PPC (PPC) A tough road ahead

PPC delivered a mixed set of results in FY22, producing strong double-digit revenue growth, however, profits were eroded by the high and rising energy costs. Growth in the SA & Botswana cement division during FY22 slowed due to the normalisation of the ‘home improvement boom’ experienced during FY21, as well as the relaxing of Covid restrictions, which aided the flow of cement being brought into SA in FY22.
Cement volumes improved marginally over the high base in the prior year, but a concern for PPC is the increase in competition from increasing imports and the threat of Mozambican imports, as well as increased competition from blenders in the inland region.
The International cement division’s strong growth came through improved economic conditions in Zimbabwe and Rwanda, as well as an increase in export sales. A concern is that Zimbabwe faces import competition from neighbouring countries and also more competition internally. This may put pressure on selling prices and volumes.
SA Materials performed well in FY22, driven by strong growth from its core businesses. Readymix volumes increased, but at a slower rate than construction activity. Aggregates volumes are also under pressure in PPC’s coastal region as the Western Cape is experiencing a slow SANRAL cycle.
High and rising energy costs are expected to continue for the rest of the year and as a result, will continue to erode profits. The calcined clay project in SA is promising, but until it is put into production, PPC’s profitability will be constrained under the prevailing market conditions.