Listed cement producer Pretoria Portland Cement Company (PPC) has reported a 4% increase in its fully diluted headline earnings per share (Heps) for the six months to the end of March 2005, from 585 cents in the year-earlier period.
The company declared an interim dividend of 260 cents per share, representing an 18% increase on the 220 cents distributed at the half-year stage in 2004.
Announcing its interim results on Friday, PPC said the secondary tax on companies (STC) it had to pay in relation to its 2004 special dividend limited its Heps increase to 4%.
By contrast, PPC has recorded an 11% rise in revenue to R1,8-billion from R1,63-billion a year earlier, and operating profit surged to R646,9-million from R517,2-million.
After tax and STC of R135,1-million, the company’s net profit was 10% higher at R344,1-million, while profit attributable to shareholders rose by 8% to R337,6-million.
PPC said the strong growth in operating profit resulted from continued growth in domestic cement volumes and improved operational efficiencies. Domestic cement demand growth — with its South African cement volumes 10% higher — were driven by the upswing in residential construction on the back of lower interest rates.
These volumes, together with price increases, excellent cost reductions and improved operational efficiencies in all the group’s divisions were the driving factors behind its operating profit growth.
The company’s exports were lower, however, curtailed by rand strength as well as capacity constraints at national rail operator Spoornet, it said.
“The strong growth in the local market, which was higher than we anticipated, has more than compensated for the decline experienced in the export markets,” said PPC CEO John Gomersall.
While PPC has already announced its planning and scoping of a one-million-tonne expansion programme for the inland market, its board had approved capital expenditure of R50-million to recommission the 550 000-tonne-a-year Jupiter plant in Germiston, he revealed.
“For this limited amount of capital expenditure, we will provide the market with additional security of supply over the two-and-a-half-year construction and commissioning period of our new expansion project,” said Gomersall.
“The one-million-tonne project should be presented to the PPC board for approval during the last quarter of 2005,” continued Gomersall.
Capital expenditure amounted to R47-million, up from R34,3-million a year earlier. According to Gomersall, expenditure included the purchasing of quarrying equipment, information system upgrades, and the scoping and costing of the inland capacity expansion project.
Commenting on PPC’s prospects going forward, Gomersall said: “There is renewed optimism in the construction industry, which is driven mainly by the government’s commitment to increase infrastructure investment. This, combined with buoyant economic forecasts and business confidence, will impact positively on cement demand.
“We would caution, though, that demand may be tempered by shortages of other building materials and skills in the industry; nevertheless we believe that cement demand could grow by between 8% and 10% for our full financial year.
“We are also confident that strong demand from the local steel producers will be beneficial to the performance of the lime division,” forecast Gomersall.
PPC expects to report increased operating results and cash flows for the full year, based on the strength of its performance during the first half and positive forecasts in cement volumes for the remainder of 2005.
Turning to the company’s divisional performance, revenue in the Cement division increased by 14% to R1,5-billion from R1,3-billion the previous year, with operating profit realising a 25% increase to R574,7-million.
Increased cement demand had created the necessity for some of the older kiln production units at PPC Cement to be recommissioned.
“These kilns are less efficient, and whilst they cannot be run cost-effectively over a sustainable period, they are fully depreciated and therefore reflect further improvement in the cement operating margin,” Gomersall noted.
Revenue in the Lime operation improved by 6%, reflecting increased demand from customers in the local steel sector. Operating profit showed a 28% improvement to R54,1-million.
Finally, the packaging division experienced strong demand for cement sacks and reported a 30% improvement in operating profit at R18,1-million.
“We are very pleased with this great performance in the first interim reporting period of our black economic empowerment joint venture in Afripack with the women executives and shareholders of Nozala Investments,” concluded Gomersall. — I-Net Bridge