Pretoria Portland Cement Ltd, South Africa’s biggest cement maker, has revealed its net debt to have reduced by a third. Even so, the company’s focus to commission overseas projects to boost sales is on track, although higher finance costs helped depress half-year profit.
The company said it had cut its net debt to US$410.6m by the end of September, from US$640.3m by the end of March, 2016, following the receipt of proceeds from a rights issue in September, which raised US$278.4m and was heavily oversubscribed.
Along with the South African builders, PPC is struggling to grow revenue and sales, partly due to a slow roll-out of the government’s planned US$55bn infrastructure investment package over the next three years.
In response to slow sales, falling prices and a weak economic environment at home, PPC is building factories in Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of Congo to boost sales overseas. However, due to factories construction the company has suspended dividend payments since June this year.
“With the unwinding of our broad-based black economic empowerment scheme we expect another one billion rand inflow into PPC which will probably also put us in a better cash and net debt position,” said Darryll Castle PPC Chief Executive. “Certainly at the center we do expect some additional de-gearing,” he added.
According to PPC, headline earnings per share (EPS) declined 66% from a year earlier to 14 cents in the six months to end-September, hurt by higher finance costs. Headline EPS, which strips out certain one-off items, is the main profit measure in South Africa. Shares in PPC were down 2.8% at 5.74 rand by 0748 GMT.
Group cement sales volumes increased by 13%, reflecting the impact of double-digit volume growth in the coastal regions, while revenue rose 15% to 5.2 billion rand.
Even so, according to Gareth Visser, Avior Capital Markets analyst, PPC has managed to post a stable operational performance, the key going forward will be whether the price increases put through by the industry hold.