Key message: FY22 will be a normal year and should reflect the real operational performance. While cement volumes will probably stabilise at 2H FY21 levels, average prices (up 3-4%) and volumes (up 10-12%) in FY22 should drive good earnings growth.

  • PPC released FY21 results. It is difficult to compare these results to prior periods due to restatement following the discontinuation of the DRC business, PPC Lime and Botswana Aggregates. HEPS from continuing operations was 3c (down from a restated 54c).
  • Cement South Africa and Botswana: revenue up 7% as volumes increased by 6%. Price increases pushed through in 2H should positively impact the current period. EBITDA increased by 41% at a 16.7% margin (2H FY21 18.7% margin).
  • Zimbabwe: revenue down 13% but volumes up 10% and prices increased to offset local inflation. Hyperinflation negatively impacted the result. EBITDA fell 32% as margins fell to 29.6% (off an inflated base). US$ dividends are being declared and paid (US$7m paid in the last six months). The region remains financially self-sufficient.
  • Rwanda: revenue up 21% as volumes increased by 8%. EBITDA increased 51% at a margin of 30.3%. The business improved its performance after plant upgrades despite a new competitor in Rwanda.
  • The debt restructuring removed the direct link of US$175m worth of debt in the DRC project to PPC’s balance sheet. The agreement included a final deficiency payment of US$16.5m in early April 2021.
  • EBITDA margins in the SA cement division should be breaching 20% in 1H FY22 as a result of increased capacity utilisation (80% was achieved by the end of FY21), price increases (effective Oct 2020 and Feb 2021 so not yet fully in the base) and cost reduction (R300m).
  • Cash generation in the Southern African region is now sufficient to comfortably cover debt service costs and minimal capex required. A resumption of dividends could be considered from FY23, in our opinion. Finance costs fell by 19% (excluding the discontinued DRC debt). The tax rate was high at 42% due to deferred tax issues. Gross debt was R2 628, with approx. R500m to be repaid in the current period after the PPC Lime and Botswana Aggregate sales.
  • Our SA cement EBITDA margin forecast is 20%, 21% and 22% for the forecast period (we have pulled back FY22 margins from previous forecast to be conservative and based on management comments).

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