Key message: Margins stabilising in SA Cement and signs of volumes bottoming. Price increases are sticking – any volume growth will boost earnings considerably.

  • PPC released a Trading Update for the five months to August 2023.
  • Cement South Africa and Botswana: Sales volumes down 6% and prices up 10%. Revenue increased 5% with a stable margin (11%). Cost inflation was mitigated by price adjustments, operational efficiencies and improved industrial performance. Net debt levels declined to R648 (from R800m). Inland cement sales look to be bottoming, coastal volumes down due to weather and weaker retail demand.
  • We continue to forecast a 2-3% recovery in EBITDA margins as volumes start to recover (a number of companies have reported a good pickup in construction materials demand over recent months).
  • Zimbabwe: Sales volumes up 42% after the planned kiln shutdown and growth in residential and public construction. Prices increased 12%. Revenue increased by 58% (in USD parallel rate). EBITDA margin recovered well to 27%. Numbers to be reported in USD as functional currency going forward, removing the hyperinflation adjustments. USD3.5m extracted in July 2023.
  • Rwanda: Sales volumes up 13% due to public infrastructure spend. Price increase of 6% drove a revenue increase of 19%. EBITDA margin fell to 29% (from 32%) due to input cost pressures. Regional competition has increased.
  • Materials: Despite weaker volumes (revenue down 3%) EBITDA turned positive following restructuring. Price increases have been implemented.
  • We expect a return to profitability in FY24 as price increases finally catch up to cost inflation and non-cash items decline. We have increased our FY24 and FY25 HEPS forecasts by 37% and 14% respectively to 38c and 53c.
  • PPC has weathered a very tough market and remains able to consider a dividend in FY24. Any recovery in cement demand in South Africa will have a significant impact on the bottom line. We adjust our Target Price to R3.80 (from R3.70).

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