PPC’s 1H25 performance was mixed. While revenue declined, changes implemented by management came into effect and lifted contribution margin, despite volume declines in SA and Zimbabwe.
Management’s assessment of PPC and the previous group structure was scathing. None of the plants were being run efficiently and all were below optimal capacity, preventing the company from competing effectively and leading to lost market share. Management also noted the high general expenses, which they believe should be no more than 5% of revenue, while PPC’s accounted for 13% of revenue.
At NPC, the team was able to reduce logistics costs by 15% and is now targeting the same reduction in costs by implementing the identical strategy, with a new contract expected in February 2025. Along with changing the company’s structure, rooting out bad management and poor corporate culture, the new team has breathed life into the business with a key focus on improving efficiency and increasing capacity.
While the turnaround will be a marathon not a sprint, some of the changes have already had a strong effect on the bottom line. Implementation of the new logistics strategy could reduce costs by c. R150m and provide PPC with the scope to be more competitive in the 32.5 blender market. Further improvements to extender utilisation and a reduction in clinker factor could help PPC gain market share in Limpopo and Mpumalanga.
We are concerned about the threat that imports from Mozambique could bring to the SA market, and that the potential for growth in LP and MP may be overstated as construction activity remains low in those provinces. Despite our concerns, we see a clear path to margin expansion through cost reduction and increased efficiency. The solid plan and technical support from Sinoma provide us with confidence in PPC’s recovery.