| Mon 26 Jan 2009, 12:08 | | PPC - Pretoria Portland Cement Company Limited - Chairman`s statement at the AGM |
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PPC
PPC
PPC - Pretoria Portland Cement Company Limited - Chairman`s statement at the AGM
- 26 January 2009 - Trading update
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE & ZSE Code: PPC
ISIN: ZAE000125886
("PPC" or "the company")
Chairman`s statement at the AGM - 26 January 2009
Trading update
Regional industry cement volumes for the first quarter of the financial year
were down 8.2% whilst the decline for the whole 2008 calendar year was only
3.9%. The November and December industry inland sales were constrained due to
competitors` production problems, resulting in a cement shortage. The company
benefited from additional sales but as a result experienced stock-outs at times.
Unfortunately there continues to be too much emphasis placed on statistics in
respect of building plans passed, which firstly only include data for major
metropoles` and secondly have become less pertinent, as data for major civil
projects and the sustained rural demand are not included in building statistics.
South Africa will inevitably feel some of the effects of the international
economic slow down and it is therefore difficult to give a definitive outlook
for the year. The company however, continues to believe that the demand for
cement regionally will remain reasonably resilient as a result of current and
future infrastructure projects. This view is in line with recent statements made
by most large South African construction companies whose order books have an
increasing weighting of infrastructure projects. Additionally, some economists
are predicting an increase in the percentage of GFCF to GDP as this year
progresses.
The industry has virtually stopped unprofitable imports which represented 5% of
the 2008 regional demand. Volumes in the Western Cape remain disappointing, but
strong demand in Botswana, up 14%, and Mpumalanga, up 8%, has helped support the
company`s sales. Our established geographic footprint and our new production
capacity positions PPC well to take advantage of any tight supply situation.
Cement operating margins have remained under pressure during the first financial
quarter. Until January the diesel price reduction has lagged the fall in the
rand price of crude oil and the rate of petrol price decreases but is at last
reducing appropriately. We expect some relief on coal prices in the second half
of the financial year as some contracts are re-negotiated.
The new Dwaalboom kiln production is progressing well and we are pleased to
report that 90,000t of cement was produced in December which enabled us to
rebuild stocks in the latter half of the month. The Hercules mill project is
progressing according to schedule, while the environmental impact assessment
process for the Riebeeck plant continues.
The Lime and Aggregates divisions have experienced a decline in sales volumes
due to decreasing demand from the steel producers and concrete product
manufacturers. This decline in demand combined with cost pressures has impacted
on margins. We have however, seen some recent signs of an improvement in demand
from the steel industry.
All the requirements of the Broad Based Black Economic Empowerment transaction
and associated Scheme of Arrangement were completed on 15 December 2008. The
company intends appointing two additional black non-executive directors to the
board from nominees put forward by the BEE Strategic Partner Consortium. The
board currently has a majority of independent non-executive directors and has an
increased number of black directors.
South Africa will inevitably feel some of the effects of the international
economic slow down and it is therefore difficult to give a definitive outlook
for the year. The company however, continues to believe that the demand for
cement regionally will remain reasonably resilient as a result of current and
future infrastructure projects. This view is in line with recent statements made
by most large South African construction companies whose order books have an
increasing weighting of infrastructure projects. Additionally, some economists
are predicting an increase in the percentage of GFCF to GDP as this year
progresses.
The company will continue to review potential scenarios within South Africa and
to explore export opportunities while optimising our production and supply
networks. As stated in the 2008 Annual Report, cash earnings should remain
strong and all major project capital expenditure will continue to be funded
through borrowings.
BL Sibiya
Chairman
For more details please contact:
John Gomersall
Chief Executive Officer
+2711 386 9058
Kevin Odendaal
Executive: Investor Relations and Strategy
+2711 386 9024
Johannesburg
26 January 2009
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 26/01/2009 12:08:01 Produced by the JSE SENS Department.
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