Key message: Impressive EBITDA expansion continues with the new RK3 plant due to boost margins even further.
- PPC hosted an Investor Day and released a Trading Statement for the 10 months to January 2026. The operating performance was better than expected with revenue and EBITDA increasing by 4% and 22% respectively, with the EBITDA margin climbing to 19.4%.
- South African volumes increased by 2% but were offset by declines in Botswana. The EBITDA margin for the region increased to 17.3% (from 14.8%).
- Zimbabwe volumes increased by 22% with the EBITDA margin increasing to 26.9% (from 26.0%). PPC Zimbabwe has paid US$36m in dividends in the period with the transfer of cash complete. A gearbox failure at the Bulawayo factory will impact margins in February and March 2026. Management expects an impact to margins due to this in FY27 with the overall PPC EBITDA margin expected to flat at approx. 18%.
- Key takeaways from the Investor Day: PPC has taken the refreshing view that a cement company needs to maximise its returns from the current market and not wait for a market recovery. PPC has focussed on the contribution margin and cut back on any business that is not providing the right returns. This has been combined with a focus on maintaining pricing and not chasing market share. The results have been very impressive with EBITDA margins now well ahead of peer companies.
- The importance of having newer kilns was also highlighted, with PPC due to running only new kilns (<20 years old) once the RK3 project is complete. This should provide a competitive advantage over all competitors (Mamba and Sephaku also have new kilns but with only one kiln each have limited operational flexibility and geographic diversity).
- The impact of the new R3.1bn RK3 kiln in the W Cape will be significant due to the approx. 30% savings in variable and 25% in fixed costs. The project is on track to be commissioned in December 2026 with first clinker produced in 1Q CY27. The new RK3 plant could boost SA & Botswana EBITDA margins by at least 5%, in our opinion. The plant will be able to increase the geographic footprint into the E and N Cape.
- We roll our valuation to FY27 and increase our Target Price to R6.80 (from R5.90). PPC is well positioned to benefit from any increase in cement demand with ample spare capacity available at little extra cost.