PPC sells more cement at lower profit
The company says that cement is too cheap in SA so industry is unable to recover cost increases
Growth in the rest of Africa helped cement maker PPC lift its top line, but profitability suffered in the first half of its 2019 financial year.
PPC reported on Friday morning that its rest of Africa division grew interim sales 36% to R1.7bn, helping offset a 4% decline in revenue in its domestic market to R2.8bn.
The group’s overall revenue grew 8% to R5.6bn in the six months to end-September from R5.2bn in the matching period in 2017.
But net profit declined 14.5% to R260m, with a 29% decline in profit of cement sales in the rest of Africa and 18% in its home market.
The rest of Africa helped PPC grow the overall amount of cement sold by 4% to about 3.1-million tons, despite a 3% decline in its home market.
“Volume declines were experienced in SA, against the backdrop of a challenging market — where both the consumer segment and construction industry came under severe pressure,” CEO Johan Claassen said in the results statement.
“Cement imports increased by 71%, albeit off a low base, with the majority of imported product received via Durban, and to a lesser extent Cape Town. Increased blender activity contributed to a competitive inland market.”
Claassen said the industry requires real cement price increases to recover operational cost increases.
The group has set itself a target of improving its profit by R50/ton, and has achieved R22/ton so far, the results statement said.