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Pretoria Portland Cement Company Limited - Reviewed Interim
Results for the half-year ended 31 March 2004
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE Code: PPC
ISIN: ZAE 000005559
Reviewed Interim Results for the half-year ended 31 March 2004
- 15% growth in domestic cement volumes
- 37% growth in operating profit
- 26% growth in dividend
- 33% growth in headline earnings per share
Consolidated Income Statement
Six months ended Year ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed % Audited
Rm Rm Change Rm
Revenue 1,630.0 1,400.1 16 3,015.9
Operating profit 517.4 376.8 37 866.2
Exceptional items (1.9) 3.6 4.1
Profit from operations 515.5 380.4 36 870.3
Fair value (loss)/profit (0.6) 13.6 6.5
on financial instruments
Finance costs 25.6 42.8 40 56.1
Income from investments 53.2 68.7 (23) 126.4
Amortisation of goodwill (0.1) (0.1) (0.1)
Profit before tax 542.6 420.0 29 947.2
Tax 158.9 118.6 (34) 256.9
STC on dividends paid 72.6 60.5 (20) 69.1
Net profit after tax 311.1 240.9 29 621.2
Share of associates" 3.7 1.2 5.9
retained profit
Net profit attributable 314.8 242.1 30 627.1
to shareholders
Net profit per share
(cents)
- basic 585.8 450.5 30 1,166.9
- fully diluted 585.7 450.5 30 1,166.8
Headline earnings per
share (cents)*
- basic 587.7 441.0 33 1,154.0
- fully diluted 587.6 441.0 33 1,153.9
Ordinary shares of R1 53,744 53,744 53,744
each fully paid in issue
(000)
Weighted average number
of shares
in issue during the 53,744 53,744 53,744
period (000)
Increase in number of
shares as a
result of unexercised 4 - 2
options (000)
Fully diluted weighted 53,748 53,744 53,746
average number of shares
(000)
Dividends per share
(cents)
- special - - 650
- final - - 550
- interim 220 175 26 175
220 175 26 1,375
Determination of headline
earnings per share
Net profit per share 585.8 450.5 1,166.9
(cents)
Adjusted for (after tax):
Profit on disposal of
property, plant and
equipment (3.2) (9.4) (12.6)
Impairment of intangibles 5.2 - -
Amortisation of goodwill (0.1) (0.1) (0.3)
Headline earnings per 587.7 441.0 1,154.0
share (cents)
*Refer notes 3 and 4 for a reconciliation of net profit
attributable to shareholders to headline earnings.
Consolidated Balance Sheet
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets 1,973.0 2,101.5 1,935.4
Property, plant and equipment, 1,537.7 1,976.8 1,818.5
investments and loans
Investment in subsidiary company 322.3 - -
Intangible assets 7.2 10.3 10.4
Negative goodwill (1.0) (1.1) (1.1)
Deferred tax assets 15.2 13.8 16.0
Long-term loan 91.6 101.7 91.6
Current assets 1,086.0 1,083.7 1,551.3
Investment in associate company 4.1 5.4 6.0
subject to sale
Inventories and receivables 705.0 678.4 641.7
Cash and cash equivalents 376.9 399.9 903.6
Total assets 3,059.0 3,185.2 3,486.7
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 865.8 865.8 865.8
Non-distributable reserves 47.0 13.7 (98.3)
Retained profit 1,073.4 1,069.8 1,369.6
Interest of shareholders of PPC 1,986.2 1,949.3 2,137.1
Minority interest - 0.1 0.1
Interest of all shareholders 1,986.2 1,949.4 2,137.2
Non-current liabilities 680.3 826.2 751.2
Interest-bearing 366.6 387.5 366.6
Non-interest-bearing 119.3 125.9 118.5
Deferred tax liabilities 194.4 312.8 266.1
Current liabilities 392.5 409.6 598.3
Short-term borrowings 12.5 12.2 12.7
Accounts payable and provisions 380.0 397.4 585.6
Total equity and liabilities 3,059.0 3,185.2 3,486.7
Net asset value per share 3,695.7 3,627.2 3,998.1
(cents)
Statement of Changes in Shareholders" Interest
Six months ended Year ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed Audited
Rm Rm Rm
Interest of shareholders of
PPC
Balance at beginning of 2,137.1 2,310.7 2,121.1
period
Net movements not recognised 152.5 (96.1) (10.2)
through the income statement
Revaluation of investments - - 0.8
(net of deferred tax)
Impact of deconsolidation of 7.2 - -
Porthold on opening retained
profit
Foreign Currency Translation 145.3 (96.1) (11.0)
Reserve and other movements*
Net movements recognised (303.4) (265.3) 26.2
through the income statement
Net profit attributable to 314.8 242.1 627.1
shareholders
Dividends paid (618.2) (507.4) (600.9)
Balance at end of period 1,986.2 1,949.3 2,137.1
* The FCTR movement relates principally to the deconsolidation of
Porthold.
Consolidated Abridged Cash Flow Statement
Six months ended Year
ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed Audited
Rm Rm Rm
Profit before tax and 544.5 416.4 943.1
exceptional items
Depreciation and other non- 90.0 96.4 181.6
cash items
Net increase in working (123.9) (139.7) (52.2)
capital
Tax paid (377.3) (235.1) (261.6)
Dividends paid (618.2) (507.4) (600.9)
- ordinary (268.9) (184.9) (278.4)
- special (349.3) (322.5) (322.5)
Net cash (outflow)/inflow from (484.9) (369.4) 210.0
operating activities
Replacement capital (34.3) (85.5) (152.1)
expenditure
Investment in future - (14.0) (17.1)
operations
Movements in investments and 5.1 8.3 12.6
loans
Proceeds from the disposal of 4.8 6.9 9.2
property, plant and equipment
Receipt of instalment on long- - - 10.2
term loan
Net cash outflow from (24.4) (84.3) (137.2)
investing activities
Net cash outflow from - (2.1) (21.2)
financing activities
Effects of exchange rates on (6.3) (15.9) (9.0)
opening cash position
Effects of deconsolidation of (11.1) - -
Porthold
Net (decrease)/increase in (526.7) (471.7) 42.6
cash and cash equivalents
Notes
Six months ended Year
ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed Audited
Rm Rm Rm
1. Profit before tax
Included in profit before tax
are:
Cost of sales 981.7 899.3 1,907.8
Depreciation 76.6 90.3 170.0
Fair value (loss)/profit on (0.6) 13.6 6.5
financial instruments
- translation of foreign (1.6) 16.4 9.1
currency monetary items
- other instruments 1.0 (2.8) (2.6)
2. Finance costs
Finance costs comprise:
Bank and other borrowings 1.0 2.0 2.8
Financial lease interest 23.8 24.7 41.2
Monetary loss on hyperinflation - 12.3 9.5
Unwinding of discount on 0.8 3.8 2.6
rehabilitation provisions
25.6 42.8 56.1
3. Net profit before
exceptional items
Net profit attributable to 314.8 242.1 627.1
shareholders
Profit on disposal of (0.9) (3.6) (4.1)
properties
Impairment of intangibles 2.8 - -
Tax on exceptional items - 0.2 0.1
Net profit before exceptional 316.7 238.7 623.1
items
4. Headline earnings
Net profit before exceptional 316.7 238.7 623.1
items
Profit on disposal of plant and (0.8) (1.6) (2.8)
equipment (after tax)
Amortisation of goodwill (0.1) (0.1) (0.1)
Headline earnings 315.8 237.0 620.2
5. Investments
At fair value 259.9 259.1 259.9
Unlisted associates including 12.2 16.0 16.4
loans at carrying value
- non-current 8.1 10.6 16.4
- current 4.1 5.4 -
Directors" valuation of 280.9 284.7 287.9
unlisted shares
6. Borrowings 379.1 399.7 379.3
The company"s borrowing powers
are not restricted.
7. Commitments
Capital commitments 14.5 32.4 24.5
- contracted 12.7 28.3 18.4
- approved 1.8 4.1 6.1
Operating lease commitments 5.2 17.2 6.4
19.7 49.6 30.9
These commitments will be met
from available resources.
8. Contingent liabilities
Guarantees for loans, banking 6.8 9.2 6.7
facilities and other
obligations to third parties.
9. Deconsolidation of Portland Holdings Limited (Porthold)
The results of Porthold, a wholly owned Zimbabwean subsidiary,
have in terms of the exclusion contained in IAS 27 (Consolidated
Financial Statements and Accounting for Investments in
Subsidiaries) not been consolidated into the Group results as at
31 March 2004.
The circumstances in Zimbabwe are such that there are severe
restrictions placed on our ability to access foreign currency and
remit funds. This fact, together with the significant constraints
impacting the normal operation of Porthold, have resulted in the
PPC Board concluding that management does not have the ability to
exercise control over the business.
In view of the circumstances, the results of Porthold have been
deconsolidated from the Group results in the current period and
have been accounted for on a fair value investment basis, with
earnings being recognised on a dividend basis.
The summarised results of Porthold, adjusted for hyperinflation
and converted back to Rands at the prevailing auction rate, were:
Six months ended Year
ended
31 March 31 March 30 Sept.
2004 2003 2003
Revenue 83.3 27.7 49.1
Operating profit/(loss) 2.5 (9.6) 0.6
Profit/(loss) before tax 6.4 (13.3) (0.4)
Tax 2.2 (3.1) 3.0
Profit/(loss) after tax 4.2 (10.2) (3.4)
Total assets 718.7 381.3 246.2
Total liabilities 227.5 121.1 81.6
The impact of the deconsolidation of Porthold was to reduce
headline earnings per share in the period by 10.7 cents from 598.4
cents to 587.7 cents.
10. Comparative information
The comparative results of the Group have not been restated for
the effects of Porthold applying IAS 29 (Financial Reporting in
Hyperinflationary Economies). This is in accordance with the
revised IAS 21 (The Effects of Changes in Foreign Exchange Rates),
which the Group has adopted in the period under review. This has
no effect other than to no longer require the restatement of the
Group"s 2003 results for the effect of hyperinflation in Porthold.
11. Basis of preparation
The interim results have been prepared in accordance with IAS 34
(Interim Financial Reporting). Except for the items mentioned in
notes 9 and 10 above, the accounting policies adopted are
consistent with those applied in the annual financial results for
the year ended 30 September 2003.
12. JSE Securities Exchange requirements
The interim announcement has been prepared in accordance with the
listings requirements of the JSE Securities Exchange South Africa.
13. Auditors" review
The auditors, Deloitte & Touche, have reviewed these interim
results. A copy of their unqualified review opinion is available
for inspection at the company"s registered office.
Segmental Analysis of the Group"s Operations
Revenue
Six months ended Year ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed % Audited
Rm Rm Change Rm
Cement 1,317.3 1,105.9 19 2,417.8
Lime 225.9 228.2 (1) 462.6
Packaging 137.5 117.6 17 239.5
1,680.7 1,451.7 16 3,119.9
Less: Inter-segment
revenue 50.7 51.6 (2) 104.0
1,630.0 1,400.1 16 3,015.9
Operating profit
Six months ended Year ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed % Audited
Rm Rm Change Rm
Cement 460.6 312.3 47 740.5
Lime 42.2 50.1 (16) 98.8
Packaging 14.6 14.4 1 26.9
517.4 376.8 37 866.2
Operating margin
Six months ended Year ended
31 March 31 March 30 Sept.
2004 2003 2003
Reviewed Reviewed Audited
% % %
Cement 35.0 28.3 30.6
Lime 18.7 22.0 21.4
Packaging 10.6 12.2 11.2
31.7* 27.0* 28.7*
* Net of inter-segment revenue
Commentary
The strong performance in the first half is largely attributable
to the continued growth in cement demand arising from improved
levels of infrastructural spending and buoyant housing
construction prompted by the lower interest rates. This combined
with our ongoing Value Based Management (VBM) focus on value
creation, resulted in an improvement in operating profit well
ahead of revenue growth.
Headline earnings per share increased 33% to 587.7 cents, this
after an STC charge of 81.3 cents per share (2003: 75.0 cents per
share) on the special dividend of R6.50 per share paid in January
2004.
Group revenue increased 16% to R1.6 billion following 13% growth
in industry cement volumes for the half year, with growth of over
20% in February and March 2004 over the same months last year.
Cement export volumes were 28% lower than last year and despite
this and the effect of the stronger Rand, they made the same
contribution as last year mainly as a result of lower costs and
better international US Dollar prices.
Operating profit increased by 37% to R517.4 million in spite of
the decline in the Lime division. Notwithstanding the very
difficult conditions prevailing in Zimbabwe, Porthold managed to
report a small operating profit (2003: small operating loss).
Investment income and finance costs have been impacted by the
deconsolidation of Porthold.
Capital expenditure of R34.3 million (2003: R99.5 million) related
mainly to items of a replacement nature.
In view of the company"s strong results, favourable cash position
and current low level of capital expenditure, the directors have
proposed that an increased interim dividend of 220 cents per share
(2003: 175 cents) be declared.
CEMENT
Domestic cement sales for the half-year increased by 15% over the
comparable period last year and revenues increased accordingly by
27%. Gauteng, the Western, Southern and Eastern Cape continued to
be the areas of greatest volume growth. The Coega Harbour project
and associated development has been a major boost to construction
activity in the Eastern Cape and sales in the Port Elizabeth area
for the month of March 2004 were at an all time record.
The Rand strength and Spoornet capacity problems continue to
curtail exports both overland into Africa and to offshore markets.
The situation in Zimbabwe continued to deteriorate with the
economy struggling with both hyperinflation and continual
shortages of foreign exchange. These conditions resulted in our
Zimbabwe sales volumes declining to almost 50% of those achieved
last year. Inflationary pressures on input costs, wages and coal
have reduced margins, whilst unrealistic prices, particularly
electricity have resulted in a temporary stoppage of the Colleen
Bawn operations.
The circumstances in Zimbabwe are such that there are severe
restrictions placed on our ability to access foreign currency and
remit funds. This fact, together with the significant constraints
impacting management"s ability to exercise effective control over
the business has resulted in the PPC Board concluding that the
results of Porthold should no longer be consolidated. The results
of Porthold have been deconsolidated from the Group results in the
current period and have been accounted for on a fair value
investment basis with earnings being recognised as dividends are
received.
Operating profit increased by 47% from R312.3 million to R460.6
million on revenue increases of 19%.
LIME
Sales volumes were 7% lower than last year and this is reflected
in the revenue decline of 1%. Pricing in terms of long-term
contracts with certain customers is still at a low level,
negatively impacting on both revenues and margins.
Operating profit was 16% lower than last year at R42.2 million.
PACKAGING
The sale of 75% of Afripack to a BEE and management consortium
remains subject to certain suspensive conditions, including the
approval of the Competition Commission.
Strong demand for cement sacks and good growth in other product
lines generated a 17% increase in revenue. Operating margins
declined to 11% (2003: 12%) due to the impact of higher priced
inputs as a result of the stronger Rand and as a consequence, the
operating profit of R14.6 million was only 1% higher than last
year.
ASSOCIATES
Share of associates" retained profit increased to R3.7 million
from R1.2 million last year, mainly due to an improved
contribution from Slagment. The sale of the one-third interest in
Slagment is awaiting approval from the Competition Tribunal.
BOARD AND MANAGEMENT
Mr RKJ Chambers retired as a director with effect from 26 January
2004. His valuable contribution over the past 10 years is
sincerely appreciated.
Mr P Esterhuysen was appointed to the Board as Director Finance
and Administration with effect from 1 December 2003.
Mr PJ Blackbeard will leave the Board on 30 June 2004 to head up
the Scientific Division of Barloworld Limited in the United
Kingdom.
Dr O Fenn was appointed Managing Director of the PPC Cement
Division and was appointed to the Board on 5 March 2004.
TRANSFER SECRETARIES
The company changed its South African transfer secretaries from
Computershare Investor Services Limited to Ultra Registrars (Pty)
Limited with effect from 1 March 2004.
PROSPECTS
The first half reflected unexpected cement volume growth of 15%
and arose largely from very high cement demand in the months of
February and March 2004 in particular. Whilst it is unlikely that
this level of growth can be maintained through the remainder of
this year, local cement demand could grow by 8% to 10% for the
financial year, which is double the original forecast.
Lime and burnt dolomite volumes may increase marginally as South
African steel producers are likely to increase their output to
meet the surge in worldwide steel demand. The low Producer Price
Index will place a restraint on lime contractual price increases
in the short term.
Porthold will continue to experience difficult conditions with the
management focus being on maintaining a cash positive position.
The disposal of the 75% interest in Afripack is expected to be
completed before the end of the current quarter and Packaging will
therefore reflect a reduced contribution in the second half.
The balance sheet remains sound and the company is well positioned
to take advantage of any opportunities that may arise. Strong cash
flows are expected to continue, arising from the improved
profitability and a lower level of capital expenditure.
The current growth in cement demand should enable the company to
report increased operating profits and cash flow for the full
year. The year on year rate of increase in the second half is
however likely to be lower than that achieved in the first half.
On behalf of the Board
W A M Clewlow J E Gomersall
Chairman Chief Executive Officer
5 May 2004
Dividend Announcement
Notice is hereby given that interim ordinary dividend No. 197 of
220 cents per share has been declared in respect of the six months
ended 31 March 2004. This dividend will be paid out of profits as
determined by the directors, to shareholders recorded as such in
the register at the close of business on the record date, Friday,
4 June 2004. The last date to trade to participate in the dividend
is Friday, 28 May 2004. Shares will commence trading ex-dividend
from Monday, 31 May 2004.
The important dates pertaining to this dividend for shareholders
trading on the JSE Securities Exchange South Africa are as
follows:
Last day to trade "CUM" dividend Friday, 28 May 2004
Shares trade "EX" dividend Monday, 31 May 2004
Record date Friday, 4 June 2004
Payment date Monday, 7 June 2004
Share certificates may not be dematerialised or rematerialised
between Monday, 31 May 2004 and Friday, 4 June 2004, 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* Monday, 31 May 2004
Shares trade "EX" dividend Monday, 31 May 2004
Last day to register to receive Friday, 4 June 2004
the dividend
Payment date Monday, 7 June 2004
The register of members in Zimbabwe will be closed from Monday, 31
May 2004 to Friday, 4 June 2004, 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 as the official market buying
rate of the SA Rand against the Zimbabwe Dollar at or about 11:00
am on Monday, 31 May 2004 or the first business day thereafter on
which foreign currency dealings are transacted.
By order of the Board
Barloworld Trust Company Limited
Secretaries
Per AR Holt
5 May 2004
Directors:
W A M Clewlow (Chairman), J E Gomersall* (Chief Executive
Officer), P J Blackbeard (Chief Operating Officer), R J Burn, R H
Dent, P Esterhuysen, O Fenn*, A J Lamprecht, A J Phillips*, M J
Shaw, E P Theron
*British
Registered Office:
180 Katherine Street, Sandton, South Africa
(P.O. Box 782248, Sandton 2146, South Africa)
Transfer Secretaries:
Ultra Registrars (Proprietary) Limited
11 Diagonal Street, Johannesburg, South Africa
(P.O. Box 4844, Johannesburg 2000, South Africa)
Transfer Secretaries Zimbabwe:
Corpserve (Private) Limited
4th Floor, Intermarket Centre, Corner 1st Street/Kwame Nkrumah
Avenue, Harare, Zimbabwe
(P.O.Box 2208, Harare, Zimbabwe)
These results and other information are available on the PPC
Internet website www.ppc.co.za
Date: 06/05/2004 07:00:41 AM Produced by the JSE SENS Department
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