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PPC
PPC
PPC - Strong Cement Growth Drives Further Expansion
Pretoria Portland Cement Company Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC & ISIN: ZAE000005559
STRONG CEMENT GROWTH DRIVES FURTHER EXPANSION
Sustained double digit growth in cement demand has resulted in the domestic
industry reaching full capacity according to Pretoria Portland Cement Ltd
(PPC) who released their full year results to September, today.
Commenting on the results John Gomersall, chief executive officer of PPC
said, "Regional cement sales grew 17% year-on-year and boosted market share
as PPC supplied an increased customer base. Both the residential and non-
residential construction sectors continued to exhibit strong growth.
Consequently, the buoyant market conditions have driven cement demand to
record levels. The South African together with neighboroughing states
cement consumption is now at the same level as the United Kingdom," he
added
At the interim stage Gomersall warned that as the company reached full
capacity, earnings growth would slow until the increased output from
expansion projects becomes available. Today Gomersall reiterated that the
earnings growth achieved over the past few years is unlikely to resume
until additional capacity from the Batsweledi project becomes available.
"Owing to the increased demand, all production units, including the
Jupiter kiln which was re-commissioned in March, were fully operational,
providing the much needed additional capacity in the second half," said
Gomersall.
PPC cautioned, however that operating older kiln lines resulted in higher
operated costs. In addition logistics costs had also increased due to the
increased complexity in the movements of product to keep customers
supplied. These additional costs put some pressure on cement margins.
Capital expenditure amounted to R395.0 million (2005: R180.6 million) and
related mainly to the Batsweledi expansion and Jupiter projects.
"The Batsweledi project which will add 1.2 million tons of cement capacity
is progressing according to plan," said Gomersall. The planning phase to
expand and modernise the capacity in the Western Cape at Riebeeck West is
progressing well and I anticipate that this proposal will be presented to
the Board by August 2007. The R600 million state-of-the-art cement milling
facility at our Hercules plant in Pretoria to serve the Inland region, has
reached the final planning phase and this proposal is likely to be
presented to the Board in the first calendar quarter of 2007,. The
Environmental Impact Assessment processes for both these projects are in
full swing," he stated.
The strong market conditions resulted in group revenue increasing by 18% to
R4.7 billion whilst operating profit rose 23% to R1.9 billion and headline
earnings per share increased by 31% to 2260 cents per share.
In a further display of commitment to its empowerment initiatives, PPC
announced the formation of a Broad Based Black Economic Empowerment (BBBEE)
and Transformation Committee. The initial focus of the committee will be on
the company"s implementation of its BBBEE ownership plans.
Commenting on PPC"s prospects Gomersall said that infrastructural
development and increased construction activity ahead of 2010 bodes well
for cement demand. Nonetheless, the middle and upper residential
construction sectors could experience a slow down following the recent
interest rate hikes.
PPC however cautioned that expenditure on Batsweledi and the two other
expansion projects if approved, would necessitate increased levels of
capital investment and borrowing and would likely impact on the declaration
of further special dividends.
In view of the good results and surplus cash position, the company has
declared a final dividend of 1100 cents per share (2005: 840 cents per
share) and a special dividend of 770 cents per share (2005:800 cents per
share).
For further information contact:
John Gomersall
Barloworld: 011-445-1015
Orrie Fenn
PPC: 011-386-9069
Sandton
8 November 2006
Sponsor: JPMorgan Equities Limited
Date: 08/11/2006 10:42:35 AM Produced by the JSE SENS Department
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