| Wed 10 May 2006, 11:02 | | PPC - Reviewed Interim Results for the half-year e |
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PPC
PPC
PPC - Reviewed Interim Results for the half-year ended 31 March 2006
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC
ISIN: ZAE000005559
Reviewed Interim Results for the half-year ended 31 March 2006
These results and other information are available on the PPC internet website
www.ppc.co.za
Financial highlights
*Continued strong growth in cement volumes
*3% growth in operating profit
*Headline earnings per share benefits from a lower STC charge
*R1,5 billion investment in capacity expansion well on track
*Further cement capacity expansion projects totalling around R3 billion being
evaluated
Consolidated income statement
Year
Six months ended ended
31 March 31 March 30 Sept
2006 2005 2005
Reviewed Restated % Restated
Rm Rm Change Rm
Revenue 2 182,9 1 813,1 20 3 973,6
Cost of sales 1 185,6 1 036,4 (14) 2 175,2
Gross profit 997,3 776,7 28 1 798,4
Non-operating income 7,9 7,4 0,1
Administrative expenditure 110,6 100,5 39,7
Other operating expenditure 39,0 38,2 249,9
Operating profit 855,6 645,4 33 1 508,9
Fair value losses on financial
instruments 0,6 4,2 6,9
Finance costs 24,2 31,3 23 63,6
Income from investments 32,1 43,3 (26) 84,0
Profit before exceptional items 862,9 653,2 1 522,4
Exceptional items - 9,6 12,5
Share of associates" retained
profit - 1,7 1,4
Profit before tax 862,9 664,5 30 1 536,3
Tax 252,7 186,8 (35) 432,1
STC on dividends paid 105,9 135,1 22 150,3
Net profit for the period 504,3 342,6 47 953,9
Attributable to:
Outside shareholders" interest 7,7 6,5 13,4
PPC Company Limited
shareholders 496,6 336,1 48 940,5
504,3 342,6 47 953,9
Net profit per share (cents)
- basic and fully diluted 924 625 48 1 749
Ordinary shares of R1 each
fully paid in issue (000) 53 761 53 761 53 761
Weighted and fully diluted
average number of shares in
issue during the period (000) 53 761 53 760 53 761
Dividends per share (cents)
- special - - 800
- final - - 840
- interim 330 260 27 260
330 260 27 1 900
Headline earnings per share
(cents)
- basic and fully diluted 922 607 52 1 724
Determination of headline
earnings per share
Net profit per share (cents) 924 625 1 749
Adjusted for (after tax):
Profit on disposal of
property, plant and equipment
and
intangible assets (2) (16) (2)
Goodwill and other impairments - - (8)
Reversal of negative goodwill - (2) -
Profit on disposal of
investments - - (15)
Headline earnings per share
(cents) 922 607 1 724
Consolidated balance sheet
31 March 31 March 30 Sept
2006 2005 2005
Reviewed Restated Restated
Rm Rm Rm
ASSETS
Non-current assets 1 790,4 1 874,9 1 793,3
Property, plant and equipment 1 349,4 1 188,0 1 246,9
Intangible assets 13,4 14,8 14,1
Investment in non-consolidated
subsidiary 294,5 301,7 294,5
Other non-current assets 113,9 356,3 214,2
Deferred tax assets 19,2 14,1 23,6
Current assets 1 129,8 874,5 1 461,4
Short-term investment - - 147,1
Inventories and receivables 920,7 741,6 722,8
Cash and cash equivalents 209,1 132,9 591,5
Total assets 2 920,2 2 749,4 3 254,7
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 867,6 867,6 867,6
Non-distributable reserves 44,6 49,1 47,0
Distributable reserves 705,7 622,0 1 091,3
Interest of shareholders of PPC 1 617,9 1 538,7 2 005,9
Outside shareholders" interest 28,7 14,0 21,0
Interest of all shareholders 1 646,6 1 552,7 2 026,9
Non-current liabilities 376,7 664,0 481,8
Deferred tax liabilities 175,8 172,7 181,7
Interest-bearing 96,0 369,8 197,1
Non-interest-bearing 104,9 121,5 103,0
Current liabilities 896,9 532,7 746,0
Short-term borrowings 97,9 104,5 160,1
Bank overdraft 307,9 - -
Accounts payable and provisions 491,1 428,2 585,9
Total equity and liabilities 2 920,2 2 749,4 3 254,7
Net asset value per share (cents) 3 062,8 2 862,1 3 731,1
Statement of changes in shareholders" interest
Year
Six months ended ended
31 March 31 March 30 Sept
2006 2005 2005
Reviewed Restated Restated
Rm Rm Rm
Interest of all shareholders
Balance at beginning of period 2 026,9 2 338,2 2 338,2
IFRS 2 impact on equity compensation
reserve - prior years - 2,4 2,4
IFRS 2 impact on retained earnings -
prior year adjustment - (2,4) (2,4)
2 026,9 2 338,2 2 338,2
Revaluation of investments (net of
deferred tax) - - 10,2
IFRS 2 impact on equity compensation
reserve 1,3 1,5 3,0
Issue of share capital - 1,1 1,1
Foreign currency translation reserve
and other movements (4,2) (1,8) (10,9)
Dividends paid (881,7) (1 128,9) (1 268,6)
Net profit for the period 504,3 342,6 953,9
Balance at end of period 1 646,6 1 552,7 2 026,9
Consolidated abridged cash flow statement
Year
Six months ended ended
31 March 31 March 30 Sept
2006 2005 2005
Reviewed Restated Restated
Rm Rm Rm
Cash flow from operating activities
Operating cash flows before movements
in working capital 941,3 735,0 1 644,9
Net (increase)/decrease in working
capital (118,5) (96,2) 23,0
Cash generated from operations 822,8 638,8 1 667,9
Finance costs, investment income and
realised fair value adjustments
on financial instruments 7,4 7,8 13,9
Tax paid (436,3) (377,5) (587,1)
Cash available from operations 393,9 269,1 1 094,7
Dividends paid (881,7) (1 128,9) (1 268,6)
Net cash utilised in operating
activities (487,8) (859,8) (173,9)
Net cash applied to investing
activities (184,0) (14,6) (128,8)
Net cash generated/(utilised) from
financing activities 291,6 60,8 (64,9)
Net decrease in cash and cash
equivalents (380,2) (813,6) (367,6)
Cash and cash equivalents at beginning
of period 591,5 948,0 948,0
Effects of exchange rates on opening
cash position (2,2) (1,5) 11,1
Cash and cash equivalents at end of
period 209,1 132,9 591,5
Notes
Year
Six months ended ended
31 March 31 March 30 Sept
2006 2005 2005
Reviewed Restated Restated
Rm Rm Rm
1. Profit before tax
Depreciation included in profit
before tax 79,6 81,8 155,0
2. Finance costs
Finance costs comprise:
Bank and other borrowings 14,6 3,7 8,2
Financial lease interest 6,3 23,3 46,6
Unwinding of discount on
rehabilitation provisions 3,3 4,3 8,8
24,2 31,3 63,6
3. Headline earnings
Net profit attributable to
shareholders of PPC 496,6 336,1 940,5
Profit on disposal of properties,
Plant and equipment, investments
and intangibles (1,2) (8,7) (9,4)
Impairment of plant and equipment
and intangibles - - 2,5
Reversal of impairment of
financial assets - - (5,4)
Reversal of negative goodwill - (1,0) (1,0)
Tax on exceptional items - 0,1 (0,3)
Headline earnings 495,4 326,5 926,9
4. Investments
Listed and unlisted investments at
fair value 32,6 265,3 277,6
Directors" valuation of unlisted
investments 32,6 265,3 277,6
5. Borrowings 501,8 474,3 357,2
The company"s borrowing powers are
not restricted.
6. Commitments
Capital commitments 1 327,5 112,6 1 479,4
*contracted 682,9 49,6 46,0
*approved 644,6 63,0 1 433,4
Operating lease commitments 24,5 35,2 29,8
1 352,0 147,8 1 509,2
These commitments will be met from
existing cash resources and
borrowing facilities available to
the Group.
7. Contingent liabilities
Guarantees for loans, banking
facilities and other obligations
to third parties. 6,7 7,0 7,1
8. 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 (Revised) (Consolidated Financial Statements
and Accounting for Investments in Subsidiaries) not been consolidated into the
Group results as at 31 March 2006.
Significant constraints impacting on the normal operation of Porthold, has
resulted in the PPC Board concluding that the management does not have the
ability to exercise effective control over the business and as a result, the
results of Porthold have continued to be excluded from the group results in the
current period. Severe restrictions are placed on the ability to access foreign
currency and remit funds and as a result the investment continues to be
accounted for on a fair value investment basis with dividends only being
recognised to the extent they are received.
Revenue 113,0 116,8 120,9
Operating profit/(loss) 2,0 (14,0) (5,2)
Loss before tax (11,4) (12,8) (6,9)
Tax 6,5 4,3 4,9
Loss after tax (17,9) (17,1) (11,8)
Total assets 599,9 847,4 408,8
Total liabilities 199,9 289,8 137,8
The effect of not consolidating Porthold was to increase headline earnings per
share by 33 cents (2005: increase of 32 cents) from 889 cents to 922 cents.
Porthold"s results are reflected on a hyperinflated basis, converted to South
African rands at the interbank rate of exchange (ZWD 15 669 to ZAR).
9. Basis of preparation
The interim results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies used to prepare the interim
financial statements are consistent with those applied in the 2005 annual
financial statements and are in accordance with International Financial
Reporting Standards (IFRS), 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 11 below, did not have a
material impact on the reported results:
- IFRS 2 (Share-based payment); and
- IAS 27 (Revised) (Consolidated Financial Statements and Accounting for
Investments in Subsidiaries).
10. JSE Limited requirements
The interim announcement has been prepared in accordance with the listings
requirements of the JSE Limited.
11. Comparative information
The Group has restated the comparative information for the effects of adopting
IFRS 2 (Share-based payment).
The aggregate effect of the above restatements is as follows:
Previously
stated Adjustment Restated
Rm Rm Rm
Interest of all shareholders -
2004 2 338,2 - 2 338,2
For the six months ended 31 March
2005
Profit before tax 666,0 (1,5) 664,5
Tax 321,9 - 321,9
Net profit 344,1 (1,5) 342,6
Interest of all shareholders 1 552,7 - 1 552,7
The effect thereof was to reduce
headline earnings per share by 3
cents from 610 cents to 607
cents.
For the year ended 30 September
2005
Profit before tax 1 539,3 (3,0) 1 536,3
Tax 582,4 - 582,4
Net profit 956,9 (3,0) 953,9
Interest of all shareholders 2 026,9 - 2 026,9
The effect thereof was to reduce
headline earnings per share by 6
cents from 1 730 cents to 1 724
cents.
12. 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.
COMMENTARY
The strong growth in the South African economy, as evidenced by booming
conditions in both the residential and non-residential building sectors,
together with increasing investment in public-sector infrastructure, continues
to create double-digit growth in cement demand.
Group revenue increased 20% to R2,2 billion whilst operating profit rose 33% to
R855,6 million.
Headline earnings per share (HEPS) increased 52% to 922 cents reflecting the
benefit of a reduction of R40,3 million in the STC charge on the reduced special
dividend paid in January 2006. This reduction accounted for 12% points of the
HEPS improvement in the first half but will have a reduced impact on the full
year"s HEPS result.
Capital expenditure amounted to R187,8 million (2005: R47,0 million) and
related mainly to the Dwaalboom Batsweledi expansion and Jupiter re-
commissioning projects. Cash flow on the Batsweledi project will be limited in
the current year with most of the expenditure spanning the next two financial
years.
In view of the company"s good results and strong cash flow, the directors have
declared an increased interim dividend of 330 cents per share (2005: 260 cents
per share).
CEMENT & AGGREGATES
South African domestic cement industry sales remained buoyant with volume growth
of more than 13% over the comparable period last year. Cement demand in
Botswana remained low due to the depressed construction sector, whilst exports
continued at recent low levels.
In order to meet demand during this period all kilns were fully operational.
Many of the older kilns carry a low depreciation charge, which increased the
operating margin. However, these older kilns cannot be run cost effectively for
a sustained period, and replacement will become necessary if cement demand
continues to grow.
The re-commissioning of the Jupiter kiln was successfully completed in the March
quarter and in a full year will provide an additional 550 000 tons of cement
capacity. The Batsweledi project is progressing according to plan and within
budget. Design and process changes have increased the original estimated 1
million tons capacity to 1,25 million tons of cement per annum for the same
capital expenditure.
LIME
Revenue for the period under review was impacted negatively by the downturn in
world stainless steel markets. However, margins improved as the excessive price
increases of rail transport and coal costs experienced in the last few years,
were recovered through recently renewed long-term lime supply contracts.
PACKAGING
Afripack experienced strong demand for cement sacks but overall revenue reduced
slightly due to the company exiting certain markets. However, tight cost
control, combined with gains in production efficiencies and improved working
capital management, resulted in margins and profitability being maintained.
ZIMBABWE
Porthold continued to experience very difficult operating and trading
conditions, with continuous shortages of transport and production inputs leading
to plant stoppages, impacting on our ability to supply customers. These and
other circumstances continue to warrant the non-consolidation of this company"s
results. Despite these constraints, the company remained cash positive for the
half.
PROSPECTS
Although growth in the residential sector appears to be slowing, increased
investment on infrastructural projects is likely to offset this. This bodes well
for future industry cement demand, which the company estimates could grow by
around 12% in the current financial year. The shortage of skills and delivery
of infrastructural services are increasingly proving to be a constraint in the
residential construction sector. The company should, however, continue to report
improved performance and strong operating cash flows for the full year.
Capacity utilisation has increased significantly over the past five years and
has resulted in a high rate of earnings growth. As full capacity utilisation is
approached, the rate of earnings growth may slow until the increased output from
the Batsweledi project becomes available in mid 2008.
In view of the positive outlook for cement demand, the Board has approved the
planning phase to expand and modernise the capacity in the Western Cape,
complimenting the capacity expansion project underway in the Inland region. In
addition, the planning phase of a state-of-the-art cement milling facility in
the inland region is in process. Estimated capital expenditure for these two
projects, if approved, could be in the region of R3 billion and would be
incurred over 3 years commencing during the next financial year. The increased
output resulting from these two projects will not however become available until
late 2009 and 2008 respectively.
On behalf of the Board
AJ Phillips JE Gomersall
Chairman Chief Executive Officer
9 May 2006
Dividend announcement
Notice is hereby given that interim ordinary dividend No 203 of 330 cents per
share has been declared in respect of the six months ended 31 March 2006.
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, 2 June 2006. The last date to trade to participate in the
dividend is Friday, 26 May 2006. Shares will commence trading ex-dividend from
Monday, 29 May 2006.
The important dates pertaining to this dividend for shareholders trading on the
JSE Limited are as follows:
Last day to trade "CUM" dividend Friday, 26 May 2006
Shares trade "EX" dividend Monday, 29 May 2006
Record date Friday, 2 June 2006
Payment date Monday, 5 June 2006
Share certificates may not be dematerialised or rematerialised between Monday,
29 May 2006 and Friday, 2 June 2006, both days inclusive.
Zimbabwe
The important dates pertaining to this dividend for shareholders trading on the
Zimbabwe Stock Exchange are as follows:
Last day to register to receive the dividend Friday, 26 May 2006
Shares trade "EX" dividend Monday, 29 May 2006
Currency conversion date* Friday, 2 June 2006
Payment date Monday, 5 June 2006
The register of members in Zimbabwe will be closed from Monday, 29 May 2006 to
Friday, 2 June 2006, both days inclusive, for the purpose of determining those
shareholders to whom the dividend will be paid.
*The dividend will be paid in Zimbabwean dollars at the rate quoted by Stanbic
Bank Zimbabwe Limited at the official market rate of the South African rand
against the Zimbabwean dollar at or about 11:00 am on Friday, 2 June 2006.
By order of the Board
Barloworld Trust Company Limited
Secretaries
AR Holt
9 May 2006
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)
Sponsor: J.P.Morgan Equities Limited
Date: 10/05/2006 11:02:44 AM Produced by the JSE SENS Department
