PPC delivered a strong set of results for 1H26. While it is not visible at first glance, management was able to produce a solid turnaround. PPC SA and Botswana achieved margins not seen since FY18, and PPC Zimbabwe recovered well, despite the headwinds faced in the period. Management delivered on their promise to increase contribution margin across all business units, and they will implement more initiatives. In SA, electricity costs are expected to decline due to the commissioning of two solar plants and significant reductions are anticipated from the renegotiation of logistics contracts in 2026. In Zimbabwe, a clear maintenance schedule has been put in place, and OEE is expected to improve. Furthermore, by FY28, the Colleen Bawn solar plant should be operational, also significantly reducing electricity costs. As guided by management, the focus is on improving operational efficiency and increasing contribution margin. This is perhaps necessary in the current environment, where cement demand in SA is relatively weak and imports continue to rise. While imports do not really pose a threat to PPC directly, they could cannibalise already weak demand in a very price-sensitive market. This is why we believe that PPC needs its turnaround strategy to work and get RK3 operational without any delays. We are confident that through management’s initiatives, the group should be able to expand margins further, and compete with low-cost producers. However, this does require higher construction activity in SA. While the Western Cape is performing well and the outlook is positive, the Northern Region remains under pressure. With increasing competition from Chinese companies and local producers, PPC should remain wary.
