eBusiness Weekly
Nelson Gahadza
PPC Zimbabwe says it implemented US dollar price increases three times this year in order to recover input cost inflation.
PPC Limited in its half year financials for the period ended September 30, 2022, said the increases at its Zimbabwean unit were implemented in March of 5 percent, 2 percent in April 2022 and a further 5 percent increase in August 2022.
“The sound group performance was, however, impacted by hyperinflation accounting, with the Zimbabwean dollar depreciating 72 percent against the rand since March 31, 2022 and distorting the consolidated results,” the group said.
However, it noted that while PPC Zimbabwe continued to generate good cash returns, US$4,4 million in dividends were paid to the group during the period under review.
During the period under review, due to a planned kiln shutdown, required for maintenance, PPC Zimbabwe’s cement sales volumes declined 13 percent period-on-period.
The group noted that following the resumption of clinker production at the end of May 2022, PPC Zimbabwe’s cement sales volumes improved in the second quarter of FY23 relative to the first quarter of FY23 with a continued robust cement demand from residential construction and Government-funded infrastructure projects.
“Further, PPC observed an increase in foreign currency availability in the Zimbabwean economy, with over 80 percent of cement sales occurring in foreign currency during the period under review.”
PPC said it received a US$3,7 million dividend in December 2021 and an additional US$4,4 million in dividends in June 2022.
Revenue for the period decreased by 31 percent to R855 million due to the impact of the planned kiln maintenance and the depreciation in the Zimbabwean dollar against the rand.
EBITDA declined by 48 percent to R148 million with a reduced EBITDA margin of 17,3 percent.
The group said the EBITDA and EBITDA margin were adversely impacted by the procurement of clinker from South Africa and Zambia as a way to offset the impact of the kiln shutdown during a high demand period.
“Imported clinker, including transport, is more expensive than PPC Zimbabwe’s own clinker manufacturing costs.
“In addition, the shutdown of the kiln incurred once-off additional maintenance costs, which negatively impacted the EBITDA margin,” the group said.
The group indicated that as at September 30, 2022, PPC Zimbabwe held R253 million in hard currency cash.
“In light of the current economic climate, the group will continue to improve cash generation and operational efficiencies in an effort to further strengthen its financial position
and reduce the impact of rising input cost inflation.”
The group noted that without a significant increase in infrastructure spending and tangible action against imports, South Africa’s cement demand is expected to remain subdued.
However, PPC Zimbabwe anticipates a further recovery for the balance of the financial year thereby restoring its profitability to historical levels.
