South Africa Cement supplier PPC overall sales volumes in the first quarter of 2016 declined by 3% while cement sales in the South African business declined by 1.6% with international businesses recording an 8% decline.
PPC’s construction projects at sites in the Democratic Republic of the Congo, Zimbabwe and Ethiopia are up and moving on schedule even as the cement supplier’s expansion plans remain on track.
The company stated that it intends to become a provider of materials and solutions into the basic services sector and progress the company’s ready-mix channel management strategy. PPC has thus continued to advance its proposed acquisition of ready-mix concrete supplier 3Q Mahuma Concrete.
During a trading update on Monday, the group said that coastal regions achieved positive volume growth despite the tough South African operating environment. This was however more than offset by declines in the increasingly competitive Gauteng and inland regions.
Average selling prices, according to the group, decreased by 4% for the same period.
PPC also reported that the conclusion of major infrastructure projects in Zimbabwe had led to double-digit declines in local sales, while cement exports also reducing significantly on the back of exchange-rate effects.
Cement sales in Botswana have reduced significantly even after a strong performance in 2015. The retail market has remained highly contested owing to weak demand and intense competitor activity,” the company added.
Meanwhile, in the first quarter of 2016, cement sold by PPC’s operation in Rwanda doubled more than the expected earnings before interest, depreciation and amortization margin.
High rainfall during the season, together with constrained export opportunities, contributed to the sales decline.
The new 600 000 t/y plant was, however reported to be performing satisfactorily and the kiln had passed its performance test in terms of output and heat consumption.
The lime division’s performance was negatively affected by the performance of the local steel and alloys industry over the period.
Upcoming projects secured by the aggregates and Pronto divisions on the other hand led to improved performance.
Stable earnings are anticipated for the first half of 2016 and this is expected to reflect an annual decline on the back of a tough operating environment and increased interest charges owing to the ramping-up of the Rwanda operations.
Despite the fact that the South African and rest of African market continue to face resistance, we stand firm and believe that our response strategies have positioned PPC well to limit the impact on the group, the company said.