Nicola Mawson
JSE-listed PPC’s plans to construct a new R3 billion state-of-the-art integrated cement plant in the Western Cape, in a show of confidence in the economy, forms part of its aim to regain market share that it has been losing for years as well as regain volumes in terms of production.
The company, which is 130 years old having started operations on the outskirts of Pretoria in 1892, announced on Thursday that Sinoma Overseas Development Company would be constructing the plant, which should be commissioned by the end of 2026, subject to board approval. The new “super” plant will replace two other plants, which are 40 years old, and currently push out 1.5 million tons via three kilns and four cement plants.
PPC CEO Matias Cardarelli told Business Report that the new plant would save between 25% to 30% in thermal energy costs as well as a conservative 30 to 35% in fixed costs in the Western Cape and would serve customers in the Western, Eastern, and Northern Cape.
Cardarelli said, “South Africa’s changing cement market dynamic urgently requires modern and cost-efficient assets, and environmentally conscious producers”. He added that this is a “major step in the sustainability of our business moving forward and will play a key role in achieving PPC’s commitment to reduce its carbon emissions and to deliver value to shareholders”.
The new plant will be equipped with a fully dedicated solar generation system and will enable PPC to supply the lowest-carbon cement in the country, it said. It will deliver between 1.5 and 1.7m tons via one kiln and one cement mill. PPC has 11 factories in South Africa, Botswana, DRC, Ethiopia, Rwanda and Zimbabwe.
“We are looking at regaining the market share that PPC has been losing for years and regaining volumes that PPC has been losing for years. It's not only a cost reduction initiative, which, of course is significant, but we are also looking at a very positive impact on our top line by recovering market share and pushing up our volumes,” he said.
Cardarelli added that the turnaround initiatives announced in November during its half-year results were starting to pay off as costs were already coming down, with the “super” plant expected to aid trimming the cost base.
“We are going to be much, much more competitive… And able to give our customers a better value proposition,” said the CEO.
PPC is confident that the sector will continue to see growth, Cardarelli said. “We strongly believe that this investment will pay off significantly even if the economy and the infrastructure and construction market don't grow. But we are conservative that we have reached to the bottom of the negative cycle. And we're conservatively optimistic that we will start to see the construction and infrastructure sector slowly coming back in the country.”
In the third quarter of last year, the construction sector recorded its second straight rise of 1.1%, according to Statistics South Africa. The agency said this “may seem relatively small, but it’s the biggest increase in two years. The positive showing in the third quarter was mainly driven by construction works, with support from activities related to non-residential buildings.”
Over the next three months, PPC and Sinoma will finalise the scope and final assessment of the new plant, as well as the associated turnkey engineer, procure and construct agreements.
PPC’s existing plants in the Western Cape will continue to operate during the construction and commissioning process to provide funding support and a smooth transition.
Funding for the “super” plant is likely to be through a combination of debt, assisted by cash from existing operations.
BUSINESS REPORT