PPC's earnings crumble on Zimbabwe inflation


PPC's earnings crumble on Zimbabwe inflation


Published Date: 2019-11-21 | Source: Stephen Gunnion | Author: Stephen Gunnion

PPC's earnings crumble on Zimbabwe inflation

The cement producer has resorted to hyperinflationary accounting for PPC Zimbabwe, while volumes in Southern Africa also declined.

Hyperinflation in Zimbabwe and falling volumes at home have pushed PPC into a first-half loss. But the impact was cushioned by better performances in Rwanda and the Democratic Republic of Congo (DRC).

The cement producer said a 17% decline in volumes to 2.6 million tonnes in the six months to end-September was the result of weaker demand in its Southern Africa and Zimbabwe businesses. The deterioration was in line with the wider industry, which recorded an estimated fall of 10-15% as consumer and construction sector demand remained under pressure. The competitive environment was exacerbated by imports and blender activity, with imports up 5% to 849,000 tonnes for calendar year August 2019.

While its business in Zimbabwe remained self-sufficient, PPC said the Zimbabwe Public Accountants and Auditors Board announced that the country was a hyperinflationary economy. This was supported by a rapid increase in the inflation rate, which was above 150% at the end of September, while the traded interbank Zimbabwean dollar exchange rate showed a significant deterioration and there was a lack of access to foreign currency to discharge foreign liabilities.

Group revenue declined 12% to R4.99 billion for the period. Excluding PPC Zimbabwe it was 1% lower at R4.5 billion. Similarly, a 16% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to R868 million was reduced to 3% if Zimbabwe was stripped out.

In Rwanda, CIMERWA grew revenue by 28% on the back of a 20% increase in volumes, while EBITDA jumped 70%, benefitting from increased volume output and an improved cost-per-tonne performance.

PPC Barnet DRC achieved revenue growth of 26% and lifted EBITDA by 35% as it controlled costs and improved its route to market strategies. It said the business was in the process of restructuring its debt.

Earnings for the period were also impacted by once-off restructuring costs of R83 million. It reported a basic loss of 0.4c per share, down from earnings of 21c a year earlier, while headline earnings fell 71% to 6c per share.

The group said it had initiated a comprehensive strategic review and certain initiatives necessary for sustainable value creation were underway. It said the Concrete Industry had submitted an application to the International Trade Administration Commission (ITAC) highlighting the impact of imports on local cement production. It was also engaging with the relevant authorities to ensure that blended cement met the requisite standards.

Its shares rose 1.2% to R3.45 yesterday.


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