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PPC ahead of pre-crisis demand

BY MTHANDAZO NYONI

PAN-AFRICAN cement maker PPC says its Zimbabwean unit continues to trade “ahead of expectations” following a boom in demand underpinned by State-funded projects.

Harare is currently undertaking a massive revamp of its urban road network, which had collapsed following decades of neglect.

The biggest of the projects is the Harare-Beitbridge highway, which has progressed significantly in the past year.

Zimbabwe’s biggest cement producer, which trades its stock on the Zimbabwe and Johannesburg securities exchanges, said this week volumes for the half year to September 30, 2021 are expected to be 29% higher than 2019 levels.

This was the last year when companies traded normally before the Covid-19 pandemic hit the world.

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

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

“PPC Zimbabwe continues to trade ahead of expectations despite the challenging macroeconomic environment,” the group said in its restructuring and refinancing project and operating update for the six months ending September 30, 2021 on Monday,” it said.

“For the six months ending September 30, 2021, PPC Zimbabwe’s cement sales volumes are expected to increase by 14 to 18% year-on-year benefiting from retail demand, increased sales to concrete product manufacturers, and support from government-funded projects.

“Relative to the comparable period in 2019, cement sales volumes are expected to increase by 25-29%,” PPC added.

Last week, Finance and Economic Development minister Mthuli Ncube said a sharp rise in housing construction and private sector-led infrastructural development programmes had pushed demand for Zimbabwe’s cement makers, with capacity utilisation in big manufacturers trudging towards the 100% mark.

Ncube, who spoke during an international business conference at the Zimbabwe International Trade Fair, said developments in the cement production sector contrasted with the situation in other manufacturing businesses, which have battled to ride out of Covid-19, induced subdued demand.

However, the boom is in line with projections by industrial bodies like the Confederation of Zimbabwe Industries, which said in May that manufacturing capacity utilisation in the country would end at 61% this year, from 27% in 2020.

“I have never seen such a demand for cement in my life,” Ncube told the international conference.

“Things are going well in the cement sector and cement companies are loving it. I think PPC can safely say they are operating at 100% capacity and I think the same applies to Larfage.

“The biggest demand is not even from the roads that we are constructing as government. It’s coming from housing and private sector construction activities. It is amazing. Some of the diaspora remittances end up in the construction sector. We are expecting growth in 2021,” the minister added.

The cement industry is dominated by PPC Limited and Lafarge Zimbabwe, which have been expanding operations lately, setting up new manufacturing plants and introducing new products.

Until now, the survival of Zimbabwe’s cement makers had been threatened by an overflow of regional imports, which precipitated price wars.

But it appears with supply chains affected by Covid-19 induced border closures in the past year, demand has shifted to home front.

PPC said it expects total group cement sales volumes for the period under review to increase by 10 to 13% year-on-year, with double-digit volume growth in most business units.

Relative to the comparable period in 2019, total group cement sales are expected to increase by 6 to 9%.

The group’s materials businesses also experienced double-digit year-on-year growth in sales volumes.

PPC said its South African gross debt declined during the period, and will reduce further when proceeds of the disposals of PPC Lime and PPC Aggregate Quarries Botswana Proprietary Limited are received next month.

The company informed shareholders that it has signed non-binding term sheets with the SA Lenders to refinance its existing debt obligations and remove the undertaking for a capital raise subject.

The firm had previously advised shareholders that PPC South Africa Holdings Proprietary Limited had entered a binding agreement to dispose of its entire shareholding in PPC Lime for R515 million (US$33,88 billion).

On September 20, 2021, shareholders were informed that all outstanding conditions precedent in relation to the PPC Lime Disposal had been fulfilled on September 17, 2021.

On the outlook, the company said although it continued to face uncertain trading conditions, it was well-positioned to benefit from growing cement demand in the territories in which it operates.

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