PPC grim warning for Zimbabwe operations

SOUTH Africa's biggest cement producer PPC, which has operations in Zimbabwe, has warned that its headline loss per share from continuing operations will widen to between 7,75c (Rands) and 8,25c to end March, from 3c in the previous year.

In a trading update, the cement producer said volumes in Zimbabwe fell 16 percent despite robust cement demand from concrete product manufacturers and Government-funded infrastructure projects.

This is due to the impact of a planned kiln shutdown for maintenance which took place in the first-half of the year, but there were also stoppages due to power interruptions in the second-half.

PPC Zimbabwe has gradually recovered market share lost over this period and is well positioned to deliver strong volume growth going forward, reads part of the trading update.

With the southern African country struggling with currency depreciation and inflationary pressures, PPC said hyperinflationary accounting would have a R195 million (US$10,6 million) non-cash effects on its results, almost quadruple the effect of the prior year.

Valued at about R3,7 billion (US$201 million) on the JSE, PPC generates over 17 percent of its revenue from Zimbabwe. The biggest chunk, however, comes from its South African operations with the balance coming from Rwanda 15 percent and sales of other materials 12 percent at its half-year.

The group said volumes in SA and Botswana declined 5,8 percent. Trading conditions in the inland region remained difficult, it said, with this part of the business encompassing SA with the exclusion of the Western and Eastern Capes, and part of the Northern Cape.

As a result core profit in its South African and Botswana cement and materials businesses fell 26 percent to R570 million, with the materials business swinging into a loss, and feeling the effects of load shedding.

Net debt in this part of the group, however, fell to R800 million from about R1 billion. Rwanda's volumes were up one percent, which along with price increases and a weaker rand helped lift core profit by almost a third to R447 million.

"Despite challenging times in our core South African market, I am pleased that we achieved positive cashflow generation, further reduced our debt and are in a strong financial position to weather the local economic cycle," CEO Roland van Wijnen said in the update.

"Increased demand through an enhanced infrastructure investment programme and a stronger economic climate is required to enable us to more effectively utilise the capacity available in our primary market," he said.

"We therefore remain hopeful that the South African government will roll out its infrastructure development plans and protect the local cement market through the introduction of import tariffs to create a level playing field for domestic producers."