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PPC
PPC
PPC - Pretoria Portland Cement Company Limited - Unaudited Interim Results For
The Half-Year Ended 31 March 2008
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE Code: PPC
ISIN: ZAE000096475
Unaudited interim results for the half-year ended 31 March 2008
- Revenue increased by 13% to R2,9 billion
- Cement production volumes increased 3%
- HEPS increased by 16%
- Strong cash flow
Interim dividend declared 45 cents per share
John Gomersall said: "This is a robust set of half year results given current
market conditions with cement demand being driven by
infrastructural and affordable housing programmes. We are pleased to report good
progress on our capacity expansion projects, most notably with our `Batsweledi
Project` at Dwaalboom, where commissioning is expected to commence by the end of
June."
Commentary
Southern African regional cement demand reduced by 1,3% for the period due to
the combination of the exceptionally high rainfall, the Easter holidays falling
in March this year and a softening of demand from the residential sector. The
higher mortgage interest rates combined with the impact of the National Credit
Act have had the greatest impact on the residential sector to date. The level of
active infrastructural projects continues to increase and to some extent has
offset the slowdown experienced in the residential sector.
Group revenue increased by 13% to R2,9 billion (2007: R2,6 billion) on marginal
regional cement volume growth, whilst operating profit rose 9% to R1 077 million
(2007: R987 million).
The group operating margin decreased slightly compared to the same period last
year, although the manufactured cement operating margin remained virtually
unchanged. The decrease was caused by lower Gauteng aggregate sales, temporarily
reduced lime sales volumes to the steel sector and a 100% year-on-year coal
price increase in the lime division. This increase will be passed on through
long-term contracts price adjustments in October 2008 and
January 2009.
Short-term borrowings have increased to R2,2 billion to fund capital expenditure
and a small increase in working capital requirements.
A reduction in the effective normal taxation and STC rate contributed
significantly to the 16% improvement in headline
earnings per share. The company repurchased 14,9 million shares out of surplus
cash funds totalling R589 million (2,8% of issued share capital at an average
price of R39,51 per share) in terms of the approval given by shareholders at the
annual general meeting in January 2008. The repurchased shares are accounted for
as treasury shares.
Capital expenditure amounted to R412 million (2007: R372 million) and related
mainly to the Dwaalboom `Batsweledi` and Hercules `Ntsafatso` projects.
Expansion project cash outflows should approximate R500 million for the second
half of the financial year.
Our `Batsweledi` expansion project at Dwaalboom is still within budget but has
experienced some delays in the final completion stage. These delays were due to
the exceptional rainfall experienced in January and March, which impacted on
safety conditions during the final stages of equipment erection in the pre-
heater tower at 100 meters above ground level. Safety has been our top priority
and consequently work was stopped when deemed too dangerous.
Erection time has also been lost as a result of all the public holidays and
technical staff turnover experienced by contractors.
We thus expect plant commissioning to commence towards the end of June 2008,
which in the current environment is a commendable result for a 30 month project.
Consequently, the maximum potential increase in PPC manufactured cement volumes
for 2008 over 2007 is likely to be limited to 400 000 tons, down from the 700
000 tons previously advised in October last year.
The Hercules (Pretoria) cement mill expansion project is progressing according
to schedule and within budget, and is
expected to be commissioned in the middle of calendar 2009.
In the view of the company`s results and continued strong cash flow, the
directors have declared an increased interim dividend of 45 cents per share
(2007: 38,5 cents per share).
- Cement -
Despite the South African industry cement volumes reducing by 2,2% compared to
last year, the Botswana market has shown significant infrastructural-driven
growth which assisted PPC in achieving a marginal growth in volume for the
region. All kilns have been fully operational and to date, the power shortages
have not affected output. Higher levels of manufactured output reduced the
requirement for imported product into the regional market.
- Porthold Zimbabwe -
Operating and trading conditions remained very difficult with the country
experiencing hyperinflation and ever increasing shortages of basic commodities.
Availability of both inputs and foreign currency from the Zimbabwe Reserve Bank
make the continued production of cement extremely challenging. These and the
current unstable political circumstances continue to warrant the non-
consolidation of Porthold`s results.
- Other operations -
Lime volumes reduced following planned maintenance shutdowns at some major
customers, while substantial energy input cost increases negatively impacted
operating margin. The recent return to normal levels of demand is positive for
the rest of the year.
Aggregate volumes in the Gauteng market declined following tighter market
conditions in contrast to Botswana where volumes improved. Overall profitability
reduced marginally, reflecting the reduced local demand. Recent increased demand
for metallurgical grade stone is encouraging.
- BBBEE transaction update -
The broad based black economic empowerment transaction (BBBEE) process is at an
advanced stage with the announcement now expected within a few months. The
transaction has taken longer than initially anticipated as its "broad-based"
character requires engagement with a wide range of stakeholders. These
stakeholders include employees, the many communities in which PPC operates and a
variety of bodies and associations. The engagement process with these parties
was an essential pre-requisite to obtain their fullest buy-in. PPC is committed
to completing all the necessary steps as soon as possible.
- Governance -
Ms ZJ Kganyago has been appointed to the audit committee and Mr JE Gomersall has
resigned from the committee. The audit committee now comprises only non-
executive directors and whilst it is recognised that the current chairman of the
board is also the audit committee chairman, further changes are envisaged in the
short term that will ensure full compliance to best practice in corporate
governance.
- Prospects -
Infrastructure investment continues, with increased demand from government and
public enterprises projects and the 2010 Soccer World Cup stadiums and related
projects which are in full swing. The number and size of infrastructural
projects, both in progress and planned, bodes well for industry cement demand in
the medium-term and is expected to reduce the impact of the current slowdown in
the residential sector. Although demand from the commercial and
industrial property sectors has also slowed, we expect it to remain unchanged at
current levels.
Work continues on the feasibility study for the 1,25 million tons per annum
Riebeeck West expansion and modernisation project and the draft environmental
impact assessment report has been available for public comment since January
2008 with a return date for comments at the end of June.
The extent of manufactured cement volume contribution to earnings growth
achievable this year will be limited to a maximum increase of 400 000 tons. The
decline in residential construction is likely to limit industry regional cement
demand growth this year to a range of 2 - 4%.
The company is confident that in spite of current conditions we can look forward
to reporting 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 2008
Directors: MJ Shaw (Chairman), JE Gomersall* (Chief executive officer), O Fenn*
(Chief operating officer), S Abdul Kader, RH Dent, P Esterhuysen, ZJ Kganyago,
AJ Lamprecht, NB Langa-Royds,
J Shibambo *British
Consolidated income statement
Six months Year ended
ended
31 March 31 March 30 Sept
2008 2007 2007
Unaudited Reviewed % Audited
Rm Rm Change Rm
Revenue 2 919 2 588 13 5 566
Cost of sales 1 673 1 458 (15) 3 069
Gross profit 1 246 1 130 10 2 497
Administration and 169 143 (18) 323
net operating
expenditure
Operating profit 1 077 987 9 2 174
Fair value 12 (4) 1
gains/(losses) on
financial instruments
Finance costs 69 43 (60) 84
Investment income 59 47 26 82
Profit before 1 079 987 9 2 173
exceptional items
Exceptional items 1 3 14
Share of associate`s 7 4 7
retained profit
Profit before 1 087 994 9 2 194
taxation
Taxation 413 408 (1) 765
Net profit 674 586 15 1 429
attributable to
shareholders
Net profit per share
(cents)*
- basic and fully 126 109 16 266
diluted**
Ordinary shares
(000)*
- in issue 522 712 537 612 537 612
- weighted average 535 846 537 612 537 612
number of shares
- diluted weighted 535 846 537 612 537 612
average number of
shares
Dividends per share
(cents)*
- special - - 61,0
- final - - 166,0
- interim 45,0 38,5 17 38,5
45,0 38,5 17 265,5
*March 2007 restated for the effect of the 10:1 share subdivision.
**Adjusted for treasury shares purchased during the current period
(refer note 5).
Consolidated balance sheet
31 March 31 March 30 Sept
2008 2007 2007
Unaudited Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 2 885 2 074 2 546
Property, plant and 2 487 1 688 2 178
equipment
Intangible assets 20 16 20
Investment in non- 260 260 260
consolidated subsidiary
Other non-current assets 105 100 78
Investment in associate 13 10 10
Current assets 1 560 1 078 2 336
Short-term investments - 49 2
Inventories 336 328 337
Accounts receivable 756 655 696
Cash and cash equivalents 468 46 1 301
Total assets 4 445 3 152 4 882
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium** 279 868 868
Other reserves 47 76 16
Retained profit 972 838 1 465
Total equity 1 298 1 782 2 349
Non-current liabilities 360 358 341
Long-term borrowings 68 83 68
Deferred taxation 165 166 156
liabilities
Provisions and other non- 127 109 117
current liabilities
Current liabilities 2 787 1 012 2 192
Short-term borrowings 2 161 463 1 366
Accounts payable and 626 549 826
provisions
Total equity and liabilities 4 445 3 152 4 882
Net asset value per share 248 331 437
(cents)*
**Impacted by treasury shares purchased during the current period
(refer note 5).
*March 2007 restated for the effect of the 10:1 share subdivision.
Condensed statement of changes in equity
Six months ended Year
ended
31 March 31 March 30 Sept
2008 2007 2007
Unaudited Reviewed Audited
Rm Rm Rm
Total equity
Balance at 2 349 2 203 2 203
beginning of
period
Purchase of (589) - -
treasury shares
Cash flow hedge 19 (13) (33)
reserve (net of
deferred taxation)
Other movements 11 11 (38)
Net profit 674 586 1 429
Dividends declared (1 166) (1 005) (1 212)
Balance at end of 1 298 1 782 2 349
period
Condensed consolidated cash flow statement
Six months ended Year ended
31 March 31 March 30 Sept
2008 2007 2007
Unaudited Reviewed Audited
Rm Rm Rm
Cash flow from
operating
activities
Operating cash 1 194 1 084 2 370
flows before
movements in
working capital
Net increase in (88) (199) (178)
working capital
Cash generated 1 106 885 2 192
from operations
Net investment 9 9 11
income
Taxation paid (555) (523) (743)
Cash available 560 371 1 460
from operations
Dividends paid (1 166) (1 005) (1 207)
Equity-settled - - (30)
share incentive
scheme payment
Net cash (606) (634) 223
(outflow)/inflow
from operating
activities
Acquisition of (433) (379) (772)
property, plant
and equipment and
other movements
Acquisition of (589) - -
treasury shares
Net cash outflow (1 022) (379) (772)
from investing
activities
Net cash
inflow/(outflow)
from financing
activities 795 (423) 368
Net decrease in (833) (1 436) (181)
cash and cash
equivalents
Cash and cash 1 301 1 482 1 482
equivalents at
beginning of
period
Cash and cash 468 46 1 301
equivalents at end
of period
Notes
1. Basis of preparation
This unaudited interim report has been prepared using accounting
policies compliant with International Financial Reporting Standards
(IFRS), and are in compliance with IAS 34: Interim Financial
Reporting, the JSE Limited`s listing requirements and the South
African Companies Act. The accounting polices and methods of
computation used are consistent with those applied in the
preparation of the annual financial statements for the year ended 30
September 2007, except where the group has adopted new or revised
IFRS statements.
The group has adopted the following new or revised accounting
pronouncements in the current period, which did not have a material
impact on the reported results:
IFRS 7: Financial Instruments: Disclosures
IFRS 8: Operating segments (early adopted)
31 March 31 March 30 Sept
2008 2007 2007
Unaudite Reviewed Audited
d
Rm Rm Rm
2. Profit before
taxation
Included in profit
before taxation are:
Amortisation of 2 2 4
intangible assets
Depreciation 102 91 192
3. Finance costs
Bank and other 80 33 68
borrowings
Financial lease 5 6 16
interest
Unwinding of discount 4 4 8
on rehabilitation
provisions
89 43 92
Interest capitalised (20) - (8)
to property, plant
and equipment
69 43 84
4. Headline earnings per
share
Headline earnings per
share (cents)*
- basic and fully 126 108 263
diluted, adjusted for
treasury shares
Determination of
headline earnings per
share (cents)*
Net profit per share 126 109 266
(cents)
Adjusted for (after
taxation):
- Profit on disposal
of property, plant
and equipment
and intangible assets
- (1) (3)
126 108 263
Headline earnings
(Rm)
Net profit 674 586 1 429
attributable to
shareholders
Profit on disposal of (1) (4) (15)
property, plant and
equipment and
intangible assets
Impairments - - 1
673 582 1 415
*March 2007 restated for the effect of the 10:1 share. subdivision
5. Share capital and
premium
Issued share capital
537 612 390 ordinary 54 54 54
shares in issue at
beginning of the
period
14 900 000 ordinary (1) - -
shares bought back
during the period
522 712 390 ordinary 53 54 54
shares in issue at
end of the period
Share premium 226 814 814
Balance at the 814 814 814
beginning of the
period
Utilised for purchase (588) - -
of treasury shares
Total issued share 279 868 868
capital and premium
During the period, the company bought back 14 900 000 ordinary
shares in the company, which are held as treasury shares. As these
shares were purchased during the period, the impact on earnings and
headline earnings per share is reduced as the shares are weighted
for the period for which they have been held as treasury shares.
6. Investments
Listed and unlisted 26 43 28
investments at fair
value
Directors` valuation 26 43 28
of unlisted
investments
7. Group segment
analysis
Revenue
Cement 2 514 2 209 4 798
Lime 286 265 512
Aggregates 121 124 262
2 921 2 598 5 572
Less: Inter-segment (2) (10) (6)
revenue
Total revenue 2 919 2 588 5 566
Operating profit
Cement 970 866 1 951
Lime 77 90 154
Aggregates 30 31 69
1 077 987 2 174
Total assets
Cement 3 959 2 707 4 407
Lime 357 318 338
Aggregates 129 127 137
4 445 3 152 4 882
8. 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 2008. 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.
9. Borrowings 2 229 546 1 434
The borrowings bear interest at prevailing market rates. The
company`s borrowings are not restricted.
10. Commitments
- Contracted capital 648 849 766
commitments
- Approved capital 563 807 537
commitments
Capital commitments 1 211 1 656 1 303
Operating lease 44 59 22
commitments
1 255 1 715 1 325
These commitments will be met from existing cash resources and
borrowing facilities available to the group.
11. Contingent
liabilities
Guarantees for loans, 9 8 7
banking facilities
and other obligations
to third parties
12. Post-balance sheet events
There are no post-balance sheet events that may have an impact on
the group`s reported financial position as at 31 March 2008.
Dividend announcement
Notice is hereby given that interim ordinary dividend No. 209 of 45 cents per
share has been declared in respect of the six months ended 31 March 2008.
This dividend will be paid out of profits as determined by the directors.
The important dates pertaining to this dividend for shareholders trading on the
JSE Limited are as follows:
Last day to trade "cum" dividend Friday, 23 May 2008
Shares trade "ex" dividend Monday, 26 May 2008
Record date Friday, 30 May 2008
Payment date Monday, 2 June 2008
Share certificates may not be dematerialised or rematerialised between Monday,
26 May 2008 and Friday, 30 May 2008, 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, 30 May 2008
Shares trade "ex" dividend Monday, 26 May 2008
Last day to register to receive the dividend Friday, 30 May 2008
Payment date on or shortly after Monday, 2 June 2008
The register of members in Zimbabwe will be closed from Monday, 26 May 2008 to
Friday, 30 May 2008, 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, 30 May 2008.
By order of the board
Jaco Snyman
Group company secretary
7 May 2008
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
4th Floor, Intermarket Centre, Corner 1st Street/Kwame Nkrumah Avenue, Harare,
Zimbabwe
PO Box 2208, Harare, Zimbabwe
Disclaimer
This document contains certain forward-looking statements with respect to
certain of the Group`s plans and its current goals and expectations relating to
its future financial condition and performance. Examples of forward-looking
statements include, among others, statements regarding the group`s future
financial position, income growth, impairment charges, business strategy,
projected levels of growth in the construction industry, projected costs,
estimates of capital expenditures, and plans and objectives for future
operations. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances, including,
but not limited to, domestic and global economic and business conditions, the
effects of continued volatility in credit markets, market related risks such as
changes in interest rates and exchange rates, the policies and actions of
governmental and regulatory authorities, changes in legislation, the further
development of standards and interpretations under International Financial
Reporting Standards (IFRS) applicable to past, current and future periods,
evolving practices with regard to the interpretation and application of
standards under IFRS and other strategic transactions and the impact of
competition - a number of which factors are beyond the group`s control. Whereas
the group`s actual future results may differ materially from the plans, goals,
and expectations set forth in the group`s forward-looking statements, PPC
accepts no responsibility for any consequential, indirect, special or incidental
damages, whether foreseeable or unforeseeable, based on claims arising out of
misrepresentation or negligence arising in connection with a forward-looking
statement. Forward-looking statements apply only as of the date on which they
are made, and we do not undertake other than in terms of the listing
requirements of the JSE Limited, any obligation to update or revise any of them,
whether as a result of new information, future events or otherwise. All profit
forecasts published in this interim report are unaudited.
These results and other information are available on the PPC website:
www.ppc.co.za
Date: 07/05/2008 07:01:11 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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