PPC had another mixed year in FY25. While revenue declined, profitability and earnings experienced a step change due to management’s turnaround plan yielding results sooner than expected. Management identified key areas of focus and has done well to reduce logistics, energy and clinker costs, which drove increases in the contribution margin in each of its businesses.
An important recovery came from the SA & Botswana cement division, which was able to increase sales volumes in H2 and improve the contribution margin by 4%. While stronger improvements in contribution margin came from Zimbabwe, it was impacted by a higher number of kiln shutdowns, which impacted sales volumes and topline growth. However, with the kiln now fully operational and a normalised maintenance schedule going forward, we expect a much improved result in FY26.
Conditions in SA remain tough. Building activity has slowed and material volumes continue to decline. PPC has faced a backlash from buying groups and continues to lose market share at some of the big retailers. However, management is not affected by this as it is singularly focused on making the business more sustainable before chasing volumes and regaining market share.
We remain concerned about the threat that imports from Mozambique could pose for the SA market as import volumes have accelerated. While it is still a small amount at this stage, Mozambique is now the fourth largest source of imported cement, and Chinese companies continue to make inroads into the SA market. Despite these factors, our outlook for FY26 is positive. While we do not expect significant topline growth, we believe that PPC should be able to maintain its profitability. A key focus will be on cash generation as group debt will be increasing significantly over the next two years.