Key message: Overall cement volumes and pricing are up, led by the international cement operations. Zimbabwean cash extraction is improving, and a dividend is likely in FY23.

  • PPC released an operational update for FY22 and hosted a Capital Markets Day and Site Visit to the De Hoek plant.
  • Group revenue should be up approx. 16% based on the operational update (group volumes up 4-8%, prices up +10%). We expect the group EBITDA margin to increase to just under 20% (from 17.9%), although some short-term margin pressure from rising fuel and coal costs could impact 1H FY23.
  • Cement prices are holding in South Africa, with further increases planned to counter an expected 10% increase in costs due to cost spikes in fuel and coal.
  • Cement South Africa and Botswana: Sales volumes up 0-3% and prices up 4-7%. We forecast revenue to increase 5% for FY22 with the EBITDA margin increased to 19% (from 16.7%).
  • Demand from the private sector remains good but public infrastructure spend is not yet evident. Cement demand has moderated from post-Covid lockdown DIY boom, with 2H revenue expected to be down 5% as a result.
  • Zimbabwe: Sales volumes up 21-25% and prices up. We forecast revenue to increase 60% for FY22 with the EBITDA margin falling to 25% (from 29.6%). Cash extraction is improving in Zimbabwe with profits generated in forex allowed to be declared as dividends.
  • Rwanda: Sales volumes up 18-20% and prices flat. We forecast revenue to increase 6% for FY22 with the EBITDA margin falling to 30% (from 30.3%).
  • There has been no progress on the ITAC application for cement tariffs on imports and the industry has started a process to apply for anti-dumping duties against Vietnam.
  • Our Target Price in the absence of tariffs is R5.45 (from R5.14). Should tariffs be implemented our Target Price increases to R6.89. We assume dividends will resume in FY23.
  • PPC is looking at a number of projects to reduce its carbon footprint, including new extender sources and burning waste instead of coal.

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