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PPC
PPC
PPC - Pretoria Portland Cement Company Limited - Unaudited interim results for
the half-year ended 31 March 2011
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE code: PPC
JSE ISIN: ZAE000125886
ZSE code: PPC
ZSE ISIN: ZWE000096475
Unaudited interim results for the half-year ended 31 March 2011
Good cash generation continues
Interim dividend of 35 cents per share declared
Continuing efforts to reduce costs
Rate of decline in cement demand is slowing
Consolidated statements of comprehensive income
Six months ended Year ended
31 March 31 March 30 Sept
2011 2010 2010
Unaudited Unaudited % Audited
Rm Rm Change Rm
Revenue 3 257 3 421 (5) 6 807
Cost of sales 2 120 1 989 7 4 067
Gross profit 1 137 1 432 (21) 2 740
Administration and other 309 307 1 625
operating expenditure
Operating profit before 828 1 125 (26) 2 115
item listed below
BBBEE IFRS 2 charges (5) (6) (10)
Operating profit 823 1 119 (26) 2 105
Fair value losses on (4) (8) (20)
financial instruments
Finance costs 180 176 2 366
Investment income 14 20 (30) 39
Profit before 653 955 (32) 1 758
exceptional items
Exceptional items - - (32)
Share of associates` 7 3 8
retained profit
Profit before taxation 660 958 (31) 1 734
Taxation 282 352 (20) 622
Profit for the period 378 606 (38) 1 112
Attributable to:
Ordinary shareholders 343 551 (38) 1 010
Other shareholders 35 55 (36) 102
(refer note 5)
378 606 (38) 1 112
Profit for the period 378 606 1 112
Other comprehensive 6 (53) (114)
income, net of taxation
Effect of translation of (15) (20) (47)
foreign operations
Effect of cash flow 21 (32) (56)
hedges
Revaluation of available- - - (12)
for-sale financial
investments
Taxation on other - (1) 1
comprehensive income
Total comprehensive 384 553 998
income
Earnings per share
(cents)
- basic 71.8 115.3 (38) 211.1
- diluted 71.3 114.6 (38) 209.8
Profit for the period is apportioned between ordinary and other
shareholders based on the number of shares held by each category
of shareholders as a ratio of total share capital. Refer note 7.
Condensed consolidated statements of changes in equity
Six months ended Year ended
31 March 31 March 30 Sept
2011 2010 2010
Unaudited Unaudited Audited
Rm Rm Rm
Total equity
Balance at beginning of the 858 915 915
period
Total comprehensive income 384 553 998
Dividends paid (695) (823) (1 062)
Treasury shares held by - (3) (3)
consolidated Porthold Trust
(Private) Limited (refer note 7)
BBBEE IFRS 2 charges 5 6 10
Balance at end of the period 552 648 858
Condensed consolidated statements of financial position
31 March 31 March 30 Sept
2011 2010 2010
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 4 482 4 354 4 449
Property, plant and equipment 4 182 4 071 4 175
Intangible assets 96 71 78
Non-current financial assets 117 140 120
Investment in associates 87 72 76
Current assets 1 787 1 731 1 663
Inventories 660 621 596
Trade and other receivables 867 889 827
Cash and cash equivalents 260 221 240
Total assets 6 269 6 085 6 112
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium (1 091) (1 091) (1 091)
Other reserves 62 108 32
Retained profit 1 581 1 631 1 917
Total equity 552 648 858
Non-current liabilities 3 670 3 424 3 591
Deferred taxation liabilities 635 480 568
Long-term borrowings 2 641 2 624 2 645
Provisions and other non-current 394 320 378
liabilities
Current liabilities 2 047 2 013 1 663
Short-term borrowings 1 378 1 348 876
Trade and other payables and 669 665 787
provisions
Total equity and liabilities 6 269 6 085 6 112
Net asset value per share (cents) 105 123 163
Condensed consolidated statements of cash flows
Six months ended Year ended
31 March 31 March 30 Sept
2011 2010 2010
Unaudited Unaudited Audited
Rm Rm Rm
Cash flow from operating
activities
Operating cash flows before 1 054 1 268 2 486
movements in working capital
Net increase in working capital (157) (171) (44)
Cash generated from operations 897 1 097 2 442
Net finance costs paid (109) (99) (222)
Taxation paid (284) (407) (531)
Cash available from operations 504 591 1 689
Dividends paid (695) (823) (1 062)
Net cash (outflow)/inflow from (191) (232) 627
operating activities
Acquisition of property, plant (231) (331) (660)
and equipment and other
movements
Acquisition of treasury shares - (3) (3)
by consolidated Porthold Trust
(Private) Limited
Net cash outflow from investing (231) (334) (663)
activities
Net cash inflow from financing 442 539 28
activities
Net increase/(decrease) in cash 20 (27) (8)
and cash equivalents
Cash and cash equivalents at 240 248 248
beginning of the period
Cash and cash equivalents at 260 221 240
end of the period
Cash earnings per share 95.7 112.2 320.6
(cents)*
*Cash earnings per share is calculated using cash available from operations
divided by the weighted average number of shares in issue for the period.
Notes
1. Basis of preparation
The preparation of this unaudited interim report was supervised by the CFO, P
Esterhuysen.
This unaudited interim report has been prepared using accounting policies
compliant with International Financial Reporting Standards (IFRS), the AC 500
standards as issued by the Accounting Practices Board and is in compliance with
IAS 34: Interim Financial Reporting, the JSE Limited`s listing requirements and
the South African Companies Act. The accounting policies and methods of
computation used are consistent with those applied in the preparation of the
annual financial statements for the year ended 30 September 2010, except where
the group has adopted new or revised accounting standards and interpretations of
those standards.
The group has adopted the following revised accounting standards, amendments and
interpretations, in the current period, which did not have an impact on the
reported results:
Conceptual Framework for Financial Reporting 2010
IFRS 2 Share-based Payments (Amendments relating to group cash-settled share-
based payment transactions)
IFRS 3 (amendment) Business Combinations (Measurement of non-controlling
interests, Transition requirements for contingent consideration from a business
combination that occurred before the effective date of the revised IFRS, un-
replaced and voluntarily replaced share-based payment awards)
IAS 27 (amendment) Consolidated and separate financial statements (Transition
requirements for amendments made as a result of IAS 27 (as amended in 2008))
IAS 32 (amendment) Financial Instruments: Presentation (Amendments relating to
classification of rights issues)
IFRIC 19 Extinguishing financial liabilities with equity instruments
IASB IFRS 2009 Improvements
31 March 31 March 30 Sept
2011 2010 2010
Unaudited Unaudited Audited
Rm Rm Rm
2. Profit before taxation
Included in profit before
taxation are:
Amortisation of intangible assets 9 3 9
Depreciation 200 168 359
Impairment of plant and equipment - - (33)
and financial assets
Dividends paid to BBBEE trusts 4 5 6
treated as an expense
Restructuring costs 13 - -
3. Finance costs
Bank and other borrowings 111 121 241
Dividends on redeemable 29 29 58
preference shares
Long-term borrowings 29 26 55
Finance lease interest 2 3 7
Unwinding of discount on 9 8 18
rehabilitation provisions
180 187 379
Capitalised to plant and - (11) (13)
equipment
180 176 366
4. Earnings per share and
headline earnings per share
Earnings per share (cents)
(excluding BBBEE IFRS 2 charges)
- basic 72.6 116.3 212.9
- diluted 72.2 115.6 211.6
Headline earnings per share
(cents)
- basic 71.8 115.0 216.9
- diluted 71.3 114.3 215.6
Headline earnings per share
(cents) (excluding BBBEE IFRS 2
charges)
- basic 72.6 116.0 218.7
- diluted 72.2 115.3 217.4
Determination of headline
earnings per share (cents)
Earnings per share 71.8 115.3 211.1
Adjusted for:
- Impairment of plant and - - 6.4
equipment and financial assets
- Profit on disposal of property, - (0.4) (0.7)
plant and equipment and
intangible assets
- Taxation on profit on disposal - 0.1 0.1
of property, plant and equipment
and intangible assets
Headline earnings per share 71.8 115.0 216.9
- BBBEE IFRS 2 charges 0.9 1.1 1.9
- Taxation on BBBEE IFRS 2 (0.1) (0.1) (0.1)
charges
Headline earnings per share 72.6 116.0 218.7
(excluding BBBEE IFRS 2 charges)
Headline earnings attributable to
ordinary shareholders (Rm)
Profit for the period 343 551 1 010
attributable to ordinary
shareholders
Impairment of plant and equipment - - 30
and financial assets
Profit on disposal of property, - (2) (4)
plant and equipment and
intangible assets
Taxation on profit on disposal of - 1 1
property, plant and equipment and
intangible assets
Headline earnings attributable to 343 550 1 037
ordinary shareholders
BBBEE IFRS 2 charges 4 5 10
Taxation on BBBEE IFRS 2 charges - - (1)
Headline earnings (excluding 347 555 1 046
BBBEE IFRS 2 charges)
attributable to ordinary
shareholders
5. Reconciliation of weighted
average number of ordinary shares
in issue (000)
Number of shares in issue, net of 517 472 517 472 517 472
treasury shares purchased in 2008
in terms of share buy-back
Less: Weighted average number of (37 991) (37 991) (37
shares held by consolidated BBBEE 991)
trusts and funding SPVs
Less: Weighted average number of (1 285) (1 233) (1 259)
shares held by consolidated
Porthold Trust (Private) Limited
Add: Weighted average number of 48 558 48 558 48 558
shares issued to the BBBEE CSG
and SBP funding SPVs
Weighted average number of shares 526 754 526 806 526 780
used for cash earnings per share
Less: Weighted average number of (48 558) (48 558) (48
shares issued to the BBBEE CSG 558)
and SBP funding SPVs*
Weighted average number of shares 478 196 478 248 478 222
used for basic earnings per share
calculation
Add: Dilutive adjustment for 2 894 2 987 3 007
potential ordinary shares
Weighted average number of shares 481 090 481 235 481 229
used for dilutive earnings per
share calculation
*Treated as a separate class of
shares for earnings per share
calculations as these shares have
restrictions on transferability,
and are subject to a call option
by PPC to purchase these shares
at par on 15 December 2016.
Relates to share-based payment
grants made to BBBEE trusts and
trust funding SPVs which is
treated in a manner similar to an
option.
CSG: Community Service Groups;
SBP: Strategic Black Partners.
Also refer note 7.
6. Dividend per share (cents)
- final - - 130
- interim 35 45 45
35 45 175
7. Share capital and premium
Issued share capital
- Ordinary
517 471 989 (March 2010 and 52 52 52
September 2010: 517 471 989)
shares net of treasury shares
purchased in 2008 in terms of
share buy-back
37 991 204 (March 2010 and (4) (4) (4)
September 2010: 37 991 204)
treasury shares held by the
consolidated BBBEE trusts and
trust funding SPVs*
1 284 556 (March 2010 and - - -
September 2010: 1 284 556)
treasury shares held by Porthold
Trust (Private) Limited
478 196 229 (March 2010 and 48 48 48
September 2010: 478 196 229)
shares in issue at end of the
period
- Other
48 557 982 (March 2010 and 5 5 5
September 2010: 48 557 982)
shares issued to the BBBEE CSG
and SBP funding SPVs
Total share capital 53 53 53
Share premium (1 144) (1 144) (1 144)
Balance at beginning of the (1 144) (1 141) (1 141)
period
Treasury shares held by - (3) (3)
consolidated Porthold Trust
(Private) Limited
Total issued share capital and (1 091) (1 091) (1 091)
premium
*In terms of IFRS SIC
Interpretation 12 (Consolidation
- Special Purpose Entities), The
PPC Black Managers Trust, The
Current PPC Team Trust, The
Future PPC Team Trust, The PPC
Black Independent Non-executive
Directors Trust and the trust
funding SPVs are consolidated,
and as a result, shares owned by
the entities are carried as
treasury shares on consolidation.
Following PPC gaining effective
control of PPC Zimbabwe with
effect from 30 September 2009 and
in terms of IFRS SIC
Interpretation 12, the PPC shares
owned by Porthold Trust (Private)
Limited have been carried as
treasury shares on consolidation.
The company purchased 135 300
additional shares during 2010.
8. Group segment analysis
Revenue
Cement 2 795 2 943 5 806
Lime 362 338 711
Aggregates 118 143 296
3 275 3 424 6 813
Less: Inter-segment revenue (18) (3) (6)
Total revenue 3 257 3 421 6 807
EBITDA
Cement 946 1 169 2 226
Lime 77 95 190
Aggregates 18 37 74
BBBEE trust and trust funding (4) (5) (7)
SPVs
EBITDA (excluding BBBEE IFRS 2 1 037 1 296 2 483
charges)
Operating profit
Cement 760 1 019 1 902
Lime 61 80 159
Aggregates 11 31 61
BBBEE trust and trust funding (4) (5) (7)
SPVs
Operating profit (excluding BBBEE 828 1 125 2 115
IFRS 2 charges)
BBBEE IFRS 2 charges (5) (6) (10)
Operating profit 823 1 119 2 105
Assets
Cement 5 678 5 412 5 450
Lime 429 458 452
Aggregates 160 211 208
BBBEE trust and trust funding 2 4 2
SPVs
Total assets 6 269 6 085 6 112
9. Borrowings
- Long-term* 1 517 1 517 1 517
- Finance lease liability@ 28 41 28
- Preference shares 122 131 130
1 667 1 689 1 675
BBBEE funding transaction
974 935 970
Long-term borrowings 2 641 2 624 2 645
Short-term borrowings and short- 1 378 1 348 876
term portion of long-term
borrowings
Total borrowings 4 019 3 972 3 521
*Comprises a bullet loan, bearing
interest at a fixed rate of
10.86% p.a., and is repayable on
15 December 2016, with interest
payable semi-annually.
@Bears interest at a fixed rate
of 13.1% with interest and
capital repayable annually with
the last payment payable in 2013.
Redeemable preference shares
bearing semi-annual dividends,
with variable interest rates
linked to prime and fixed rates
between 8.34% to 9.37% p.a. and
repayment dates varying between
3 - 5 years.
Redeemable preference shares
bearing semi-annual dividends,
with variable interest rates
linked to prime and fixed rates
between 8.91% and 9.62% p.a. with
repayment dates varying between
3 - 5 years, and loans bearing
interest, after giving effect to
fixed-for-variable interest rates
swaps, at a rate of 11.20% p.a.,
with interest and capital
repayable on 15 December 2013.
In terms of IFRS, these long-term
borrowings have been consolidated
as Pretoria Portland Cement
Company Limited has provided
guarantees for funding that had
an outstanding balance of R961
million as at 31 March 2011
(March 2010: R912 million and
September 2010: R940 million).
The company`s borrowing powers
are not restricted.
10. Commitments
- Contracted capital commitments 183 289 176
- Approved capital commitments 521 428 317
Capital commitments 704 717 493
Operating lease commitments 24 33 25
728 750 518
Commitments for capital expenditure are stated in current values
which, together with expected price escalations, will be financed
from surplus cash generated from operations and borrowing
facilities available to the group. The company`s capacity
upgrades in the Western Cape are expected to approximate R3
billion and expenditure will be phased over the period ending
2016. The project is still in the feasibility phase and yet to be
formally approved by the board.
11. Post-balance sheet events
There are no post-balance sheet events that may have an impact on
the group`s reported financial position at 31 March 2011. With
effect from 1 May 2011, the company complies with the new South
African Companies Act of 2008.
Paul Stuiver, CEO, said: "These results are a reflection of the difficult
business environment in the local building and construction industry. The first
half of our financial year has been impacted by lower cement demand, pressure on
selling prices and considerable input cost inflation. Apart from our usual focus
on operational costs and efficiencies, we have taken steps to curb overhead
expenditure. The company remains in a good cash generative position and is well
placed to benefit from a recovery in cement demand."
Commentary
Group revenue declined 5% to R3 257 million (2010: R3 421 million) due to lower
sales volumes across all divisions and selling price increases that were less
than the rate of cost inflation. PPC`s total cement volumes declined by 7% for
the period.
Cost of sales of R2 120 million (2010: R1 989 million) increased by 7% following
increases in electricity prices, higher depreciation charges resulting from
completed capital projects and higher diesel prices which increased distribution
costs.
Administration and other operating expenditure of R309 million (2010: R307
million) included restructuring costs of R13 million for employees who accepted
voluntary severance packages as part of a cost-reduction programme at corporate
head office.
Operating profit decreased by 26% to R823 million (2010: R1 119 million) and
group EBITDA was R1 037 million (2010: R1 296 million). The group`s EBITDA
margin declined to 32% during the period (2010: 38%) due to the combined impact
of lower sales volumes and an under-recovery of input cost inflation.
Net finance charges were R170 million (2010: R164 million). During the prior
period interest of R11 million was capitalised to property, plant and equipment
while no interest was capitalised during the current period.
Taxation, inclusive of STC of R74 million (2010: R88 million), amounted to R282
million (2010: R352 million). The overall taxation rate increased mainly due to
the release of a R19 million deferred tax provision in 2010 following a
reduction in the Zimbabwean income taxation rate.
Headline earnings per share ended 38% lower than last year at 71.8 cents per
share (2010: 115.0 cents per share).
The company`s stated dividend policy is an annual dividend cover of 1.2 to 1.5
times. The directors have declared an interim dividend of 35 cents per share
(2010: 45 cents per share).
The group`s gearing remains conservative with gross debt of R4 019 million
(2010: R3 972 million) relatively unchanged from last year. Capital investment
during the half amounted to R230 million (2010: R325 million) and the prior
financial year`s final dividend of R695 million (2010: R823 million) was paid
during this period.
Cement
South African industry cement sales volumes continued to decline, with a 4% year
on year decline recorded from October 2010 to March 2011 being the smallest for
a six-month reporting period since September 2008.
Cement demand in the Western and Eastern Cape regions remained the worst
affected. Inland regions were less affected with some rural areas recording
slight increases in sales volume over the previous year. Sales volumes in
Botswana were at similar levels to last year. As a result of its high exposure
to the Western and Eastern Cape regions, PPC`s overall cement sales in South
Africa declined by slightly more than the national average.
High input cost inflation, especially in energy prices and the cost of transport
remained a concern and was given priority focus at both an operational and
strategic level. Capital expenditure plans were reviewed and reduced in line
with lower capacity requirements.
Over-capacity in the South African cement industry occasioned by the lower
demand has resulted in an even more competitive market with increased pressure
on cement selling prices which prevented full recovery of increasing input
costs.
With regards to the modernisation of our Western Cape factories: civil
construction has commenced at the De Hoek factory and detailed proposals for the
upgrade of the Riebeeck factory were invited from potential suppliers. The
environmental impact assessment for the Riebeeck factory is progressing
according to schedule.
PPC Zimbabwe`s domestic sales increased by almost 20%. Operating performance was
hampered by production problems at the Colleen Bawn factory and significant
price inflation of key items during the early part of the reporting period.
Improvements in operational performance and selling prices were achieved by PPC
Zimbabwe during the latter part of the reporting period.
Exports to neighbouring countries remain challenging and volumes decreased by
35%.
In accordance with PPC`s leniency agreement, the company continues to co-operate
with the Competition Commission in its ongoing investigation into the cement
industry.
Lime and aggregates
Lime sales declined by 10% during the period under review, being negatively
impacted by key customers in the steel and alloys industries suffering
operational problems and extended shutdowns. The lime division posted a 19%
reduction in EBITDA to R77 million (2010: R95 million).
The aggregates division experienced a 20% reduction in sales volumes in line
with the downturn in the construction industry. EBITDA reduced by 51% to R18
million (2010: R37 million).
Board changes
Mr Harley Dent resigned as a director effective 1 November 2010 and retired from
the company at the end of 2010.
Ms Bridgette Modise was appointed to the board as an independent non-executive
director and as a member of the audit committee effective 1 December 2010.
Prospects
Management expects that challenging trading conditions will continue for the
remainder of the year. Although year to date cement demand is currently
negative, the rate of decline has been slowing and recent month to month cement
volume comparisons suggest that overall South African industry volumes for 2011
could be similar to 2010.
The outlook for the lime division will continue to depend on operational
activity of key customers in the local steel and alloys industries.
Our strategy to expand operations beyond historic geographical boundaries,
primarily into Africa, continues to receive management effort and attention.
Building on operational improvements and efficiencies that are being
implemented, PPC is well placed to benefit from a recovery in South African
cement demand.
On behalf of the board
BL Sibiya P Stuiver
Chairman Chief executive officer
17 May 2011
Dividend announcement
Notice is hereby given that interim ordinary dividend No. 215 of 35 cents per
share has been declared in respect of the six months ended 31 March 2011.
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:
Declaration date Tuesday, 17 May 2011
Last day to trade "CUM" dividend Friday, 3 June 2011
Shares trade "EX" dividend Monday, 6 June 2011
Record date Friday, 10 June 2011
Payment date Monday, 13 June 2011
Share certificates may not be dematerialised or rematerialised between Monday, 6
June and Friday, 10 June 2011, both days inclusive.
Transfers between the South African register and Zimbabwe register may not take
place between Monday, 6 June and Friday, 10 June 2011.
Zimbabwe
The important dates pertaining to this dividend for shareholders trading on the
Zimbabwe Stock Exchange are as follows:
Shares trade "EX" dividend Monday, 6 June 2011
Last day to register to receive the dividend Friday, 10 June 2011
Payment date on or shortly after Monday, 13 June 2011
The register of members in Zimbabwe will be closed from Monday, 6 June to
Friday, 10 June 2011, both days inclusive, for the purpose of determining those
shareholders to whom the dividend will be paid.
By order of the board
Jaco Snyman
Group company secretary
17 May 2011
Directors
BL Sibiya (Chairman), P Stuiver* (Chief executive officer),
S Abdul Kader, P Esterhuysen, SG Helepi, ZJ Kganyago,
AJ Lamprecht, NB Langa-Royds, MP Malungani, B Modise, TDA Ross,
J Shibambo, JS Vilakazi *Dutch
Registered office
180 Katherine Street, Sandton South Africa
(PO Box 787416, Sandton, 2146 South Africa)
Transfer secretaries
Link Market Services SA (Pty) Limited
Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein
(PO Box 4844, Johannesburg, 2000 South Africa)
Transfer secretaries: Zimbabwe
Corpserve (Private) Limited
4th Floor, Intermarket Centre
Corner First Street/Kwame Nkrumah Avenue, Harare, Zimbabwe
(PO Box 2208, Harare, Zimbabwe)
Disclaimer
This document including, without limitation, those statements concerning the
demand outlook, PPC`s expansion projects and its capital resources and
expenditure, contain certain forward-looking views. By their nature, forward-
looking statements involve risk and uncertainty and although PPC believes that
the expectations reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to have been correct.
Accordingly, results could differ materially from those set out in the forward-
looking statements as a result of, among other factors, changes in economic and
market conditions, success of business and operating initiatives, changes in the
regulatory environment and other government action and business and operational
risk management. While PPC takes reasonable care to ensure the accuracy of the
information presented, 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. This document is not intended to
contain any profit forecasts or profit estimates.
These results and other information are available on the PPC website:
www.ppc.co.za
Date: 17/05/2011 07:06:24 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
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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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