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Pretoria Portland Cement Company Limited - PPC Interim Results
PRETORIA PORTLAND CEMENT COMPANY LIMITED
Incorporated in the Republic of South Africa
(Registration number 1892/000667/06)
(`PPC` or `the company`)
JSE code:PPC
ISIN code:ZAE000005559
Reviewed Interim Results
for the half-year ended 31 March 2005
Financial highlights
* Continued strong growth in domestic cement volumes
* 25% growth in operating profit
* Cash generated from operations up 31%
* STC paid on the special dividend limits HEPS increase to 4%
* Interim dividend up 18%
Consolidated income statement
Six months ended Year ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed Audited
Restated % Restated
Rm Rm Change Rm
Revenue 1 813,1 1 630,0 11 3 440,1
Operating profit 646,9 517,2 25 1 172,8
Fair value (4,2) (0,6) 0,2
(losses)/gains on
financial
instruments
Finance costs 31,3 27,7 (13) 58,5
Income from 43,3 53,2 (19) 100,6
investments
Profit before 654,7 542,1 1 215,1
exceptional items
Exceptional items 9,6 (1,9) (0,3)
Share of associates` 1,7 3,7 10,9
retained profit
Profit before tax 666,0 543,9 22 1 225,7
Tax 186,8 158,2 18 352,3
STC on dividends 135,1 72,6 86,0
paid
Net profit 344,1 313,1 10 787,4
Attributable to:
Outside 6,5 - 3,8
shareholders`
interest
PPC Company Limited 337,6 313,1 8 783,6
shareholders
344,1 313,1 10 787,4
Net profit per share
(cents)
- basic and fully 628 583 8 1 458
diluted
Headline earnings
per share (cents)*
- basic and fully 610 585 4 1 458
diluted
Ordinary shares of 53 761 53 744 53 750
R1 each fully paid
in issue (000)
Weighted average 53 760 53 744 53 745
number of shares in
issue during the
period (000)
Fully diluted 53 760 53 748 53 750
weighted average
number of shares
(000)
Dividends per share
(cents)
- special - - 1 400
- final - - 700
- interim 260 220 18 220
260 220 18 2 320
Determination of
headline earnings
per share
Net profit per share 628 583 1 458
(cents)
Adjusted for (after
tax):
Profit on disposal (16) (3) (5)
of property, plant
and equipment,
associates and
intangible assets
Impairment of - 5 5
intangibles
Reversal of negative (2) - -
goodwill
Headline earnings 610 585 1 458
per 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
2005 2004 2004
Reviewed Reviewed Audited
Restated Restated
Rm Rm Rm
ASSETS
Non-current assets 1 874,9 1 960,7 1 931,3
Property, plant and 1 462,5 1 525,4 1 501,6
equipment, investments and
loans
Investment in subsidiary 301,7 322,3 315,2
company
Intangible assets 14,8 7,2 15,2
Negative goodwill - (1,0) (1,0)
Deferred tax assets 14,1 15,2 18,7
Long-term loan 81,8 91,6 81,6
Current assets 874,5 1 086,0 1 618,3
Investment in associate - 4,1 7,6
company subject to sale
Inventories and receivables 741,6 705,0 662,7
Cash and cash equivalents 132,9 376,9 948,0
Total assets 2 749,4 3 046,7 3 549,6
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 867,6 865,8 866,5
Non-distributable reserves 49,1 47,0 50,9
Retained profit 622,0 1 064,8 1 413,2
Interest of shareholders of 1 538,7 1 977,6 2 330,6
PPC
Outside shareholders` 14,0 - 7,6
interest
Interest of all shareholders 1 552,7 1 977,6 2 338,2
Non-current liabilities 664,0 676,6 691,9
Interest-bearing 369,8 366,6 393,3
Non-interest-bearing 121,5 119,3 117,9
Deferred tax liabilities 172,7 190,7 180,7
Current liabilities 532,7 392,5 519,5
Short-term borrowings 104,5 12,5 21,3
Accounts payable and 428,2 380,0 498,2
provisions
Total equity and liabilities 2 749,4 3 046,7 3 549,6
Net asset value per share 2 862,1 3 696,2 4 338,2
(cents)
Statement of changes in shareholders` interest
Six months ended Year ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed Audited
Restated Restated
Rm Rm Rm
Interest of all
shareholders
Balance at beginning of 2 338,2 2 130,2 2 130,2
period
Net movements not (0,7) 152,5 157,2
recognised through the
income statement
Revaluation of investments - - 4,7
(net of deferred tax)
Issue of share capital 1,1 - 0,7
Outside shareholders on - - 3,7
part disposal of
subsidiary company
Foreign currency (1,8) 152,5 148,1
translation reserve and
other movements
Net movements recognised (784,8) (305,1) 50,8
through the income
statement
Net profit for the period 344,1 313,1 787,4
Dividends paid (1 128,9) (618,2) (736,6)
Balance at end of period 1 552,7 1 977,6 2 338,2
Consolidated abridged cash flow statement
Six months ended Year ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed Audited
Restated Restated
Rm Rm Rm
Cash flow from operating
activities
Operating cash flows before 735,0 609,7 1 342,2
movements in working
capital
Net increase in working (96,2) (123,9) (48,5)
capital
Cash generated from 638,8 485,8 1 293,7
operations
Finance costs, investment 7,8 24,8 42,2
income and fair value
adjustments
Tax paid (377,5) (377,3) (528,6)
Cash available from 269,1 133,3 807,3
operations
Dividends paid (1 128,9) (618,2) (736,6)
Net cash (859,8) (484,9) 70,7
(utilised)/retained from
operating activities
Net cash applied to (14,6) (24,4) (43,5)
investing activities
Net cash inflow from 60,8 - 33,5
financing activities
Net (decrease)/increase in (813,6) (509,3) 60,7
cash and cash equivalents
Cash and cash equivalents 948,0 903,6 903,6
at beginning of period
Effects of exchange rates (1,5) (6,3) (5,2)
on opening cash position
Effects of deconsolidation - (11,1) (11,1)
of Porthold
Cash and cash equivalents 132,9 376,9 948,0
at end of period
Notes
Six months ended Year
ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed Audited
Restated Restated
Rm Rm Rm
1. PROFIT BEFORE TAX
Included in profit before
tax are:
Cost of sales 1 036,4 981,3 2 000,4
Depreciation 81,8 76,3 151,7
2. FINANCE COSTS
Finance costs comprise:
Bank and other borrowings 3,7 1,0 3,0
Financial lease interest 23,3 23,8 48,1
Unwinding of discount on 4,3 2,9 7,4
rehabilitation provisions
31,3 27,7 58,5
3. NET PROFIT BEFORE
EXCEPTIONAL ITEMS
Net profit attributable to 337,6 313,1 783,6
shareholders
Profit on disposal of (0,4) (0,9) (2,5)
properties
Impairment of intangibles - 2,8 2,8
Profit on disposal of (7,7) - -
associate company
Reversal of negative (1,0) - -
goodwill
Profit on disposal of (0,5) - -
interest in Trust
Tax on exceptional items 0,1 - -
Net profit before 328,1 315,0 783,9
exceptional items
4. HEADLINE EARNINGS
Net profit before 328,1 315,0 783,9
exceptional items
Profit on disposal of plant (0,1) (0,8) -
and equipment (after tax)
Profit on disposal of - - (0,2)
intangibles
Amortisation of negative - (0,1) (0,1)
goodwill
Headline earnings 328,0 314,1 783,6
5. INVESTMENTS
At fair value 265,3 259,9 265,4
Unlisted associates - 12,2 7,8
including loans at carrying
value
- non-current - 8,1 0,2
- current - 4,1 7,6
Directors` valuation of 265,3 280,9 274,3
unlisted shares
6. BORROWINGS 474,3 379,1 414,6
The Company`s borrowing powers are not restricted.
7. COMMITMENTS
Capital commitments 112,6 14,5 52,2
- contracted 49,6 12,7 21,1
- approved 63,0 1,8 31,1
Operating lease commitments 35,2 5,2 34,5
147,8 19,7 86,7
These commitments will be met from existing cash resources and borrowing
facilities available to the Group.
8. CONTINGENT LIABILITIES
Guarantees for loans, 7,0 6,8 6,9
banking facilities and other
obligations to third
parties.
9. NON-CONSOLIDATION 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 31 March 2005.
The circumstances in Zimbabwe are such that there are severe restrictions placed
on PPC`s ability to access foreign currency and remit funds. In view of these
circumstances, the results of Porthold have continued to be excluded from the
Group results in the current period and have been accounted for on a fair value
investment basis. The summarised results of Porthold, adjusted for
hyperinflation and converted back to Rands at the prevailing auction rate, were:
Revenue 116,8 83,3 171,5
Operating (loss)/profit (14,0) 2,5 (5,4)
(Loss)/profit before tax (12,8) 6,4 (2,2)
Tax 4,3 2,2 5,4
(Loss)/profit after tax (17,1) 4,2 (7,6)
Total assets 847,4 718,7 765,0
Total liabilities 289,8 227,5 250,9
The effect of not consolidating Porthold was to increase headline earnings per
share by 32 cents (2004: reduction by 11 cents) from 578 cents to 610 cents.
10. BASIS OF PREPARATION
The interim results have been prepared in accordance with IAS 34 and AC 127
(Interim Financial Reporting). The accounting policies used to prepare the
interim financial statements are consistent with those applied in the 2004
annual financial statements and are in accordance with International Financial
Reporting Standards and South African Statements of Generally Accepted
Accounting Practice, except where the Group has adopted new or revised IFRS
statements.
The Group has adopted the following new or revised IFRS standards in the current
period, which, except for those disclosed in note 12 below, did not have a
material impact on the reported results:
IAS 16 (Property, Plant and Equipment); IAS 36 (Impairment of Assets); IAS 38
(Intangible Assets); IFRS 3 (Business Combinations); IFRS 4 (Insurance
Contracts) and IFRIC Interpretation 1 (Changes in Existing Decommissioning,
Restoration and Similar Liabilities).
11. JSE SECURITIES EXCHANGE REQUIREMENTS
The interim announcement has been prepared in accordance with the listings
requirements of the JSE Securities Exchange South Africa.
12. COMPARATIVE INFORMATION
The Group has restated the comparative information for the effects of adopting
IAS 16 (Revised) (Property, Plant and Equipment) and IFRIC Interpretation 1
(Changes in Existing Decommissioning, Restoration and Similar Liabilities).
The aggregate effect of the above restatements is as follows:
Reported Adjustment Restated
Rm Rm Rm
Retained profit - 2003 1 369,6 (6,9) 1 362,7
For the six months ended 31
March 2004
Profit before tax 546,3 (2,4) 543,9
Tax 231,5 (0,7) 230,8
Net profit 314,8 (1,7) 313,1
Interest of all shareholders 1 986,2 (8,6) 1 977,6
Property, plant and 1 537,7 (12,3) 1 525,4
equipment, investments and
loans
Deferred tax liabilities 194,4 (3,7) 190,7
The effect thereof was to reduce headline earnings per share
by 3 cents from 588 cents to 585 cents.
For the year ended 30
September 2004
Profit before tax 1 229,8 (4,1) 1 225,7
Tax 439,6 (1,3) 438,3
Net profit 790,2 (2,8) 787,4
Interest of all shareholders 2 348,0 (9,8) 2 338,2
Property, plant and 1 516,5 (14,9) 1 501,6
equipment, investments and
loans
Deferred tax liabilities 184,9 (4,2) 180,7
Non-interest-bearing 118,8 (0,9) 117,9
liabilities
The effect thereof was to reduce headline earnings per share by 5 cents from 1
463 cents to 1 458 cents.
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
Six months ended Year ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed % Audited
Rm Restated Change Restated
Revenue
Cement 1 502,1 1 317,3 14 2 801,5
Lime 238,5 225,9 6 459,5
Packaging 127,5 137,5 (7) 282,6
1 868,1 1 680,7 11 3 543,6
Less: Inter-segment 55,0 50,7 8 103,5
revenue
1 813,1 1 630,0 11 3 440,1
Six months ended Year ended
31 March 31 March 30 Sept
2005 2004 2004
Reviewed Reviewed % Audited
Rm Restated Change Restated
Operating profit
Cement 574,7 461,1 25 1 041,1
Lime 54,1 42,2 28 101,9
Packaging 18,1 13,9 30 29,8
646,9 517,2 25 1 172,8
Commentary
The results reflect the continued improvement in cement demand arising from the
upswing in residential construction driven by low interest rates and the
increased impetus of investment on infrastructural projects.
Group revenue improved 11% to R1,8 billion following increased South African
cement sales volumes. Export volumes were lower, curtailed by the sustained
strength of the Rand, but the strong growth in the local market more than
compensated for these reduced volumes.
Increased sales volumes, price adjustments, together with cost reductions and
improved operational efficiencies, resulted in operating profit increasing by
25% to R646,9 million with all divisions reporting improved margins and
profitability.
Investment income ended lower, due to reduced yields and lower cash balances,
whilst finance costs were higher, arising from an increased level of borrowings.
The disposal of Slagment (Pty) Limited in early November reduced associate
income earned whilst the profit on disposal increased the amount included in
exceptional items.
The effective normal tax rate reduced in line with the decrease in the company
tax rate from 30% to 29% announced at the beginning of the year. The STC charge
includes R94,1 million (2004: R43,7 million) arising from the R14 per share
special dividend paid in January 2005.
Headline earnings per share increased 4% to 610 cents, this after the STC charge
of 175 cents per share (2004: 81 cents per share) on the 2004 increased special
dividend.
Capital expenditure for the first half amounted to R47,0 million (2004: R34,3
million). Major expenditure included quarrying equipment, information systems
upgrades and the scoping and costing phase of the inland capacity expansion
project.
In view of the Company`s strong operating results and current low level of
capital expenditure, the directors have declared an increased interim dividend
of 260 cents per share (2004: 220 cents).
CEMENT
South African cement volumes increased by 10% over the comparable period last
year with all provinces showing good growth, other than the Eastern Cape
reflecting the anticipated tapering off of volumes supplied to the Ngqura
harbour project. An overall slowing of the Botswana economy resulted in a sharp
decline in cement demand.
Rand strength and Spoornet capacity problems continue to curtail exports.
Increased cement demand necessitated that some older kiln production units be
recommissioned during this period. These kilns are less efficient, and whilst
they cannot be run cost effectively for a sustained period, they are fully
depreciated and thus reflect a further improvement in the cement operating
margin.
Operating profit increased by 25% from R461,1 million to R574,7 million on
revenue increases of 14%.
LIME
Revenue improved 6% reflecting the benefit of increased demand from customers in
the local steel sector whilst operating profit improved 28% to R54,1 million due
to further efficiency and cost improvements.
PACKAGING
The division experienced strong demand for cement sacks which combined with
tight cost control and improved production efficiencies resulted in operating
profit increasing 30% to R18,1 million.
ASSOCIATES
Share of associates reflects income of R1,7 million up to the sale of the
Company`s one third interest in Slagment (Pty) Limited.
ZIMBABWE
Cement operations in Zimbabwe were difficult with a contracting economy and
hyperinflationary environment. Despite this, Porthold continued to export to
neighbouring countries, thereby earning much needed foreign exchange and has
again remained cash positive over the period.
BOARD AND MANAGEMENT
Mr J Shibambo was appointed to the Board on 5 May 2005 as an independent non-
executive director.
Dr O Fenn was appointed Chief Operating Officer of the PPC Group on 5 May 2005.
Mr S Abdul Kader was appointed to the Board on 5 May 2005, having previously
been alternate director to Mr RJ Burn who resigned from the Board on 5 May 2005.
PROSPECTS
The renewed optimism in the construction industry, mainly driven by Government`s
commitment to increase infrastructural investment, together with buoyant
economic forecasts and business confidence, will continue to positively
influence cement demand. However, cement growth may be tempered by shortages of
other building materials and skills within the industry, but is now expected to
range between 8% and 10% for the financial year.
The Company is currently finalising the scope and costing of the 1 million ton
inland capacity expansion project, and anticipates submitting it for Board
approval in the last quarter of the financial year. The Board has approved a R50
million project to re-commission the 550 000 ton Jupiter plant, situated in
Germiston. This will provide security of cement supply to the market over the
two and a half year construction and commissioning period of the new expansion
project.
The strong demand from local steel producers is likely to continue to have a
beneficial impact on lime sales volumes.
With the strong performance in the first half and the positive outlook for
cement demand, the Company is expected to report increased operating results and
cash flows for the full year.
On behalf of the Board
AJ Phillips JE Gomersall
Chairman Chief Executive Officer
5 May 2005
Dividend announcement
Notice is hereby given that interim ordinary dividend No. 200 of 260 cents per
share has been declared in respect of the six months ended 31 March 2005.
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, 3 June 2005. The last date to trade to participate in the
dividend is Friday, 27 May 2005. Shares will commence trading ex-dividend from
Monday, 30 May 2005.
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, 27 May 2005
Shares trade `EX` dividend Monday, 30 May 2005
Record date Friday, 3 June 2005
Payment date Monday, 6 June 2005
Share certificates may not be dematerialised or rematerialised between Monday,
30 May 2005 and Friday, 3 June 2005, both days inclusive.
ZIMBABWE
The important dates pertaining to this dividend for shareholders trading on the
Zimbabwe Stock Exchange are as follows:
Shares trade `EX` dividend Monday, 30 May 2005
Last day to register to receive the Friday, 3 June 2005
dividend
Currency conversion date* Friday, 3 June 2005
Payment date Monday, 6 June 2005
The register of members in Zimbabwe will be closed from Monday, 30 May 2005 to
Friday, 3 June 2005, 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 at the prevailing exchange rate of the South African Rand
against the Zimbabwe Dollar at or about 11:00 am on Friday, 3 June 2005.
By order of the Board
Barloworld Trust Company Limited
Secretaries
Per AR Holt
5 May 2005
Directors:
AJ Phillips* (Chairman), JE Gomersall* (Chief Executive Officer), O Fenn* (Chief
Operating Officer), S Abdul Kader, WAM Clewlow, RH Dent, P Esterhuysen, AJ
Lamprecht, MJ Shaw, J Shibambo, 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)
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC ISIN: ZAE 000005559
These results and other information are available on the PPC internet website
www.ppc.co.za
Sponsor:
JP Morgan Equities Limited
Date: 06/05/2005 10:30:59 AM
Produced by the JSE SENS Department
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