| Wed 8 Nov 2006, 10:05 | | Pretoria Portland Cement - Audited preliminary rep |
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PPC
PPC
Pretoria Portland Cement - Audited preliminary report for the year
ended 30 September 2006 and dividend declaration
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC & ISIN: ZAE000005559
Audited preliminary report for the year ended 30 September 2006
Financial highlights
- Strong growth in cement sales volumes
- Operating profit increases 23% to R1,9 billion
- Cash generated from operations exceeds R2 billion
- Ordinary dividend up 30%
- Special dividend of 770 cents per share
Consolidated income statement
Year ended
30 Sept 30 Sept
2006 2005
Audited Audited
Restated %
Rm Rm Change
Continuing operations
Revenue 4 686,4 3 973,6 18
Cost of sales 2 520,8 2 175,2 (16)
Gross profit 2 165,6 1 798,4 20
Non-operating income 1,3 0,1
Administrative expenditure 42,7 39,7
Other operating expenditure 263,0 249,9
Operating profit 1 861,2 1 508,9 23
Fair value losses on financial
instruments (0,2) (6,9)
Finance costs 51,9 63,6 18
Income from investments 67,2 84,0 (20)
Profit before exceptional items 1 876,3 1 522,4 23
Exceptional items 0,4 12,5
Share of associates" retained - 1,4
profit
Profit before tax 1 876,7 1 536,3 22
Tax 542,9 432,1 (26)
STC on dividends paid 127,5 150,3 15
Net profit from continuing 1 206,3 953,9 26
operations
Discontinued operations
Net profit from discontinued 8,0 -
operations
Net profit 1 214,3 953,9 27
Attributable to:
Outside shareholders" interest - 13,4
PPC Company Limited shareholders 1 214,3 940,5 29
1 214,3 953,9 27
Net profit per share (cents)
From continuing and discontinued
operations
- basic and fully diluted 2 259 1 749 29
From continuing operations
- basic and fully diluted 2 243 1 749
Ordinary shares of R1 each fully
paid in issue (000) 53 761 53 761
Weighted and fully diluted average
number of shares in issue during 53 761 53 761
the period (000)
Dividends per share (cents)
- special 770 800 (4)
- final 1 100 840 31
- interim 330 260 27
2 200 1 900 16
Condensed consolidated balance sheet
30 Sept 30 Sept
2006 2005
Audited Audited
Restated
Rm Rm
ASSETS
Non-current assets 1 816,6 1 793,3
Property, plant and equipment 1 413,6 1 246,9
Intangible assets 14,2 14,1
Investment in non-consolidated subsidiary 289,8 294,5
Other non-current assets 99,0 214,2
Deferred tax assets - 23,6
Current assets 2 538,9 1 461,4
Short-term investments 97,9 147,1
Inventories and receivables 829,3 722,8
Asset classified as held-for-sale 129,7 -
Cash and cash equivalents 1 482,0 591,5
Total assets 4 355,5 3 254,7
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 867,6 867,6
Non-distributable reserves 90,9 52,4
Retained profit 1 244,8 1 085,9
Interest of shareholders of PPC 2 203,3 2 005,9
Outside shareholders" interest - 21,0
Interest of all shareholders 2 203,3 2 026,9
Non-current liabilities 364,3 481,8
Deferred tax liabilities 174,0 181,7
Interest bearing 83,0 197,1
Non-interest bearing 107,3 103,0
Current liabilities 1 787,9 746,0
Short-term borrowings 982,6 160,1
Liabilities directly associated with asset
held-for-sale 112,1 -
Accounts payable and provisions 693,2 585,9
Total equity and liabilities 4 355,5 3 254,7
Net asset value per share (cents) 4 098,3 3 731,1
Condensed statement of changes in shareholders" interest
Year ended
30 Sept 30 Sept
2006 2005
Audited Audited
Restated
Rm Rm
Interest of all shareholders
Balance at beginning of year 2 026,9 2 338,2
Revaluation of investments (net of (0,6) 10,2
deferred tax)
IFRS 2 impact on equity compensation 1,3 3,0
reserve
Issue of share capital - 1,1
Foreign currency translation reserve and
other movements (15,2) (10,9)
Cash flow hedge reserve (net of deferred 35,7 -
tax)
Dividends paid (1 059,1) (1 268,6)
Net profit for the year 1 214,3 953,9
Balance at end of year 2 203,3 2 026,9
Condensed consolidated cash flow statement
Year ended
30 Sept 30 Sept
2006 2005
Audited Audited
Restated
Rm Rm
Cash flow from operating activities
Operating cash flows before movements in
working capital 2 039,4 1 644,9
Net (increase)/decrease in working (8,3) 23,0
capital
Cash generated from operations 2 031,1 1 667,9
Finance costs and investment income 15,3 13,9
Tax paid (608,0) (587,1)
Cash available from operations 1 438,4 1 094,7
Dividends paid (1 059,1) (1 268,6)
Net cash generated from/(utilised) in
operating activities 379,3 (173,9)
Net cash applied to investing activities (243,0) (128,8)
Net cash generated from/(utilised in)
financing activities 760,8 (64,9)
Net increase/(decrease) in cash and cash
equivalents 897,1 (367,6)
Cash and cash equivalents at beginning of 591,5 948,0
year
Effects of exchange rates on opening cash
position 1,1 11,1
Deconsolidation of subsidiary company (7,7) -
Cash and cash equivalents at end of year 1 482,0 591,5
Notes
Year ended
30 Sept 30 Sept
2006 2005
Audited Audited
Restated
Rm Rm
1. Profit before tax
Included in profit before tax is:
Depreciation 165,1 155,0
2. Finance costs
Finance costs comprise:
Bank and other borrowings 18,5 8,2
Financial lease interest 26,5 46,6
Unwinding of discount on rehabilitation
provisions 6,9 8,8
51,9 63,6
3. Headline earnings per share (cents)
- basic and fully diluted 2 260 1 724
Determination of headline earnings per
share
Net profit per share (cents) 2 259 1 749
Adjusted for (after tax):
Loss/(profit) on disposal of property,
plant and
equipment and intangibles 1 (2)
Goodwill and other impairments - (8)
Profit on disposal of investments - (15)
Headline earnings per share (cents) 2 260 1 724
Headline earnings
Net profit attributable to shareholders 1 214,3 940,5
of PPC
Loss/(profit) on disposal of properties,
plant
and equipment, investments and 0,3 (9,4)
intangibles
Goodwill and other impairments - (3,9)
Tax on exceptional items - (0,3)
Headline earnings 1 214,6 926,9
4. Asset classified as held-for-sale
During the 2004 financial year, PPC sold 75% of its share in Afripack (Pty)
Limited (Afripack), to a black empowerment and management consortium. The
purchase price was funded via PPC"s subscription to redeemable preference
shares and cash proceeds. Afripack continued to be consolidated into PPC"s
group results, in terms of IAS 27 (Revised) Consolidated and Separate
Financial Statements as PPC management continued to have effective control
of Afripack until the preference shares were redeemed in October 2006.
In line with IFRS 5 (Non-current Assets Held for Sale and Discontinued
Operations), due to the preference share redemption, Afripack has been
consolidated as an asset classified as held-for-sale and comparative
information has not been restated. The results of Afripack as at 30
September 2006 were as follows:
Revenue 177,0
Operating profit 43,9
Assets:
Non-current assets 51,3
Property, plant and equipment 51,1
Intangible assets 0,2
Current assets 78,4
Inventories 23,0
Trade and other receivables 27,5
Cash and cash equivalents 27,9
Total assets 129,7
Liabilities:
Non-current liabilities 47,0
Interest bearing 3,2
Non-interest bearing and other non-current
liabilities 35,6
Deferred tax liabilities 8,2
Current liabilities 65,1
Trade and other payables 60,4
Tax payable 4,7
Total liabilities 112,1
5. Investments
Unlisted investments at fair value 129,9 277,6
Directors" valuation of unlisted investments 129,9 277,6
6. Borrowings 1 065,6 357,2
The company"s borrowing powers are not
restricted.
7. Commitments
Capital commitments 1 298,8 1 479,4
- contracted 668,2 46,0
- approved 630,6 1 433,4
Operating lease commitments 27,2 29,8
1 326,0 1 509,2
These commitments will be met from existing cash
resources and borrowing facilities available to
the group.
8. Contingent liabilities
Guarantees for loans, banking facilities and
other obligations to third parties. 6,7 7,1
9. Non-consolidation of Portland Holdings Limited (Porthold)
The results of Porthold, a wholly-owned Zimbabwean subsidiary, have not
been consolidated into the group as at 30 September 2006.
There are significant constraints impacting on the normal operation of
Porthold and the PPC board concluded that management does not have the
ability to exercise effective control over the business. In view of the
circumstances, the results of Porthold have continued to be excluded from
the group results in the current year and have been accounted for on a fair
value investment basis.
The summarised results of Porthold, adjusted for hyperinflation and
converted into rands were:
Year ended
30 Sept 30 Sept
2006 2005?
Rm Rm
Revenue 409,5 305,7
Operating profit/(loss) 30,3 (13,3)
Loss before tax (34,0) (17,4)
Tax (2,6) 12,4
Loss after tax (31,4) (29,8)
Total assets 972,0 1 033,9
Total liabilities 322,9 348,5
The effect of not consolidating Porthold was to increase headline earnings
per share for the year by 59 cents (2005: increase by 55 cents) from 2 201
cents to 2 260 cents. Porthold"s results are reflected on a hyperinflated
basis, converted to South African rand at the interbank rate of exchange
(ZWD33,6 to ZAR).
? Restated for the effects of applying hyperinflationary accounting.
10. Basis of preparation
This preliminary report has been extracted from the audited group annual
financial statements, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) on a basis consistent
with the prior year, except as disclosed in note 12.
For a better understanding of the group"s financial position, the results
of its operations and cash flows for the year, this summarised preliminary
report of annual results should be read in conjunction with the annual
financial statements from which this summarised preliminary announcement of
annual results was derived.
The group has adopted the following new or revised IFRSs in the current
period, which, except for those disclosed in note 12 below, did not have a
material impact on the reported results:
IFRS 2 Share-based Payment; IAS 27 (Revised) Consolidated and Separate
Financial Statements; IAS 19 (Revised) Employee Benefits; IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 8 Scope of IFRS 2; IFRIC 5 Rights to Interests arising from
Decommissioning, Restoration and Environmental Rehabilitation Funds; IFRIC
6 Liabilities arising from Participating in a Specific Market - Waste
Electrical and Electronic Equipment; IFRIC 7 Applying the Restatement
Approach under IAS 29 Financial Reporting in Hyperinflationary
Economies and IFRIC 9 Reassessment of Embedded Derivatives.
11. JSE Securities Exchange Limited requirements
The final announcement has been prepared in accordance with the listings
requirements of the JSE Limited.
12. 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 restatement is as follows:
Previousl
y stated Adjusted Restated
Rm Rm Rm
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.
13. Segmental analysis
The board considers the cement operations to be the predominant activity of
the company, as a result, no segmental reporting has been included.
14. Auditors" review
The auditors, Deloitte & Touche, have issued their opinion on the group"s
financial statements for the year ended 30 September 2006. A copy of their
unmodified report is available for inspection at the company"s registered
office.
Commentary
The South African economy continued to exhibit strong growth which was
mirrored in both the residential and non-residential construction sectors.
PPC benefited from these buoyant market conditions with cement volumes
achieving record levels.
Group revenue increased 18% to R4,7 billion whilst operating profit rose
23% to R1,9 billion.
Finance costs decreased from last year due to reduced finance lease
interest charges offset by costs on increased borrowings. Income from
investments was lower than the previous year due to lower dividend income
from unlisted investments.
In October 2006 the vendor funding provided to the purchasers of Afripack
(Pty) Ltd was settled, one year earlier than provided for in the
empowerment deal entered into during 2004. Consequently that company"s
results have been accounted for as discontinued operations and the assets
and liabilities reflected as "held-for-sale" in terms of accounting
standard IFRS 5. PPC"s 25% holding in the company will in future be equity
accounted as an associate company.
The effective tax rate has reduced to 35,9% owing to a lower STC charge
being incurred on the reduced dividend paid in January 2006.
Headline earnings per share increased by 31% to 2 260 cents per share. The
impact of the STC charge on special dividends was 100 cents per share
(2005: 175 cents per share).
Capital expenditure amounted to R395,0 million (2005: R180,6 million) and
related mainly to the Batsweledi expansion and Jupiter re-commissioning
projects.
In view of the company"s good results and current strong cash position, the
directors have declared an increased final dividend of 1 100 cents per
share (2005: 840 cents per share) and a special dividend of
770 cents per share (2005: 800 cents per share).
After winning the Deloitte/Financial Mail "Best Company To Work For" survey
in 2005, PPC was voted third overall in the 2006 survey, and maintained its
position as overall winner in the manufacturing category for the fourth
consecutive year.
CEMENT
Regional cement sales volumes grew 17% over last year. All production units
were fully operational, including the Jupiter kiln, which was re-
commissioned in the March quarter. It provided much needed additional
capacity in the second half of the year.
Operating older kiln lines resulted in higher costs. Logistics expenses
also increased, due to the increased complexity in the movement of product
to our customers. This additional expenditure put pressure on the profit
margin.
The Batsweledi project, which will add 1,2 million tons of cement capacity,
is progressing according to plan and within budget. Until the new capacity
comes on line in mid-2008, cement will be imported to supplement local
supply during periods of high demand. This is not expected to have a
material effect on earnings.
OTHER OPERATIONS
Lime revenue and operating profit improved following the renegotiation of
long-term supply agreements and higher volumes in the steel sector.
Aggregate operations reflected excellent volume and profit growth.
ZIMBABWE
Despite very difficult operating and trading conditions, Porthold remained
cash positive for the year. Increasingly restrictive practices on foreign
currency, pricing and ongoing shortages of transport and production inputs,
impact on our ability to exercise effective control and justify the
continued non-consolidation of this company"s results.
BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE) SOCIAL TRANSFORMATION
The board has formed a BBBEE and Transformation Committee to which
directors appropriate to this important process have been appointed. The
committee will initially focus on the implementation of the company"s BBBEE
ownership plans. Advisors have been appointed to assist the company on this
matter.
BOARD APPOINTMENT
Mr DG Wilson was appointed to the board effective 7 November 2006.
PROSPECTS
The high rate of earnings growth achieved over the past few years is
unlikely to resume until additional capacity from the Batsweledi project
becomes available. In the meantime, increased cement demand will be
supplied through imported product, at little or no margin.
Infrastructural investment and increased building activity as the 2010
World Cup deadline approaches bode well for future cement demand. However,
rises in interest rates could moderate activity in the middle and upper
income residential construction sectors.
The pre-feasibility study of capacity requirements in the Western Cape is
progressing well and a proposal will be presented to the board by August
2007. A modern cement milling facility in the Inland region at a cost of
around R600 million has reached final planning phase and a proposal will be
presented to the board in the first calendar quarter of 2007.
These projects and the Batsweledi capacity expansion will span a period of
3 to 4 years. During this period higher borrowing levels are likely to
occur and shareholders are reminded that the increased levels of capital
investment will impact on the declaration of further special dividends.
Continuing positive market conditions should enable the company to report
improved performance and strong operating cash flows in 2007. Shareholders
are also reminded that the first half earnings will bear the full impact of
STC on both the final and special dividends.
On behalf of the board
AJ Phillips JE Gomersall
Chairman Chief Executive Officer
7 November 2006
Dividend announcement
Notice is hereby given that the following dividends have been declared in
respect of the year ended 30 September 2006.
- number 204 (final dividend) of 1 100 cents per share
- number 205 (special dividend) of 770 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, 5 January 2007. The last date to trade to
participate in the dividends is Thursday, 28 December 2006. Shares will
commence trading ex dividends from Friday, 29 December 2006.
The important dates pertaining to these dividends for shareholders trading
on the JSE Limited are as follows:
Last day to trade "CUM" dividends Thursday, 28 December 2006
Shares trade "EX" dividends Friday, 29 December 2006
Record date Friday, 5 January 2007
Payment date Monday, 8 January 2007
Share certificates may not be dematerialised or rematerialised between
Friday, 29 December 2006 and Friday, 5 January 2007, 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* Friday, 5 January 2007
Shares trade "EX" dividends Friday, 29 December 2006
Last day to register to receive the Friday, 5 January 2007
dividends
Payment date on or shortly after Monday,
8 January 2007
The register of members in Zimbabwe will be closed from Friday,
29 December 2006 to Friday, 5 January 2007, 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 Friday,
5 January 2007 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
8 November 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
Link Market Services SA (Pty) 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)
These results and other information are available on the PPC internet
website www.ppc.co.za
Date: 08/11/2006 10:06:18 AM Produced by the JSE SENS Department
