| Tue 8 May 2007, 8:05 | | PPC - Pretoria Portland Cement Company - Reviewed |
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PPC
PPC
PPC - Pretoria Portland Cement Company - Reviewed Interim Results for the half-
year ended 31 March 2007 and dividend declaration
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC ISIN: ZAE000005559
Reviewed Interim Results for the half-year ended 31 March 2007
Financial highlights
- Cement volume growth remains strong
- 15% increase in operating profit to R987 million
- Capital expansion projects on target and within budget
- Operating cash flow before working capital exceeds R1 billion
Commentary
Cement demand continued to grow at double digit levels and is evidence of the
strong growth in the South African economy. Increased investment in public-
sector infrastructure is materialising rapidly and is likely to offset any
slowdown in the rate of growth in the residential building sector following the
continued rise in interest rates.
Group revenue increased by 19% to R2,6 billion whilst operating profit rose 15%
to R987 million.
In spite of some margin leverage on increased sales, operating margins decreased
slightly due to four reasons:
- the importation and sale of almost 200 000 tons of bagged Surebuild cement at
little or no margin
- significant increases in diesel and coal energy costs
- the higher cost of operating older less efficient plant as full capacity is
reached
- the inability to fully optimise distribution logistics and factory sourcing at
periods of very high demand
A reduction in the effective normal taxation rate was partly offset by an
increased secondary tax on companies (STC) charge on the higher dividends paid
in January 2007.
Headline earnings per share improved 17% on the prior year.
Capital expenditure amounted to R372 million (2006: R188 million) and related
mainly to the Dwaalboom Batsweledi project and completion of the Jupiter
recommissioning project. Expansion project cash outflows should approximate R500
million for the second half of the financial year.
Barloworld anticipates releasing shortly the salient dates relating to the
finalisation of the unbundling of its shareholding in PPC.
The broad-based black economic empowerment (BBBEE) sub-committee has commenced
detailed negotiations with the strategic partners who are likely to participate
in the company`s broad-based black equity transaction. The empowerment
transaction once complete, will incorporate these strategic partners as well as
construction sector associations, employees, and members of the communities in
which the company operates, and will effectively place 15% of the company`s
equity in the hands of black people. Funding for the transaction will
incorporate a combination of owner equity, third party institutional loans and
vendor facilitation by PPC. The company plans completing the transaction by
about the end of the current financial year.
In the view of the company`s results and strong cash flow, the directors have
declared an increased interim dividend of 385 cents per share (2006: 330 cents
per share).
CEMENT
The South African domestic cement market grew by over 12% compared with the same
period last year. The Botswana market has shown signs of recovery from the
depressed conditions of the past few years, registering growth of close to 9%
for the same period.
During this period all kilns were fully operational. Local and export demand was
supplemented with imported Surebuild cement sourced from Zimbabwe and overseas.
In addition, clinker was railed from Porthold in Zimbabwe to assist with local
production requirements.
The 1,25 million ton Batsweledi (Dwaalboom new kiln) project is progressing
according to plan and within budget. Orders for the Hercules Pretoria cement
mill upgrade and expansion project have been placed and the project is expected
to be commissioned in the middle of calendar 2009.
PORTHOLD ZIMBABWE
Operating and trading conditions remained very difficult with the country
experiencing ever increasing hyperinflation. Inbound and outbound logistical
problems, together with frequent and significant input cost increases, further
hampered forward planning and efficient operations. These and other
circumstances continue to warrant the non-consolidation of this company`s
results. Despite these constraints, the company remained cash positive for the
period under review.
OTHER OPERATIONS
Lime volumes and margins improved for the period under review following the
recovery in the world steel markets.
Aggregate volumes reflected strong growth in the Gauteng market in contrast to
Botswana where flat market conditions constrained both aggregate and ready mix
volumes. Overall profitability compared to the prior year was substantially
improved.
Afripack had successful first half results which are now equity accounted
following the redemption of the vendor financed preference shares in October
2006.
PROSPECTS
The significant investment in infrastructure planned by Government and Public
Enterprises, together with the recent award of a number of projects related to
the 2010 Soccer World Cup, bodes well for industry cement demand which is
expected to grow at current levels for the remainder of the financial year.
Growth in the commercial and industrial property sectors may be constrained due
to the technical skills shortage in the construction, infrastructure and bulk
services sectors.
Due to the expected growth in the inland market demand, the Jupiter kiln is
likely to continue operation after commissioning of the new Batsweledi kiln line
early next year and will continue to provide further cement capacity to the
market.
The increased cost of sourcing product and clinker, both internally and
externally, will continue to impact on the rate of earnings growth achievable
until the additional capacity from the current expansion projects in progress
becomes available. Progress is being made on the planning and design of the 1,25
million tons per annum Riebeeck expansion and modernisation project which will
be subject to authorisation in terms of the Environmental Impact Assessment
requirements.
The company should continue to report a good performance and strong operating
cash flows for the full year.
On behalf of the board
MJ Shaw JE Gomersall
Chairman Chief executive officer
7 May 2007
Dividend announcement
Notice is hereby given that interim ordinary dividend number 206 of 385 cents
per share has been declared in respect of the six months ended 31 March 2007.
This dividend will be paid out of profits as determined by the directors, to
shareholders recorded as such in the register at the close of business on the
record date, Friday, 1 June 2007. The last date to trade to participate in the
dividend is Friday, 25 May 2007. Shares will commence trading ex-dividend from
Monday, 28 May 2007.
The important dates pertaining to this dividend for shareholders trading on the
JSE Limited are as follows:
Last day to trade "CUM" dividend Friday, 25 May 2007
Shares trade "EX" dividend Monday, 28 May 2007
Record date Friday, 1 June 2007
Payment date Monday, 4 June 2007
Share certificates may not be dematerialised or rematerialised between Monday,
28 May 2007 and Friday, 1 June 2007, both days inclusive.
Zimbabwe
The important dates pertaining to this dividend for shareholders trading on the
Zimbabwe Stock Exchange are as follows:
Currency conversion date* Friday, 1 June 2007
Shares trade "EX" dividend Monday, 28 May 2007
Last day to register to receive the dividend Friday, 1 June 2007
Payment date on or shortly after
Monday, 4 June 2007
The register of members in Zimbabwe will be closed from Monday, 28 May 2007 to
Friday, 1 June 2007, both days inclusive, for the purpose of determining those
shareholders to whom the dividend will be paid.
* The dividend will be paid in Zimbabwe Dollars at the rate quoted by Stanbic
Bank Zimbabwe Limited at the official market rate of the SA Rand against the
Zimbabwe Dollar at or about 11:00 Friday, 1 June 2007.
By order of the board
Barloworld Trust Company Limited
Secretaries
Per AR Holt
7 May 2007
Consolidated income statement
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed % Audited
Rm Rm change Rm
Continuing operations
Revenue 2 588 2 183 19 4 686
Cost of sales 1 458 1 186 (23) 2 520
Gross profit 1 130 997 13 2 166
Non-operating income 9 8 1
Administrative expenditure 111 110 42
Other operating expenditure 41 39 (5) 263
Operating profit 987 856 15 1 862
Fair value losses on financial
instruments (4) (1) -
Finance costs 43 24 (79) 52
Income from investments 47 32 47 67
Profit before exceptional items 987 863 14 1 877
Exceptional items 3 - -
Share of associate`s retained
profit 4 - -
Profit before tax 994 863 15 1 877
Tax 284 253 (12) 543
STC on dividends paid 124 106 (17) 128
Net profit from continuing
operations 586 504 16 1 206
Net profit from discontinued
operations - - 8
Net profit 586 504 16 1 214
Attributable to:
Outside shareholders` interest - 7 -
PPC Company Limited 586 497 18 1 214
shareholders
586 504 16 1 214
Net profit per share (cents)
From continuing and
discontinued
operations
- basic and fully diluted 1 089 924 18 2 259
From continuing operations
- basic and fully diluted 1 089 924 18 2 243
Ordinary shares (000)
- in issue 53 761 53 761 53 761
- weighted average number
of shares 53 761 53 761 53 761
- diluted weighted average
number of shares 53 761 53 761 53 761
Dividends per share (cents)
- special - - 770
- final - - 1 100
- interim 385 330 17 330
385 330 17 2 200
Consolidated balance sheet
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 2 074 1 790 1 817
Property, plant and equipment 1 688 1 349 1 414
Intangible assets 16 13 14
Investment in non-consolidated subsidiary 260 295 290
Other non-current assets 110 114 99
Deferred tax - 19 -
Current assets 1 078 1 130 2 539
Short-term investments 49 - 98
Inventories and receivables 983 921 829
Assets classified as held-for-sale - - 130
Cash and cash equivalents 46 209 1 482
Total assets 3 152 2 920 4 356
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 868 868 868
Non-distributable reserves 76 44 91
Distributable reserves 838 706 1 245
Interest of shareholders of PPC 1 782 1 618 2 204
Outside shareholders` interest - 29 -
Interest of all shareholders 1 782 1 647 2 204
Non-current liabilities 358 377 364
Deferred tax 166 176 174
Interest bearing 83 96 83
Non-interest bearing 109 105 107
Current liabilities 1 012 896 1 788
Short-term borrowings 463 98 983
Liabilities directly associated with
assets held-for-sale - - 112
Bank overdraft - 307 -
Accounts payable and provisions 549 491 693
Total equity and liabilities 3 152 2 920 4 356
Net asset value per share (cents) 3 315 3 063 4 098
Condensed statement of changes in shareholders` interest
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
Interest of all shareholders
Balance at beginning of period 2 204 2 027 2 027
Revaluation of investments
(net of deferred tax) - - (1)
Equity compensation charge 1 1 1
Foreign currency translation reserve and
other movements 9 (3) (14)
Hedging reserve movements
(net of deferred tax) (13) - 36
Dividends paid (1 005) (882) (1 059)
Net profit 586 504 1 214
Balance at end of period 1 782 1 647 2 204
Condensed consolidated cash flow statement
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
Cash flow from operating activities
Operating cash flows before movements
in working capital 1 084 941 2 039
Net increase in working capital (199) (119) (8)
Cash generated from operations 885 822 2 031
Finance costs, investment income and
realised fair value adjustments on
financial instruments 9 7 15
Tax paid (523) (436) (608)
Cash available from operations 371 393 1 438
Dividends paid (1 005) (882) (1 059)
Net cash (utilised in)/generated from
operating activities (634) (489) 379
Net cash utilised in investing activities (379) (184) (243)
Net cash (utilised in)/generated from
financing activities (423) 292 761
Net (decrease)/increase in cash and
cash equivalents (1 436) (381) 897
Cash and cash equivalents at
beginning of period 1 482 592 592
Effects of exchange rates on opening
cash position - (2) 1
Deconsolidation of subsidiary company - - (8)
Cash and cash equivalents at end of period 46 209 1 482
Notes to the reviewed interim results
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
1. Profit before tax
Included in profit before tax is:
Depreciation 91 80 165
2. Finance costs
Finance costs comprise:
Bank and other borrowings 33 15 19
Financial lease interest 6 6 26
Unwinding of discount on rehabilitation
provisions 4 3 7
43 24 52
3. Headline earnings per share (cents)
- basic and fully diluted 1 082 922 2 260
Determination of headline earnings
per share (cents)
Net profit per share (cents) 1 089 924 2 259
Adjusted for (after tax):
- (Profit)/loss on disposal of property,
plant and equipment and intangible assets (7) (2) 1
1 082 922 2 260
Headline earnings (Rm)
Net profit attributable to PPC 586 497 1 214
shareholders
Adjusted for (after tax):
- (Profit)/loss on disposal of property,
plant and equipment and intangible assets (4) (1) -
582 496 1 214
4. Assets classified as held-for-sale
In line with IFRS 5 (Non-current Assets Held-for-Sale and Discontinued
Operations), due to the preference share redemption, Afripack was consolidated
as an asset classified as held-for-sale for the year ended 30 September 2006.
The results of Afripack for the period ending 30 September 2006 were as follows:
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 177
Operating profit 44
5. Investments
Unlisted investments at fair value 43 33 130
Directors` valuation of unlisted
investments 43 33 130
6. Borrowings 546 501 1 066
The company`s borrowing powers are
not restricted.
7. Commitments
Capital commitments 1 656 1 328 1 299
- contracted 849 683 668
- approved 807 645 631
Other commitments 46 - -
Operating lease commitments 59 25 27
1 761 1 353 1 326
These commitments will be met from
existing cash resources and borrowing
facilities available to the group.
8. Contingent liabilities
Guarantees for loans, banking facilities
and other obligations to third parties 8 7 7
9. Non-consolidation of Portland Holdings Limited (Porthold)
The results of Porthold, a wholly-owned Zimbabwean subsidiary, have not been
consolidated into the group as at 31 March 2007.
There are significant constraints impacting on the normal operations of Porthold
and the PPC board concluded that management does not have the ability to
exercise effective control over the business. In view of the circumstances, the
results of Porthold have continued to be excluded from group results in the
current reporting period and have been accounted for on a fair value investment
basis.
Due to the hyperinflated losses incurred, dividends received have been set-off
against the carrying value of the investment.
The summarised results of Porthold, adjusted for hyperinflation and converted
back to rands were as follows:
Year
Six months ended ended
31 March 31 March 30 Sept
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 85 113 410
Operating profit 17 2 30
Profit/(loss) before tax 1 (11) (34)
Tax 4 7 (3)
Loss after tax (3) (18) (31)
Total assets 98 600 972
Total liabilities 31 200 323
The effect of not consolidating Porthold was to increase headline earnings per
share by 6 cents (2006: increased by 33 cents) from 1 076 cents to
1 082 cents. Porthold`s results are reflected on a hyperinflated basis,
converted to South African rands at appropriate exchange rates in Zimbabwe. Due
to extreme volatility in both the inflation and exchange rates during the
period, comparison of Porthold`s results against prior reporting periods is not
meaningful.
10. Basis of preparation
The interim results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies used to prepare the interim
financial statements are consistent with those applied in the 2006 annual
financial statements and are in accordance with International Financial
Reporting Standards (IFRS), except where the group has adopted new or revised
IFRS statements.
The group has adopted the following new or revised IFRS statements in the
current period, which did not have any impact on the reported results:
AC 503: Accounting for BEE Transactions
IAS 21 Amendment: The Effects of Changes in Foreign Exchange Rates: Net
Investment in a Foreign Operation
IAS 39 Amendment: Financial Instruments: Recognition and Measurement
IFRIC 4: Determining whether an Arrangement contains a Lease
IFRIC 10: Interim Financial Reporting and Impairment
11. JSE Limited requirements
The interim announcement has been prepared in accordance with the listing
requirements of the JSE Limited.
12. Segmental analysis
The board considers the cement operations to be the predominant activity of the
company, as a result, no segmental reporting has been included.
13. Auditors` review
The auditors, Deloitte & Touche, have reviewed these interim results. A copy of
their unmodified review opinion is available for inspection at the company`s
registered office.
Directors:
MJ Shaw (Chairman), JE Gomersall* (Chief Executive Officer), O Fenn* (Chief
Operating Officer), S Abdul Kader, RH Dent, P Esterhuysen, AJ Lamprecht,
J Shibambo, EP Theron, DG Wilson *British
Registered office:
180 Katherine Street, Sandton, South Africa
(PO Box 782248, Sandton, 2146, South Africa)
Transfer secretaries:
Link Market Services SA (Pty) Limited
11 Diagonal Street, Johannesburg, South Africa
(PO Box 4844, Johannesburg, 2000, South Africa)
Transfer secretaries Zimbabwe:
Corpserve (Private) Limited
2nd Floor, Intermarket Centre
Corner 1st Street/Kwame Nkrumah Avenue, Harare, Zimbabwe
(PO Box 2208, Harare, Zimbabwe)
www.ppc.co.za
Sponsor: J.P.Morgan Equities Limited
Date: 08/05/2007 08:05:25 Produced by the JSE SENS Department.
