PPC reassures investors: Zimbabwe import permits won't impact cement volumes

PPC is unfazed by import permits granted in Zimbabwe, saying these will not affect its volumes in the country.

Zimbabwe is facing constrained supply of cement, prompting the government to issue import permits for the construction industry raw material.

This had raised fears that this could disrupt volumes for local manufacturers, including PPC, which is the biggest producer of cement in the country.

PPC CEO Matias Cardarelli said in an interview that the granting of import licences by the government was understandable given shortages on the market.

Cardarelli said, “I understand the reaction from the government to issue some import permits temporarily but also, I believe that the tariffs are very important in terms of local producers to be able to plan the investment moving forward for the future.”

PPC has just received a $20 million (R343m) half-year dividend from its Zimbabwe unit and has just completed a plant performance improvement exercise there.  

Cardarelli said the cement shortages in Zimbabwe were not attributable to PPC capacity issues but to rival operators. Lafarge has exited Zimbabwe, with local businessmen taking over the operation and re-branding it as Khaya Cement.

“Well, the point is that it's not because of us. You know that it was the former Lafarge, and other (local) competitors that we are not able to produce to the technical capacity they supposedly they have,” he said.

PPC was now working on an improved efficiency program in Zimbabwe and pivoted to a three-year plan at the Colleen Bown plant. The program would also raise capacity and reduce production costs for the company’s operation in Zimbabwe.

“We have a three-year plan in our Colleen Bown plant that is looking at increasing capacity and reducing production costs,” Cardarelli said in an interview.

The company, however, has to brace for potential disruption for its Zimbabwe market as Nigerian billionaire, Aliko Dangote has signed a deal to develop a cement manufacturing plant in the country. Chinese companies are also setting up cement plants in Zimbabwe.

Cardarelli, nonetheless, believes PPC is well positioned to stay ahead of the competition as it focuses on “quality revenues” and lowering costs.

During the half year period to the end of September, the JSE-listed PPC lifted earnings before interest, tax, depreciation and amortisation (Ebitda) by 23.5% to R983 million. This was after overall revenues for the period quickened 6.2% to above R5 billion.

Headline earnings per share (HEPS) adjusted for unrealised foreign exchange losses for the half year firmed up by 32% to 29 cents while net cash inflow before financing activities increased by 32% to R661m.

PPC has attributed this to strong operational momentum although the HEPS performance had been impacted by non-cash unrealised foreign exchange losses on foreign exchange contracts taken out to hedge US dollar exposure on the construction of the new Western Cape plant.

BUSINESS REPORT