Manufacturer to Maintain Cement Prices

PRETORIA Portland Cement (PPC), the region’s largest cement manufacturer, has said it is considering not increasing prices in July because its costs had come down.


In a statement accompanying the group’s financial results, PPC CEO John Gomersall said costs in various areas were coming down, except for electricity.

“We are considering taking a responsible approach, looking at the possibility of not increasing prices in July due to the benefits of cost price recovery,” he said.

Gomersall said operations in Zimbabwe were still plagued by low demand and inconsistent electricity and coal supplies.

“In Zimbabwe, the formation of the inclusive government and dollarisation of the economy are a step forward, but difficult operating and trading conditions are likely to persist for some time,” said Gomersall.

“Operations at Porthold are still plagued by low demand and significant constraints, particularly electricity and coal,” he said.

Releasing the group’s results for the six months ended March 31, Gomersall said the group had managed to maintain strong operating cash flows despite the South African economy experiencing the global crisis.
Most of the cement produced by PPC is consumed by South Africa.

Cash generated from operations remained strong at R1 026 billion, down from R1 106 billion.

Industry costs for the six months to March 31 were 24% higher.

Despite an increase in working capital, earnings per share excluding the cost of a broad-based black economic empowerment (BBBEE) transaction and charges related to international financial reporting standards (IFRS2) declined 16% to 105,8c from 125,8c.

Revenue rose 12% to R3 261 billion from R2 919 billion while operating profit before the IFRS 2 charges for the BBBEE transaction rose 2% to R1,1 billion from R1, 077 billion.

The group’s earnings before interest, tax, depreciation and amortisation (Ebitda), an approximate measure of a company’s operating cash flow, in the six months to March grew 5% to R1, 245 billion from R1, 181 billion.

The group’s Ebitda percentage margin decreased by 1,7 percentage points compared to the same period last year, reflecting the lower lime and cement volumes and input cost increases. Gomersall said that the cement Ebitda margin’s decline was because of consistently high cost increases experienced since last year which were only partially recovered by the January cement selling price increase.

“The cost recovery impact effect thereof will be more significant in the second half,” he said.

Finance charges increased to R171 million from R69 million and investment income declined to R39 million from R59 million, due mainly to increased borrowings for capital expansions.

PPC declared an interim dividend of 45c per share, the same level as last year, and said a team was exploring the opportunities of entering African export markets.

Meanwhile in Zimbabwe, the property market continues to experience a slump in activity halfway through the second quarter.

A survey by Kingdom Stockbrokers (KSB) on selected estate agents has shown that business was at an all time low because of foreign currency scarcity.

The number of properties offered for sale have improved significantly from the first quarter whilst able buyers have continued to dwindle in this predominantly buyers market.

“Low activity has also been exacerbated by some sellers and estate agents who continue to quote high prices last seen in the last quarter of 2008,” KSB said this week.

On average, property prices have declined by between 30% and 50% of prices last seen during the third and fourth quarter of last year.

“The property market therefore continues to readjust from the overpriced levels of 2008 and the trend is set to continue until the economy starts performing positively across all sectors,” said KSB.

The rental sector is said to have slightly improved from the first quarter as more and more tenants have started making some payments towards their rental obligations.

However, many tenants are still experiencing problems in settling their arrears and paying the required monthly rentals.

“Attempts by some landlords to further increase rentals have met serious resistance from tenants as they are struggling to pay current rentals. It is a fact that rentals remain the lowest in the region but it will take some time to consider increases as this has to be matched by positive developments in the economy,” said KSB.

KSB said property valuations have kept some estate agents afloat but have had to reduce fees below the minimum stipulated in order to attract business and make sure that services were still affordable.

“However, the frequency with which valuations are being undertaken has been reduced significantly because of dollarisation and these property valuations are becoming a once-of exercise. With the threat of prices continuing to re-adjust downwards it is still advisable to carry out quarterly property valuations,” KSB said.

Building materials prices have gradually continued to go down making construction affordable but the same issue of unavailability of foreign currency has failed to kick-start completion of stalled construction projects countrywide. Availability of building materials have also improved since the beginning of the year.  

BY PAUL NYAKAZEYA