PPC downbeat as inflation shakes Zimbabwe

JOHANNESBURG Stock Exchange (JSE)-listed Pan African cement maker, PPC has said its earnings per share (EPS) from the Zimbabwean operations would be undermined by rocketing inflation.

Ahead of releasing financial statements for the year ended March 31, 2022 next week, the South African-headquartered PPC issued a trading update yesterday, detailing how recent developments in Zimbabwe had affected its operations.

Zimbabwe is battling to forestall a raging inflationary surge, after the annual rate returned to three digit figures last month due to relentless exchange rate instabilities and forex shortages.

PPC's Zimbabwean operation remains a key factor in the overall business.

"In addition, both EPS and headline earnings from Zimbabwe are impacted by hyperinflation accounting in terms of IAS (International Accounting Standards) 29," PPC said.

However, PPC Zimbabwe's cement sales volumes are expected to increase by 21% to 25% year-on-year, benefiting from retail demand, increased sales to concrete product manufacturers and support from government-funded projects.

PPC operates a clinker plant at Colleen Bawn in Gwanda in the southern part of the country, as well as cement-milling plants outside Bulawayo and Harare.

Apart from South Africa and Zimbabwe, PPC also has units in Botswana, Ethiopia, the Democratic Republic of Congo and Rwanda.

The cement maker said group EPS from continuing operations for both the current period and the prior period was impacted by material movements in non-cash items, being fair value and foreign exchange movements, impairments and impairment reversals.

"EPS for the period from continuing operations is expected to be a loss of between three cents and seven cents per share, compared to the 65 cents per share profit for the prior period," PPC said.

It said earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations for the review period, excluding its unit in Zimbabwe were expected to be between 0% and 4% lower than the comparable prior period last year.

"In terms of the JSE Limited listings requirements, shareholders are advised that PPC is satisfied with a reasonable degree of certainty that the financial results for the period to be reported upon will differ by at least 20% from that for the previous corresponding period, being the 12 months ended 31 March 2021," the company said.

Group headline loss per share for the period from continuing operations is expected to be between one and five cents per share, compared to the three cents headline earnings per share for the prior period.

EPS for the group (including discontinued operations) for the period is expected to be between four cents and six cents per share, a decrease of between 67% and 50% from the 12 cents per share for the prior period.

"Headline loss per share for the period for the group is expected to be between 12 cents per share and 15 cents per share, an increase of between 20% and 0% from the 15 cents per share loss for the prior period.

"Earnings before interest, tax, depreciation and amortisation from continuing operations, excluding PPC Zimbabwe's EBITDA, is expected to be between 0% and 4% lower than the prior period comparable EBITDA," it said.

The company noted that cash generated from continuing operations increased by between 4% and 8% relative to the prior period.

Relative to the comparable period ended March 31, 2020 (pre-COVID-19), cement sales volumes were expected to increase by 33% to 36%.

PPC, together with Old Mutual and Seed Co International now listed on the Victoria Falls Stock Exchange were suspended from trading on the Zimbabwe Stock Exchange on June 26, 2020, with the government alleging that the companies' stocks were being used as a means of funnelling investments (foreign currency) out of the country.