Trade and Industry Correspondent
BARLOWORLD subsidiary PPC's cement sales exceeded expectations in its first quarter to December despite the major slowdown in large capital projects in SA possibly setting the scene for another good year for building material suppliers.
PPC chairman Warren Clewlow warned at the company's annual general meeting yesterday that the high level of growth in the first quarter may not be sustained. But robust cement sales growth for the year was still expected.
PPC projected a 4% to 5% rise in group sales in the year to September. Its first-quarter sales growth was ahead of these figures. The Cement and Concrete Institute estimated that cement sales would grow between 4% and 4,5% this year.
SA's cement sector recorded its fastest growth in more than six years last year, with sales climbing 5,6%.
If a growth rate of about 4% a year were maintained for the next two years, PPC would consider an investment of between R1bn and R2,5bn in a new production plant.
Lower interest rates were stimulating construction of retail, home and office buildings during the quarter to December. This compensated for the drop-off in cement demand caused by the slowdown in major capital projects, particularly in mining.
An analyst said PPC's sales in the quarter to December could also be attributed to construction at the Coega industrial development zone, which continued throughout the festive period.
PPC was a large supplier to the multibillion-rand project. PPC's Zimbabwean operations, meanwhile, remained a source of concern. MD John Blackbeard said yesterday that the situation was still "very difficult, day to day".
Obtaining spares was particularly problematic. Many of the suppliers in Zimbabwe had closed down, Blackbeard said.
Road and rail transport was also not reliable, and sourcing diesel was difficult. Sales volumes and revenue at the Zimbabwe business were slightly ahead of expectations, however.
The group still saw the Zimbabwean operation as a valuable asset in the long term.
Meanwhile, Clewlow declined to comment at the meeting yesterday on a shareholder's question about Barloworld's possible takeover of PPC, which is believed to have been on the cards for some time. Barloworld is the major shareholder of PPC with about 67%.
In its trading update issued at the meeting, PPC reiterated that strong cash flows were expected to continue
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