Key message: Solid result in weak market, with increased distributions to shareholders expected going forward.

  • PPC released 1H FY24 results, with revenue and EBITDA up 21% and 47% respectively. The EBITDA margin recovered well to 17.3% (from 14.3%) mainly due to a strong recovery in Zimbabwe after the kiln shutdown in the prior period. HEPS improved to 26c (after a loss of 5c). With the US$ being adopted as the functional currency for Zimbabwe, fair value and foreign exchange gains fell to a minimal amount of R4m.
  • Share buybacks of R103m were implemented of the R200m approved distribution with the SA obligor group (which includes dividends received from Zimbabwe and Rwanda) able to maintain within leverage targets. We believe that a dividend of R235m (12cps) is still payable within the overall distribution for FY24 within the obligor gearing limits.
  • Net debt reduced by R195m to 730m. Finance costs continued to decline as de-gearing continues and interest rates fell after negotiating improved debt terms.
  • Cement South Africa and Botswana: Sales volumes down 4.7% and prices up 8.8%. Revenue increased 4.7% and the EBITDA margin increased to 12.6% (from 12.2%). Cost inflation remains high, with coal and energy costs being the major culprit (variable production costs up 9.7%). Fixed costs declined 1.9%. Coastal demand weak due to weather and delays in large projects. The inland market was more stable as retail sales recovered in a competitive market. Namibian imports into Botswana impacted sales.
  • Zimbabwe: Sales recovered well (+44% with strong local demand and reduced imports) after the extended kiln shutdown with revenue up 104% and the EBITDA margin back up to 25% (from 17%).
  • Rwanda: The announced sale of the 51% in Cimerwa for US$42.5m was a positive surprise (approx. 3.2 times EBITDA multiple).
  • Materials: Sales volumes declined (Readymix down 19.7%, aggregates down 16.8%, fly ash up 13.8%). Turnaround measures resulted in a positive EBITDA.
  • PPC has weathered the weak South African market well and we roll our base valuation year to FY25 where we expect HEPS of 43c but increased distributions as continued de-gearing allows dividends/share buybacks. Out Target Price increases to R5.00 (from R3.70).

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