawayo and Harare factories, power supply remains a major threat.
“For example, we had close to four electricity supply related stops every month in our Colleen Bawn plant. “This resulted in about 180 hours of lost production, equivalent to 20 000 tonnes of clinker with adverse financial impact of more than US$1 million,” he said.
In this context, Sigei said his organisation continues to engage the country’s power utility, ZESA through its subsidiary, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), to address the incessant power challenges.
“Other challenges faced by our industry include a high-cost environment compared to our peers in the region, especially cost of power, transportation and manpower.
“For example, the power tariff increased by 76 percent compared to the same period in the prior year (2023).
“Electricity supply quality also remains an important issue leading to 408 hours of unplanned production stoppages over the last 12 months.”
The above challenges were exacerbated by recent policy changes that had an adverse impact on our sales coupled with difficulties emanating from local currency stability.
Presently, PPC Zimbabwe is accelerating 20MW and 10MW solar projects at Colleen Bawn and Bulawayo factory.
Sigei said the financial period under review was difficult with revenues recording a decline of 9 percent versus the prior year.
This was primarily due to influx of imports which were not allowed into Zimbabwe in the comparative period.
In October last year, when the local supply fell below what was expected, there were shortages and the Government had permitted the temporary import of cement.
However, authorities discontinued the import permits in March this year after it was observed that local manufacturers were producing more than needed to satisfy national demand. Despite the ban on imported cement, the local market continues to be flooded with smuggled cement from across the region.
“We have continued to witness a massive influx of imports into the country.
“We estimate that the country will unnecessarily lose over US$50 million of scarce foreign exchange annually if firm action to curb the imports is not taken.
“The imports enjoy an unfair playing field compared to local players, considering that importers have not made any investments, and this could ultimately lead to a slowing down of local manufacturing leading to job losses as cement grinding capacity utilisation becomes low,” he said.
In the period under review, a rigorous cost savings programme was implemented by the company to counter the lower revenues.
“This resulted in our Earnings Before Interest Tax and Armortisation (EBITDA) dropping by a lower rate of 4 percent and improvement in EBITDA margin by close to 2 percent.
“Going forward, we expect to face a rapidly changing business environment with intensified competition including an influx of cement imports and threats of new entrants into the market,” said Sigei.
It is envisaged that the cement industry will continue to be challenged by the significant cost escalation on critical cost drivers such as electricity, input materials transportation and manpower.
As a result, PPC Zimbabwe will continue implementing programmes to optimise costs and improve efficiency to recover profitability to 2023 level by the end of the current financial year. “Areas covered under the programme include cost of key inputs, transport costs, fixed costs and overheads on top of an enhanced focus on operational efficiency and innovation,” he said.ebsinessweejkl
