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PPC seeks more Africa projects to boost cement capacity by 75%

PPC, South Africa’s largest cement maker, plans to boost production capacity by as much as 75% as it targets more projects across the continent.

“The pipeline for at least one or two more projects is very healthy at the moment,” chief executive Ketso Gordhan said in a phone interview from Johannesburg on Tuesday. “By the end of 2017, we should be a 14-million-tonne player.”

The company is expanding with new plants across Africa at a cost of $1.04-billion to meet demand in countries that are net importers of cement. Johannesburg-based PPC has started four projects in Rwanda, Democratic Republic of Congo, Zimbabwe and Ethiopia, with a fifth planned.

PPC is targeting 40% of sales outside South Africa by 2017, compared with 26% in the six months through March. The domestic market is oversupplied by about 3-million tonnes, according to Gordhan. New operators including Dangote Cement are competing with PPC while demand remains sluggish due to weak economic growth.

“We have capacity and the ability to do one more project,” he said. “We are pursuing a number of opportunities” with production of as much as two million tonnes.

PPC’s current capacity is about eight million tonnes, according to the company’s website. Current expansion projects will increase that to 11-million tonnes by 2015.

Algeria venture
A new plant in Algeria is set to start operating by early 2017 after investments of $400-million to $450-million. 

Hodna Cement Co., in which PPC is acquiring a 49% stake, will produce two million tonnes of the construction material a year.

PPC fell as much as 5.3%, the steepest intraday drop since Jan 17, and was trading down 4.7% at R31.41 as of 11.39am  in Johannesburg on Tuesday. That wiped out the stock’s gain this year, in contrast to a 7.5% increase in the 166-company FTSE/JSE Africa All-Shares Index.

Fiscal first-half normalised headline earnings, which excludes some one-time costs, rose 3.6% from a year earlier to R0.86, PPC said in a statement on Tuesday. Sales increased 9% to R4.16-billion.

“We are little bit disappointed” by the results, as a strike in the platinum sector and three weeks of rain contributed to a 2% decline in sales in South Africa, Gordhan said. For the second half ending in September, PPC expects better performance as demand picked up in April and May. – Bloomberg

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