| Wed 10 May 2006, 11:22 | | Pretoria Portland Cement Company Limited - Interim |
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PPC
PPC
Pretoria Portland Cement Company Limited - Interim Media Release
PRETORIA PORTLAND CEMENT COMPANY LIMITED
Incorporated in the Republic of South Africa
(Registration number 1892/000667/06)
JSE code: PPC
ISIN code: ZAE000005559
MEDIA RELEASE:
Double-Digit Cement Growth Prompts Further Expansion
PPC planning a further R3bn investment to boost capacity to 2010
Double-digit cement demand growth continues according to Pretoria Portland
Cement Ltd (PPC) who released their interim results for six months to March,
today.
National demand growth of more than 13% over the comparable period last year has
been spurred along by the buoyant domestic economy. The ongoing surge in
building activity, especially in the residential sector, has been occasioned by
the favourable interest rates.
"Although the growth in the residential sector appears to be slowing slightly,
increased infrastructural investment should more than offset this over the next
few years," said John Gomersall, chief executive officer of PPC.
These conditions bode well for future cement demand. The country"s leading
cement producer expects national demand to grow by around 12% for the current
financial year. PPC, however, remains cautious:
"South African annual cement demand has grown by almost 50% from 9.5 million
tons in 2002 to an expected 13 million tons this financial year. Consequently,
PPC"s capacity utilisation has increased sharply which has resulted in the
recent high rate of earnings growth. While this is welcomed, it followed two
decades of significant excess and un-utilised capacity with resultant low
earnings and returns," says Gomersall. "However, as we approach full capacity,
the rate of earnings growth may slow, until the increased output from the
Batsweledi project becomes available in mid 2008," he adds.
Board approval has also been granted to accelerate the plans to expand and
modernise the capacity in the Western Cape, complementing the capacity upgrades
underway in the Inland region. In addition the planning phase of a significant
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 resultant increased output won"t however
become available until late 2009 and 2008 respectively.
"Both of these projects will further enhance energy efficiency and environmental
standards which are future trends that we need to plan for" commented Gomersall.
"The extent of the cement demand growth over the last 4 years has been
phenomenal. In our business, it unfortunately takes at least 4 years to plan,
design, construct and commission these large capital intensive facilities. The
last new production line we invested in was Dwaalboom and that was over 20 years
ago" he adds.
Capital expenditure during the period under review amounted to R187, 8 million,
up from R47 million in 2005 and related mainly to the Dwaalboom Batsweledi
expansion and Jupiter re-commissioning projects.
Expectations are that cash flow on the Batsweledi project will remain fairly
muted in the current year. The project, however, is progressing according to
plan and continues within budgeted cost. 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.
The re-commissioning of the Jupiter kiln was successfully completed in the March
quarter. In a full year it will provide an additional 550 000 tons of cement
capacity
The strong market conditions resulted in group revenue increasing by 20% to R2,
2 billion and operating profit rising 33% to R855, 6 million. Cash generated
from operations was up 29%.
In order to meet demand during this period all kilns were fully operational.
Since many of the older kilns carry a low depreciation charge, this has resulted
in a further improvement in margin. These older kilns, however, cannot be run
cost effectively for a sustained period of time. "Replacement will become
necessary if cement demand continues to grow," said Gomersall.
Headline earnings per share increased 52% to 922 cents, reflecting the benefit
of the reduced Secondary Tax on Companies charge on the special dividend, paid
in January 2006. This reduced STC charge accounted for 12% points of the HEPS
improvement but will have a reduced impact on the full year HEPS result.
"PPC should continue to report improved performance and strong operating cash
flows for the full year. Our challenges now are to keep all the facilities
running smoothly while we press ahead with the projects as fast as is prudently
possible to provide the cement required to take us through to 2010 " Gomersall
concluded.
The company has declared an interim dividend of 330 cents per share.
Ends
For further information contact:
John Gomersall
PPC 011-445-1015
Orrie Fenn
PPC 011-386-9069
Graeme Coetzee
Meropa Communications
Date: 10/05/2006 11:22:07 AM Produced by the JSE SENS Department
