PPC targets growth to rest of Africa

Paul Stuiver, CEO of PPC

Cement producer PPC will increase its exposure to the rest of Africa so that by 2016 revenue from this area will comprise between 40% and 50% of its income.

Writing in the group's annual report, CEO Paul Stuiver said PPC had selected target regions using specific criteria such as high potential for infrastructure development, low per-capita cement consumption and current cement shortages. Other criteria are to ensure suitable local partners, secure 30-year limestone reserves, to be within 250km of major population centres and to avoid locations close to ports.

PPC currently operates in emerging markets as 70% of the world's cement is produced in emerging markets. These markets present higher growth in populations, gross domestic product (GDP) and cement demand, new opportunities, and deliver higher returns for producers of cement and related products. PPC has operations in SA, Botswana, Zimbabwe and Mozambique. In addition to serving southern African markets, PPC exports cement to other African countries.

Since being established as De Eerste Cement Fabrieken Beperkt in 1892, PPC has been the acknowledged market leader in southern Africa. Over almost 12 decades, PPC has tracked the growth and development of SA, producing the cement used in many of the country's iconic landmarks and construction projects, from the Union Buildings, Gariep Dam and Van Staden's River Bridge, to the new Greenpoint Stadium, Gautrain and much of the rest of southern Africa's infrastructure.

In 2010, PPC celebrated its centenary as a JSE-listed company, joining an extremely small and elite group of listed centenarians, not only in SA but worldwide.

PPC chairman Bheki Sibiya said that with global and regional business climates so uncertain, it was impossible to predict economic trends with any accuracy. However, PPC were encouraged that after almost four years of continuing decline, some leading indicators for cement demand, namely GDP and fixed capital formation were now positive.

SA cement sales volumes rose by 3.2% in 2011 to 11.22 million tons (Mt), according to data released on Monday by the Cement and Concrete Institute (CNCI).

This was the first annual increase after three years of decline. Annual cement sales peaked in 2007 at 14.1 Mt before declining by 4.6% in 2008. The global financial crisis resulted in a further 12.5% slump in 2009 before the decline eased to a 7.8% drop in 2010.

PPC said that based on historical trends and cycles, a long-term recovery in South African cement demand was due, but unfortunately was still uncertain given the global economic turmoil. PPC expected cement demand in Zimbabwe to continue growing, albeit slower than in 2011, but demand in Botswana to remain subdued on trimmed government spending.

For the 2011 financial year, PPC's revenue was almost unchanged at R6.826 billion from R6.807 billion in 2010, while operating profit fell to9 R1.699 billion from R2.105 billion.

EPS dropped to 164.4 cents from 211.1 cents, while the total dividend fell to 130 cents per share from 175 cents per share.