PPC – Refining the mix

PPC’s FY24 performance was strong and expectedly driven by a solid recovery in the Zimbabwean operations after the extended kiln shutdown in FY23. The favourable conditions in Zimbabwe aided margin uplift, but many one-off costs, such as structural and leadership changes and mothballing of plants, eroded much of the gains.


The embattled SA Materials business continues to underperform as the level of activity within its economic area of operation is insufficient. Furthermore, increased competition has put additional pressure on the segment and the future of the aggregates business may soon be decided. We do note ideal expansion opportunities for the aggregates business in the coastal region through the CompCom required sale of Lafarge assets.


SA & Botswana cement volumes remain under pressure as PPC continues to apply price increases, but eventually it will not be able to sacrifice volumes anymore. Fortunately, management’s plan is to reduce the variable cost per tonne and increase the contribution margin over time through improved efficiencies. We also believe that the decision to mothball a plant and two kilns was wise due to the weak SA market.


That being said, the weak construction environment and highly competitive inland market cannot be used as an excuse indefinitely, especially when competitors are increasing volumes and gaining market share. PPC SA cannot wait for a construction boom and structural reform; it needs to make changes now to reduce costs and regain market share, which the new management team is doing, in our view. This is important, as the Zimbabwean operations should not be relied upon for returns – it is a one-kiln operation after all. We expect conditions to be less favourable in FY25 as competitors return to the market and demand remains flat. How well the business performs may depend on how well efficiencies are implemented.