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. 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. Capital expenditure amounted to R372 million (2006: R188 million) and related mainly to the Dwaalboom Batsweledi project and completion of the Jupiter recommissioning project. Headline earnings per share improved 17% on the prior year.
Dividend
In the view of the company's results and strong cash flow, the directors have declared an increased interim dividend of 385cps (330cps).
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.
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