PPC prepares for a pick-up when Ramaphosa’s reforms kick
PPC expects demand to pick up in SA as President Cyril Ramaphosa inspires greater investor confidence and initiates new infrastructure projects.
Demand for building material would probably be steady for six months before starting to increase, CEO Johann Claassen said in an interview at Bloomberg’s Johannesburg office.
The market stagnated under former president Jacob Zuma, when the economy faltered and major projects were put on hold.
Ramaphosa has pledged to boost the economy and fight the corruption that dogged the nine-year reign of his predecessor.
The signing of about R56bn of long-delayed renewable power projects last week was an early sign that his presidency will lead to an industrial revival, Claassen said.
"Building wind turbine plants uses a lot of cement," he said. "We have benefited a lot from the building of wind turbines in the Eastern Cape in the past."
Additional cement capacity of at least 1-million tonnes could be needed in SA by 2023 as a result of growing demand and tougher environmental regulations that would lead to the closure of older plants, Njombo Lekula, PPC’s head of southern Africa, said in the same interview.
"If the cement industry grows at around 3% a year, a new plant would be needed every three years," he said.
Nevertheless, there was still a case to be made for consolidation in the South African cement industry because the location of some of the plants affected their profitability, Claassen said.
PPC, SA’s largest cement maker, spent much of last year in merger talks with local rival AfriSam before a three-way combination that included Canadian insurer Fairfax Financial Holdings collapsed over a disagreement on value.
PPC’s share price closed 0.6% lower at R7.85 in Johannesburg on Wednesday. The shares have gained almost 13% this year, valuing the company at R12.5bn.