| Thu 4 Nov 2004, 9:42 | | Report for the year ended 30 September 2004 |
|
Pretoria Portland Cement Company Limited - Audited preliminary report for the
year ended 30 September 2004
PRETORIA PORTLAND CEMENT COMPANY LIMITED
Incorporated in the Republic of South Africa
(Registration number 1892/000667/06)
JSE code: PPC
ISIN code: ZAE000005559
(`PPC` or `the company`)
Audited preliminary report for the year ended 30 September 2004
These results and other information are available on the PPC internet website
www.ppc.co.za
financial highlights
- strong growth in cement volumes drives margin improvement
- 35% growth in operating profit - exceeds R1 billion for the first time
- 27% growth in headline earnings per share
- special dividend of 1 400 cents per share
consolidated income statement
Year ended
30 Sept 30 Sept
2004 2003
Audited Audited %
Rm Rm change
Revenue 3 440,1 3 015,9 14
Operating profit 1 171,3 866,3 35
Fair value gains on financial instruments 0,2 6,5
Finance costs 52,9 56,1 6
Income from investments 100,6 126,4 (20)
Profit before exceptional items 1 219,2 943,1 29
Exceptional items (0,3) 4,1
Profit before tax 1 218,9 947,2 29
Tax 353,6 256,9 (38)
STC on dividends paid 86,0 69,1 (24)
Net profit after tax 779,3 621,2 25
Share of associates` retained profit 10,9 5,9
Net profit 790,2 627,1 26
Outside shareholders` interest 3,8 -
Net profit attributable to shareholders in PPC 786,4 627,1 25
Company Limited
Net profit per share (cents)
- basic 1 463,2 1 166,9 25
- fully diluted 1 463,1 1 166,8 25
Headline earnings per share (cents)*
- basic 1 463,2 1 154,0 27
- fully diluted 1 463,1 1 153,9 27
Ordinary shares of R1 each fully paid in issue 53 750 53 744
(000)
Weighted average number of shares in issue 53 745 53 744
during the year (000)
Increase in number of shares as a result of 5 2
unexercised options (000)
Fully diluted weighted average number of shares 53 750 53 746
(000)
Dividends per share (cents)
- special 1 400 650 115
- final 700 550 27
- interim 220 175 26
2 320 1 375 69
Determination of headline earnings per share
Net profit per share (cents) 1 463,2 1 166,9
Adjusted for (after tax):
Profit on disposal of property, plant and (4,9) (12,6)
equipment and intangible assets
Impairment of intangibles 5,2 -
Amortisation of negative goodwill (0,3) (0,3)
Headline earnings per share (cents) 1 463,2 1 154,0
*Refer notes 3 and 4 for a reconciliation of net profit attributable to
shareholders to headline earnings.
Consolidated balance sheet
30 Sept 30 Sept
2004 2003
Audited Audited
Rm Rm
ASSETS
Non-current assets 1 946,2 1 935,4
Property, plant and equipment, investments and loans 1 516,5 1 818,5
Investment in subsidiary company 315,2 -
Intangible assets 15,2 10,4
Negative goodwill (1,0) (1,1)
Deferred tax assets 18,7 16,0
Long-term loan 81,6 91,6
Current assets 1 618,3 1 551,3
Investment in associate company subject to sale 7,6 6,0
Inventories and receivables 662,7 641,7
Cash and cash equivalents 948,0 903,6
Total assets 3 564,5 3 486,7
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 866,5 865,8
Non-distributable reserves 50,9 (98,3)
Retained profit 1 423,0 1 369,6
Interest of shareholders of PPC 2 340,4 2 137,1
Outside shareholders` interest 7,6 0,1
Interest of all shareholders 2 348,0 2 137,2
Non-current liabilities 697,0 751,2
Interest-bearing 393,3 366,6
Non-interest-bearing 118,8 118,5
Deferred tax liabilities 184,9 266,1
Current liabilities 519,5 598,3
Short-term borrowings 21,3 12,7
Accounts payable and provisions 498,2 585,6
Total equity and liabilities 3 564,5 3 486,7
Net asset value per share (cents) 4 361,8 3 998,1
statement of changes in shareholders` interest
Year ended
30 Sept 30 Sept
2004 2003
Audited Audited
Rm Rm
Interest of shareholders of PPC
Balance at beginning of year 2 137,1 2 121,1
Net movements not recognised through the income 153,5 (10,2)
statement
Revaluation of investments (net of deferred tax) 4,7 0,8
Issue of share capital 0,7 -
Foreign currency translation reserve and other 148,1 (11,0)
movements*
Net movements recognised through the income statement 49,8 26,2
Net profit attributable to shareholders in PPC 786,4 627,1
Company Limited
Dividends paid (736,6) (600,9)
Balance at end of year 2 340,4 2 137,1
* The FCTR movement relates principally to the deconsolidation of Porthold.
Consolidated abridged cash flow statement
Year ended
30 Sept 30 Sept
2004 2003
Audited Audited
Rm Rm
Cash flow from operating activities
Operating cash flows before movements in working 1 336,5 1 045,3
capital
Net increase in working capital (48,5) (52,2)
Cash generated from operations 1 288,0 993,1
Realised fair value adjustments on financial 0,3 6,4
instruments
Finance costs and investment income 47,6 73,0
Tax paid (528,6) (261,6)
Net cash inflow from operating activities 807,3 810,9
Dividends paid (736,6) (600,9)
- ordinary (387,3) (278,4)
- special (349,3) (322,5)
Net cash retained from operating activities 70,7 210,0
Acquisition of property, plant and equipment and (82,5) (169,2)
intangibles
Proceeds on disposal of subsidiary company, 23,1 22,8
investments and loans
Dividends received from non-consolidated subsidiary 6,3 -
Proceeds from the disposal of property, plant and 9,6 9,2
equipment and intangibles
Net cash applied to investing activities (43,5) (137,2)
Net cash inflow/(outflow) from financing activities 33,5 (21,2)
Net cash inflow for the year 60,7 51,6
Cash and cash equivalents at beginning of year 903,6 861,0
Net cash inflow for the year 60,7 51,6
Effects of exchange rates on opening cash position (5,2) (9,0)
Effects of deconsolidation of Porthold (11,1) -
Cash and cash equivalents at end of year 948,0 903,6
segmental analysis of the Group`s operations
Year ended
30 Sept 30 Sept
2004 2003 %
Audited Audited change
Revenue
Rm
Cement 2 801,5 2 417,8 16
Lime 459,5 462,6 (1)
Packaging 282,6 239,5 18
3 543,6 3 119,9 14
Less: Inter-segment revenue 103,5 104,0
3 440,1 3 015,9 14
Year ended
30 Sept 30 Sept
2004 2003 %
Audited Audited change
Operating profit
Rm
Cement 1 038,2 740,6 40
Lime 101,9 98,8 3
Packaging 31,2 26,9 16
1 171,3 866,3 35
Year ended
30 Sept 30 Sept
2004 2003
Audited Audited
Operating margin
%
Cement 37,1 30,6
Lime 22,2 21,4
Packaging 11,0 11,2
34,1* 28,7*
* Net of inter-segment revenue
notes
Year ended
30 Sept 30 Sept
2004 2003
Audited Audited
Rm Rm
1. Profit before tax
Included in profit before tax are:
Cost of sales 2 003,2 1 907,8
Depreciation 152,4 170,0
Amortisation of negative goodwill (0,1) (0,1)
Fair value gains on financial instruments 0,2 6,5
- translation of foreign currency monetary (0,3) 9,1
items
- other instruments 0,5 (2,6)
2. Finance costs
Finance costs comprise:
Bank and other borrowings 3,0 2,8
Financial lease interest 48,1 41,2
Monetary loss on hyperinflation - 9,5
Unwinding of discount on rehabilitation 1,8 2,6
provisions
52,9 56,1
3. Net profit before exceptional items
Net profit attributable to shareholders 786,4 627,1
Profit on disposal of properties (2,5) (4,1)
Impairment of intangibles 2,8 -
Tax on exceptional items - 0,1
Net profit before exceptional items 786,7 623,1
4. Headline earnings
Net profit before exceptional items 786,7 623,1
Profit on disposal of plant and equipment - (2,8)
(after tax)
Profit on disposal of intangibles (0,2) -
Amortisation of negative goodwill (0,1) (0,1)
Headline earnings 786,4 620,2
5. Investments and associates
Listed and unlisted investments at fair value 265,4 259,9
Unlisted associates including loans at carrying 7,8 16,4
value
- non-current 0,2 16,4
- current 7,6 -
273,2 276,3
Directors` valuation 274,3 287,9
- unlisted investments 265,2 259,8
- listed investments 0,2 0,1
- unlisted associates including loans 8,9 28,0
6. Borrowings 393,3 366,6
The company`s borrowing powers are not
restricted.
7. Commitments
Capital commitments 52,2 24,5
- contracted 21,1 18,4
- approved 31,1 6,1
Operating lease commitments 34,5 6,4
86,7 30,9
These commitments will be met from available
resources.
8. Contingent liabilities
Guarantees for loans, banking facilities and 6,9 6,7
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 exclusions contained in IAS 27 (Consolidated
Financial Statements and Accounting for Investments in Subsidiaries)
not been consolidated into the Group results as at 30 September
2004.
The circumstances in Zimbabwe are such that there are severe
restrictions placed on the 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 effective control over the business. In view of these
circumstances, the results of Porthold have been deconsolidated from
the Group results in the current year and have been accounted for on
a fair value investment basis, with earnings being recognised as
dividends are received. The summarised results of Porthold, adjusted
for hyperinflation and converted back to Rands at the prevailing
auction rate, were:
Revenue 171,5 49,1
Operating (loss)/profit (5,4) 0,6
Loss before tax (2,2) (0,4)
Tax 5,4 3,0
Loss after tax (7,6) (3,4)
Total assets 765,0 246,2
Total liabilities 250,9 81,6
Exchange rate (Z$: Rand) 860 770
Movement in the inflation index for the year (%) 363 534
The inflation index moved 363% whilst the exchange rate reflected only a
12% movement giving rise to a huge disparity in the hyperinflated results.
The impact in the current year of the deconsolidation of Porthold was to
increase headline earnings per share by 14,3 cents from 1 448,9 cents to
1 463,2 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 year 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 annual financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) and with
South African Statements of Generally Accepted Accounting Practice
on a basis consistent with previous financial statements, except
where the Group has adopted new or revised IFRS statements as
disclosed below. The Group has adopted the following IFRS statements
in the current year, which did not have a material impact on
reported results: IAS 1, IAS 2, IAS 10, IAS 17, IAS 21, IAS 24, IAS
28, IAS 31, IAS 32, IAS 33, IAS 39, IAS 40 and IFRS 5. This report
has been extracted from the audited annual financial statements.
12. JSE Securities Exchange requirements
The final announcement has been prepared in accordance with the
listings requirements of the JSE Securities Exchange South Africa.
13. Auditors` review
The auditors, Deloitte & Touche, has issued its opinion on the
Group`s financial statements for the year ended 30 September 2004. A
copy of their unqualified report is available for inspection at the
Company`s registered office.
comment
Domestic cement sales volumes grew at a higher rate than originally anticipated
and ended 14% up on last year.
Improved levels of infrastructural investment and a buoyant housing construction
market continued, with further interest rate cuts also stimulating economic
growth. These factors all assisted in the Company achieving an excellent result
for the year. The continued Value Based Management (VBM) focus also contributed
to a further improvement in operating profit well ahead of revenue growth.
Whilst the continued strength of the Rand constrained export volumes, the strong
growth of the domestic market more than compensated for these reduced volumes.
Cement demand in Zimbabwe remained low, with the country continuing to struggle
with high inflation and foreign currency shortages. Porthold was able to earn
foreign currency from exports into the neighbouring countries and remained cash
positive for the year.
Reported Group revenue growth was limited to 14% following the decision earlier
this year to discontinue consolidation of the results of Porthold in Zimbabwe,
with comparative figures not required to be restated. Whilst the current
economic situation in Zimbabwe is not satisfactory, the investment continues to
be strategic and will contribute significantly to earnings, once the economic
crisis there is resolved.
Operating profits increased by 35% with the cement margin reflecting an
improvement on the back of higher volumes, continued production efficiencies and
tight cost control, whilst the lime and packaging margins remained substantially
in line with the prior year.
Investment income and finance costs were lower than last year following lower
yields on cash balances together with the impact of not consolidating Porthold.
The effective rate for normal taxation rose from 34,3% to 36,2% due largely to
the expiry of the Section 37H taxation holiday enjoyed by the Saldanha project
over the past four years. The STC charge includes R43,7 million arising from the
special dividend paid in January 2004 (2003: R40,3 million).
Headline earnings per share increased 27% to 1 463,2 cents.
Capital expenditure amounted to R82,5 million (2003: R169,2 million) and was
limited to items of a replacement nature. After consideration of the Company`s
strong cash position, and the low level of capital expenditure planned for 2005,
the directors have declared an increased final dividend of 700 cents per share
(2003: 550 cents per share) and a special dividend of 1 400 cents per share
(2003: 650 cents per share).
CEMENT
Domestic cement volumes increased by 14% for the full year, with growth slowing
slightly in the second half after the 15% experienced in the first half. Volume
growth was evident throughout the country, with the coastal belt from Cape Town
to Port Elizabeth reflecting the highest levels. Sales to the Ngqura (Coega)
harbour project resulted in the Port Elizabeth plant running at full capacity
with additional supplies being sourced from inland factories. Demand from this
project has peaked and volumes will taper off from the final calendar quarter of
2004.
The momentum of the Kambuku and VBM processes continued and Invocom
communication processes reached a higher level of effectiveness. The Company
finished second overall and first in its class in the Deloitte / Financial Mail
Best Company to Work For 2004 award. This positive climate continues to elicit
cost savings and improved efficiencies, which together with the benefit of
increased volumes enabled a further meaningful improvement in cement operating
margins.
Operating profit increased by 40% from R740,6 million to R1 038,2 million.
LIME
Burnt product volumes reflected a decline following process changes and
operational problems at some major customers.
Re-structuring of the Lime Acres operation was successfully completed during the
year at a cost of R3 million and will reduce future costs by around R8 million
per annum.
Operating profit increased 3% from R98,8 million to R101,9 million, mainly due
to improved efficiencies and tight cost control.
PACKAGING
Improved demand for cement sacks together with good volume growth in the ream
wrap market, allowed overall volumes to increase 18%. The recently commissioned
reel-to-reel capital project also assisted in achieving higher production
volumes.
Operating profit increased by 16% from R26,9 million to R31,2 million. The sale
of 75% of the equity to a management and empowerment consortium was completed on
2 August 2004. The nature of the funding requires that the results will continue
to be consolidated until loans have been repaid.
ASSOCIATE COMPANIES
The one third interest in Slagment (Pty) Limited has been sold for R15 million,
subject to conditions precedent, which conditions were only met in October 2004.
BOARD OF directors
Mr WAM Clewlow resigned as Chairman on 5 May 2004, but will continue as a member
of the Board and
Mr AJ Phillips was appointed in his stead.
Mr P Esterhuysen was appointed to the Board as Director Finance and
Administration with effect from 1 December 2003.
Mr PG Nelson resigned from the Board effective 31 December 2003.
Mr RKJ Chambers retired as a director with effect from 26 January 2004. His
valuable contribution over the past 10 years is sincerely appreciated.
Dr O Fenn was appointed Managing Director of the PPC Cement Division and was
appointed to the Board on 5 March 2004.
Mr CB Thomson, Finance Director of Barloworld Limited, was appointed to the
Board on 5 May 2004.
Mr PJ Blackbeard resigned from the Board on 30 June 2004 to accept the position
of CEO of the Scientific Division of Barloworld Limited in the United Kingdom.
Mr RJ Burn appointed Mr S Abdul Kader as his alternate director on 3 November
2004.
TRANSFER SECRETARIES
Ultra Registrars (Pty) Ltd were appointed South African transfer secretaries
with effect from 1 March 2004.
PROSPECTS
Government`s stated intention of increasing infrastructural investment and the
current lower level of interest rates, will have a beneficial impact on cement
volumes. The formal and informal housing sector remains buoyant, as evidenced by
higher bagged cement sales to the retail sector. Domestic cement volume growth
in the range of 6% - 8% is forecast for the coming financial year.
Lime volumes should benefit from growth in demand from the steel industry.
Recently advised rail tariff increases that are significantly above inflationary
levels will impact production costs negatively, particularly in the Lime
Division. The increase in PPC`s cost index of input costs at a higher level than
the official Producer Price Index will inevitably have an impact on selling
prices.
Overall, the positive outlook for cement demand in the year ahead, should enable
the Company to report improved profits. The strong cash flows are expected to
continue and no major capital expenditure is planned during 2005. The planned
inland capacity expansion project will only begin to impact on cash flows from
2006 onwards.
On behalf of the Board
AJ Phillips JE Gomersall
Chairman Chief Executive Officer
3 November 2004
dividend announcement
Notice is hereby given that the following dividends have been declared in
respect of the year ended 30 September 2004.
- number 198 (final dividend) of 700 cents per share
- number 199 (special dividend) of 1 400 cents per share
These dividends 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, 7 January 2005. The last date to trade to participate in
the dividends is Friday, 31 December 2004. Shares will commence trading ex-
dividends from Monday, 3 January 2005.
The important dates pertaining to these dividends for shareholders trading on
the JSE Securities Exchange South Africa are as follows:
Last day to trade `CUM` dividends Friday, 31 December 2004
Shares trade `EX` dividends Monday, 3 January 2005
Record date Friday, 7 January 2005
Payment date Monday, 10 January 2005
Share certificates may not be dematerialised or rematerialised between Monday, 3
January 2005 and Friday, 7 January 2005, both days inclusive.
Zimbabwe
The important dates pertaining to these dividends for shareholders trading on
the Zimbabwe Stock Exchange are as follows:
Currency conversion date* Monday, 3 January 2005
Shares trade `EX` dividends Monday, 3 January 2005
Last day to register to receive the dividends Friday, 7 January 2005
Payment date Monday, 10 January 2005
The register of members in Zimbabwe will be closed from Monday, 3 January 2005
to Friday, 7 January 2005, both days 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 official market buying rate of the SA Rand against
the Zimbabwe Dollar at or about 11:00 on Monday, 3 January 2005 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
3 November 2004
Directors:
AJ Phillips* (Chairman), JE Gomersall* (Chief Executive Officer), S Abdul Kader
(Alternate), RJ Burn, WAM Clewlow,
RH Dent, P Esterhuysen, O Fenn*, AJ Lamprecht, MJ Shaw, EP Theron, CB Thomson
*British
Registered office:
180 Katherine Street, Sandton
South Africa
(PO Box 782248, Sandton, 2146
South Africa)
Transfer secretaries:
Ultra Registrars (Proprietary) Limited
11 Diagonal Street, Johannesburg
South Africa
(PO Box 4844, Johannesburg, 2000
South Africa)
Transfer secretaries Zimbabwe:
Corpserve (Private) Limited
4th Floor, Intermarket Centre
Corner 1st Street/Kwame Nkrumah Avenue, Harare, Zimbabwe
(PO Box 2208, Harare, Zimbabwe)
Date: 04/11/2004 09:39:56 AM
Produced by the JSE SENS Department
