PPC bullish about prospects following awarding of Sanral tenders

Cement producer PPC has cheered the awarding of delayed multibillion-rand construction tenders by the South African National Roads Agency (Sanral).

The agency this week finally awarded four of the five tenders it cancelled in June after its board raised several issues on how they were awarded. The tenders are worth more than R12-billion.

PPC CEO Roland van Wijnen said the company is primed to benefit from the tenders when construction work begins.

“Looking forward, we are encouraged by the recent announcements by Sanral to award large construction projects in South Africa, as well as the comments on increased infrastructure spending made in the recent mid-term budget speech of the minister of finance,” said Van Wijnen.

“PPC is well-positioned to benefit from increased cement demand to support the much-needed construction work across South Africa.”

PPC, in its trading update released on Wednesday, said the group’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) declined 23% to R728-million in the six months to September.

The group further said it expects profit for the period to come in lower due to lower earnings generation in South Africa and Botswana cement and aggregates, readymix and ash segments, and PPC Zimbabwe.

The group reduced its debt to R677-million at the end of September, compared with R1-billion it reported in March.

Van Wijnen said in light of the current economic climate, the group will continue to improve cash generation and enhance operational efficiencies in an effort to further strengthen its financial position and reduce the impact of rising input cost inflation.

“The PPC group continues to deliver sound cash generation and deleverage the balance sheet despite difficult trading conditions in its core South African and Botswana cement markets, offset by positive trading conditions in its Zimbabwe and Rwanda operations.

“To maintain volumes in the South African and Botswana cement markets, sales price increases were limited to 5% in the period under review,” he said.

“Key input costs, especially those related to fuel and energy, increased at double digits in percentage terms. Whilst various cost mitigation initiatives are under way, these actions take time to implement, and for the period under review we’re not able to fully offset cost increases, resulting in EBITDA margin compression.”

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