PPC has been on the radar of many investors in recent times. The share price has increased over 150% in the past year, yet longer-term holders are still in the red as the company is down over 14% in the past three years.
2022 hasn’t been kind to the share price, with a sell-off of around 20% this year.
PPC has now released an operating update for the twelve months ending March 2022. Total cement volumes are expected to increase by between 4% and 8% in this period. South Africa and Botswana have only seen low single digit growth, while Zimbabwe and Rwanda have achieved strong double-digit volume growth.
It doesn’t help the local industry that imported cement accounts for around 10% of South African cement sales. Imports increased by 11% in this period and are running ahead of pre-Covid levels. Naturally, PPC spends a lot of time lobbying government for relief against “unfair competition from imports” and the impact on local jobs.
In response to input cost inflation, PPC increased prices by between 4% and 7% year-on-year.
Of concern to shareholders will be the news that PPC has not experienced a meaningful uplift in sales from the government’s designation related to the use of locally produced cement on government projects. I remember that when the news of that designation broke in the market, punters got very excited about PPC. This is the cement version of “buy the rumour; sell the fact” I suppose!
Having said that, PPC believes that it is well-positioned to benefit from a boost in demand once the infrastructure programme gathers momentum.
Moving on to materials, the readymix and aggregates businesses reported an uptick in volumes. Readymix volumes are up by between 5% and 10% and aggregates are 10% to 14% higher. Fly ash sales volumes are down 14% to 18% due to an unusually high base year.
Importantly, group debt reduced from R1.7 billion at 30 September 2021 to R1.2 billion at the end of February 2022. This improvement was driven by strong cash generation and the sale of PPC Lime and the Botswana aggregates business.
