| Thu 8 Nov 2001, 0:00 | | Pretoria Portland Cement Company Limited - Audited |
|
the year ended 30 September 2001
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
Company Registration number 1892/000667/06
JSE Code: PPC
ISIN Code: ZAE 000005559
Audited Preliminary Report for the year ended 30 September 2001
Highlights
- 48% growth in operating profit
- 45% growth in headline earnings per share
- 51% increase in final dividend plus a special dividend of R5,00 per
share
- VBM and Kambuku deliver improved results
COMMENT
The pleasing results for the year are largely attributable to the Value
Based Management (VBM) initiatives and the continued success of the global
competitiveness drive. The Kambuku "people process" has fostered a culture
of continuous improvement resulting in cost reductions and improved customer
service in all divisions.
Headline earnings per share increased by 45% to 709,7 cents per share (2000:
490,4 cents) and earnings per share before exceptional items increased by
46% to 711,8 cents per share (2000: 487,7 cents). The effect of the
restatements detailed in note 8 has been to reduce earnings per share by
16,0 cents (2000: 12,4 cents).
Operating profit increased by 48% to R458,5 million. All divisions reported
increased operating profits and margins.
Investment income increased by 52% reflecting the continued benefit of
strong cash flows and higher levels of cash deposits and investments in
preference shares.
Finance costs include additional provisions relating to quarrying
rehabilitation, plant decommissioning and retirement costs amounting to R8,9
million, that are accounted for on a discounted basis (2000: R8,6 million).
Exceptional items include the R56,4 million profit on the sale of PPC
Logistics (Pty) Limited.
Capital expenditure amounted to R90,6 million (2000: R161,9 million).
CEMENT
National cement demand grew by a disappointing 2,3% and while PPC enjoyed
volume growth in several provinces, excessive rains in the Western Cape
restricted our overall sales volume growth. The continued focus on improving
service levels and the quality of the customer base, the exiting of high
cost-to-serve markets and products have once again improved margins and
profitability. As a result of these factors, domestic sales volumes grew by
only 0,7% and PPC's market share declined for the second year running. A
renewed focus on increasing higher value cement exports rather than clinker
exports, increased export margins by almost 50%.
Improved process efficiencies, better plant utilisation, innovative waste
burning solutions and many employee generated cost savings have
significantly reduced costs. The improved performance of our aggregate and
ready-mix operations together with the acquisition of the Mooiplaas quarry,
have also contributed to the increase in Cement turnover and operating
profits.
In Botswana, PPC Readymix and the 50% interest in the Kgale aggregate quarry
produced acceptable returns.
Operating profit including associate companies increased by 44% to R399,8
million and the operating margin improved to 25,1% (2000: 20,2%).
LIME
Weak international commodity prices and low market demand experienced by
many of our customers, impacted negatively on our sales of lime. However
overall volumes improved by 3% as a result of increased burnt dolomite
sales.
Most of the business continued under long-term supply agreements and a
number of these were re-negotiated at better prices during the year.
Coal costs were reduced following the commissioning of the retrofitted pre-
heater on Kiln 7 and increased levels of waste burning. The introduction of
7-day, 24-hour mining operations contributed to mining efficiency
improvements.
Operating profit increased by 38% to R59,0 million and the operating margin
improved to 16,0% (2000: 13,3%). While the increase in operating profits is
pleasing, the financial returns remain below the cost of capital and prices
will have to improve.
PACKAGING
The benefit of prior year restructuring, increased sales of self-opening
bags and improvements in productivity, quality and working capital
management resulted in a significantly improved performance. Operating
profit increased from last year's R0,5 million to R10,8 million and
operating margins improved to 6,7% (2000: 0,3%).
ASSOCIATE COMPANIES
The share of associate companies' profits improved as a result of a stronger
performance from Natal Portland Cement Co. (Pty) Limited and Ash Resources
(Pty) Limited. In addition, Slagment (Pty) Limited reported profits for the
first time in a number of years.
The rationale for retaining investments in the above-mentioned associates is
currently being reviewed.
LOGISTICS: DISCONTINUING OPERATION
During the year PPC Logistics grew market share in both transport and
logistics management. The benefit of prior year restructuring, the
acquisition of new vehicles with full maintenance contracts and a continued
focus on VBM contributed to a significant improvement in operating profit
from R4,3 million to R12,5 million and operating margins improved to 9,2%
(2000: 3,9%).
PPC Logistics was sold to Barloworld Limited for R168,7 million effective
from 30 September 2001. This included R23,7 million in respect of cash
balances at year-end. This business will form part of the new Barloworld
Logistics company.
POST BALANCE SHEET EVENT: ACQUISITION
Pursuant to a scheme of arrangement approved on 22 August 2001 and
sanctioned by the High Court of Harare on 26 September 2001, PPC acquired
100% of Portland Holdings Limited Zimbabwe (Porthold) with effect from 18
October 2001. The purchase consideration of R432,4 million was settled by
way of a cash payment of R186,1 million and an issue of 3 656 119 shares in
Pretoria Portland Cement Company Limited. The shares were issued at R67,35
per share and listed on the JSE Securities Exchange South Africa and on the
Zimbabwe Stock Exchange by way of a secondary listing. Consequent to the
above, the issued share capital of the company will increase in the new
financial year to 53 668 831 shares of R1 each and the share premium will
increase to R807,5 million.
The acquisition of Porthold is a strategic long-term investment in the
southern African region. It presents a unique opportunity to benefit from
regional growth and to extend operational and marketing expertise. The
enlarged group will be more cost competitive and better positioned to meet
international competition and add value.
SPECIAL DIVIDEND
Following a period of strong cash flows and the sale of PPC Logistics, PPC
has substantial cash reserves in excess of its requirements. Consequently, a
special dividend of R5,00 per share will be paid to all shareholders.
PROSPECTS
The current year's results reflect the benefits of the focus on cash flow
returns and improved operating efficiences. Further improvements are
targeted in all our businesses in the year ahead.
It is difficult to predict what effect the current global economic
contraction may have on the South African economy and the company's
prospects for the forthcoming year with confidence. Currently we feel that
demand for our products is likely to remain static and at best may show some
modest growth.
In 2002 Portland Holdings Limited should generate positive cash flows but is
unlikely to meaningfully contribute to earnings.
In 2002 interest income will fall and tax charges will increase as a result
of the special dividend. However, modest growth in operating profits and
continued strong cash flows are expected. The company is well poised to
benefit from any improvement in market conditions and opportunities that
arise.
On behalf of the Board
W A M Clewlow J E Gomersall
Chairman Chief Executive Officer
8 November 2001
Consolidated Income Statement
Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated %
Rm Rm Change
Revenue 2 071,2 1 778,4 16
- continuing operations 2 047,9 1 761,1 16
- discontinuing operation+ 23,3 17,3 35
Operating profit 458,5 310,4 48
- continuing operations 446,0 306,1 46
- discontinuing operation 12,5 4,3 191
Finance costs 51,4 51,1 (1)
Income from investments 64,4 42,3 52
Profit before exceptional items 471,5 301,6 56
Exceptional items 57,7 9,9
Profit before tax 529,2 311,5 70
Tax 134,6 69,5
Net profit after tax 394,6 242,0 63
Share of associate companies'
retained profit 18,6 11,1 68
Net profit attributable to
shareholders 413,2 253,1 63
Earnings per share before
exceptional items (cents)
- basic 711,8 487,7 46
- fully diluted 711,8 487,7 46
Earnings per share after
exceptional items (cents)
- basic 826,3 506,2 63
- fully diluted 826,2 506,1 63
Ordinary shares of R1 each fully
paid in issue (000) 50 013 50 006
Weighted average number of
shares in issue during
the year (000) 50 011 49 999
Dividends per share (cents)
- special 500 -
- final 340 225 51
- interim 120 90 33
960 315 205
+Excluding inter-group sales of R112,1 million (2000: R94,1 million)
Consolidated Balance Sheet
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
Non-current assets 1 748,6 1 891,4
Property, plant and equipment,
intangibles,
investments and loans 1 736,3 1 878,2
Deferred tax assets 12,3 13,2
Current assets 1 186,1 660,5
Inventories and receivables 510,2 503,4
Proceeds receivable -
discontinuing operation 168,7 -
Cash and cash equivalents 507,2 157,1
Total assets 2 934,7 2 551,9
Capital and reserves
Share capital and premium 614,9 614,8
Non-distributable reserves and
retained profit 1 324,3 1 061,9
Shareholders' interest 1 939,2 1 676,7
Non-current liabilities 615,9 604,4
Interest-bearing 287,6 277,4
Non-interest bearing 120,1 107,3
Deferred tax liabilities 208,2 219,7
Current liabilities 379,6 270,8
Short-term borrowings - 18,7
Accounts payable and provisions 379,6 252,1
Total equity and liabilities 2 934,7 2 551,9
Statement of Changes in Shareholders' Interest
Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
Shareholders' interest at
beginning of year 1 676,7 1 557,8
Increase in share capital
and premium 0,1 0,9
Non-distributable reserve
movements 21,7 2,4
Net profit attributable to
shareholders 413,2 253,1
Dividends (172,5) (137,5)
Shareholders' interest at
end of year 1 939,2 1 676,7
Segmental Analysis of the Group
Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited %
Restated Change
Revenue from continuing
operations
Rm
Cement 1 593,8 1 372,7 16
Lime 368,2 322,0 14
Packaging 161,6 143,9 12
2 123,6 1 838,6 16
Less: Inter-group sales 75,7 77,5 (2)
2 047,9 1 761,1 16
Operating profit including
income from
associate companies
Rm
Cement 399,8 277,6 44
Lime 59,0 42,8 38
Packaging 10,8 0,5 2 060
469,6 320,9 46
Operating profit including
income from associate
companies is arrived at as follows:
Rm
Operating profit from
continuing operations 446,0 306,1 46
Dividends from associate
companies 5,0 3,7 35
Share of associate companies'
retained profit 18,6 11,1 68
469,6 320,9 46
Operating margin - continuing
operations
%
Cement 25,1 20,2
Lime 16,0 13,3
Packaging 6,7 0,3
22,9* 18,2*
* Based on revenue net of inter-group sales
Net operating assets
Rm
Cement 1 008,7 1 166,9 (14)
Lime 364,8 368,9 (1)
Packaging 31,6 52,3 (40)
Logistics# - 100,8
Proceeds receivable -
discontinuing operation 168,7 -
1 573,8 1 688,9 (7)
# Logistics net operating assets of R104,4 million were disposed in 2001.
Consolidated Abridged Cash Flow Statement
Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
Profit before exceptional items 471,5 301,6
Add depreciation and other 175,2 163,6
Net (increase)/decrease in
working capital (5,6) 7,5
Tax paid (9,2) (72,9)
Dividends paid (172,5) (137,5)
Net cash inflow from operating
activities 459,4 262,3
Replacement capital expenditure (80,6) (136,0)
Investment in future operations (10,0) (25,9)
Acquisition of subsidiary (24,1) -
Cash surrendered on disposal of
subsidiary (23,7) -
Proceeds on disposal of property,
plant and equipment 16,8 15,9
Investments and loans 19,3 (42,6)
Net cash outflow from investing
activities (102,3) (188,6)
Net cash (outflow)/inflow from
financing activities (8,4) 4,8
Effects of exchange rates on cash 1,4 -
Net increase in cash and cash
equivalents 350,1 78,5
Notes Year ended
30 Sept. 30 Sept.
2001 2000
Audited Audited
Restated
Rm Rm
1. Profit before tax
Included in profit before tax is:
Cost of sales 1 345,9 1 213,9
Depreciation 165,0 151,2
2. Net profit before
exceptional items
Net profit attributable to
shareholders 413,2 253,1
Profit on disposal of
subsidiary (56,4) -
Profit on disposal of
properties (1,7) (2,0)
Impairment losses/(reversal) 0,4 (0,7)
Purchase consideration of
subsidiary recovered - (7,2)
Tax on exceptional items 0,5 0,7
Net profit before exceptional
items 356,0 243,9
3. Headline earnings
Net profit before exceptional
items 356,0 243,9
(Profit)/loss on disposal
of plant and
equipment net of tax (1,6) 0,9
Amortisation of intangibles 0,5 0,4
Headline earnings 354,9 245,2
4. Investments
Unlisted at cost 246,9 246,9
Unlisted associate companies
including loans
at carrying value 74,7 62,5
Directors' valuation of
investments
- unlisted 256,0 253,7
- unlisted associate companies
including loans 227,2 171,5
5. Borrowings 287,6 296,1
The Company's borrowing powers
are not restricted
6. Commitments
Capital commitments 444,5 30,5
Acquisition of Portland
Holdings Limited
Zimbabwe 432,4 -
Contracted 11,9 12,6
Approved 0,2 17,9
Lease commitments 15,0 17,4
459,5 47,9
7. Contingent liabilities
There are contingent liabilities
in respect of
guarantees covering loans,
banking facilities and
other obligations of subsidiaries
and other third
parties limited to 5,1 5,1
8. Prior year restatement
During the year under review it has been established that the Group has
further constructive obligations in respect of plant closure decommissioning
costs and certain employee related costs at retirement. Prior year results
have been restated accordingly. The effect of providing for these additional
obligations was to reduce current year earnings by R8,0 million and to
reduce 2000 earnings by R6,2 million.
Dividend Announcement
The directors of Pretoria Portland Cement Company Limited ("PPC") have
resolved to declare the following dividends to all shareholders:
- number 189 (final dividend) of 340 cents per share
- number 190 (special dividend) of 500 cents per share.
The following schedule pertains to shareholders trading on the JSE
Securities Exchange South Africa:
Last date to trade "CUM" the dividends: Friday, 4 January 2002
Date on which PPC will trade "EX"the dividends:Monday, 7 January 2002
Record date: Friday, 11 January 2002
Payment date: Monday, 14 January 2002
Note that share certificates may not be dematerialised/rematerialised
between Friday, 28 December 2001 and Friday, 11 January 2002, both days
inclusive.
The following schedule pertains to shareholders trading on the Zimbabwe
Stock Exchange:
Last date to register to receive the dividends: Friday, 4 January 2002
Currency conversion date*: Monday, 7 January 2002
Date on which PPC will trade "EX"the dividends: Monday, 7 January 2002
Payment date: Monday, 14 January 2002
The register of members in Zimbabwe will be closed from 5 January 2002 to 7
January 2002 inclusive, for the purpose of determining those shareholders to
whom the dividends will be paid.
* The dividends will be paid in Zimbabwe Dollars at the rate quoted by
Stanbic Bank Zimbabwe Limited as the market buying rate of the SA Rand
against the Zimbabwe Dollar at or about 11:00 on Monday, 7 January 2002 or
the first business day thereafter on which foreign currency dealings are
transacted. The dividends will be paid in part through the Dividend Access
Trust (DAT).
By order of the Board
Barloworld Trust Company Limited
Secretaries
8 November 2001
Directors:
W A M Clewlow (Chairman), J E Gomersall* (Chief Executive Officer), D C
Arnold, P J Blackbeard, R J Burn, R K J Chambers, R H Dent, A J Lamprecht, P
G Nelson, A J Phillips*, P Stuiver+, M J Shaw, E P Theron.
* British +Dutch
Registered Office:
180 Katherine Street, Sandton,
South Africa
(P.O. Box 782248, Sandton 2146,
South Africa)
Transfer Secretaries:
Mercantile Registrars Limited
11 Diagonal Street,
Johannesburg 2001, South Africa
(P.O. Box 1053, Johannesburg 2000,
South Africa)
These results and other information are available on the
PPC Internet website www.ppc.co.za
PPC charges ahead with a 45% increase in headline earnings
Media Release
8 November 2001
Sharply increased profits in all divisions helped PPC to increase headline
earnings per share by 45% to 709,7 cents (2000: 490,4 cents) in the year to
September 2001.
A final dividend of 340 cents has been declared, making a total of 460 cents
declared for the year, an improvement of 46%. In addition, a special
dividend of R5.00 per share has been declared in view of the excess cash
that has arisen from strong operational cash flows and the sale of PPC
Logistics.
"We have seen a remarkable recovery in line with our 2000 forecast, however,
we are cautious on the Group's prospects for 2002 as we are unable to
predict the effect of the current global economic situation. Currently we
feel that demand for our products is likely to remain static," said John
Gomersall, Chief Executive Officer of PPC.
Cement operating profit increased by 44% to R399,8-million (2000: R277,6-
million), due to a continued focus on improving service levels, the quality
of the customer base and the withdrawal from markets which are costly to
service. Profit margins on exports increased by almost 50%, reflecting the
continued focus on cement rather than clinker exports. The aggregate and
ready-mix operations improved their performance and the acquisition of the
Mooiplaas quarry also boosted revenue and profits.
An increase of 38% in the Lime operating profits to R59-million (2000: R42,8-
million) and improved operating margins of 16% (2000: 13.3%) are pleasing,
however, cash flow returns remain below the cost of capital.
"Although lime volumes improved by three percent thanks to increased sales
of burnt dolomite, lime prices will have to improve as the business cannot
be sustained at current price levels. Domestic prices are about 40% lower
than international prices," continued Gomersall.
Group turnover rose by 16% to R2,1-billion (2000: R1,7-billion) and
operating profits increased by 48% to R459-million (2000: R310-million).
The Group operating margin from continuing operations increased to 22,9%
(2000:18,2%) and finance costs were virtually constant at R51,4-million
(2000: R51,1-million).
Income from investments rose 52% to R64,4-million (2000: R42,3-million).
The sale of PPC Logistics to Barloworld resulted in an exceptional profit of
R56,4-million.
Pre-tax income of R471,5-million resulted in a tax charge of R134,6-million
(2000: R69,5-million) which represents an effective rate of 28,5%. Net
profit attributable to shareholders rose 63% to R413,2-million (2000: R253,1-
million).
PPC's acquisition of 100% of Portland Holdings Limited Zimbabwe (Porthold)
effective from 18 October 2001 at a purchase consideration of R432,4-
million, was settled by way of a cash payment of R186,1-million and an issue
of 3 656 119 shares in Pretoria Portland Cement Company Limited.
Said Gomersall: "The acquisition of Porthold is a strategic long-term
investment in the southern African region. It presents a unique opportunity
to benefit from regional growth, and extended operational and marketing
expertise. We believe that our enlarged group will be able to add further
value, be more cost competitive and better positioned to meet international
competition."
"These pleasing results are attributable to the Value Based Management (VBM)
initiatives and the continued success of our global competitiveness drive.
In addition, the Kambuku `people process' has fostered a culture of
continuous improvement resulting in significant cost reductions and improved
customer service in all divisions," concluded Gomersall.
Ends
