PPC busy with four new Africa ventures

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By Roy Cokayne

Roy Cokayne

Pretoria Portland Cement (PPC) is pursuing four new opportunities in African countries in line with its strategy to increase its revenue generation beyond South Africa.

This follows the listed cement and lime producer investing $12 million (R105m) cash in July to obtain a 27 percent stake in the Habesha Cement Share Company in Ethiopia. The Industrial Development Corporation (IDC) simultaneously invested $9m for a 20 percent equity stake.

PPC chief executive Paul Stuiver said yesterday that all of these opportunities were at different stages of development, including final due diligence, and was certain “one of them will be done and dusted one way or the other” during the next three months.

Stuiver said none of these opportunities, which were a mixture of greenfields and brownfields projects, was more than a year away.

He declined to identify the countries involved other than confirming PPC was on record as having an interest in the Democratic Republic of Congo (DRC) and there were opportunities in Mozambique and in Zimbabwe, where it already has cement operations.

“The way these things work out, we’ll seldom get 100 percent . If they all came to fruition, it would add 3 million tons to PPC cement capacity. I’ll be pleased if we get two out of four opportunities and delighted if we get three out of four,” he said.

Stuiver said PPC had learnt its lesson that every African country would eventually have a local ownership requirement, whether it was black economic empowerment (BEE) or an indigenisation policy, and he did not want to think about owning 100 percent of these operations.

“We welcome local partners and wouldn’t want to go above 70 percent on any of these initiatives, which also helps with the funding. Our target is to own between 51 percent and 70 percent of projects,” he said.

Stuiver added that PPC would “very soon” embark on the second phase development of the Habesha Cement Share Company in Ethiopia to double the capacity of the plant to 2.8 million tons a year.

Habesha Cement’s new $130m plant, north-west of Addis Ababa, will have an annual capacity of 1.4 million tons to supply the growing Ethiopian cement market, with production planned to commence during the first half of 2014.

Stuiver said there was a growing demand and need for cement in Southern Sudan, which would result in PPC putting in a second line very quickly. “It was likely to be up and running in 2016 or 2017.”

This would involve a further investment of $130m and an opportunity for PPC to increase its shareholding in Habesha Cement, possibly by up to 40 percent, by investing more than its shareholding required, Stuiver added.

Despite another year in a tough economic environment, characterised by overcapacity in the industry, competitive cement pricing, rising energy costs and strike action in adjacent industries, PPC yesterday reported an 11 percent growth in normalised earnings a share to 185c in the year to September from the previous year.

The firm’s normalised earnings exclude BEE international financial reporting standard (IFRS) charges.

Revenue increased 8 percent to R7.35 billion with improved selling prices compensating for lower cement sales volumes.

Operating profit before BEE IFRS charges increased 9 percent to R1.87bn.

Cost of sales rose 7 percent to R4.8bn, largely because of rising electricity and outbound logistics costs.

A final dividend of 108c a share was declared, increasing the annual dividend by 12 percent to 146c a share.

PPC stock rose 1.63 percent to R28.66 yesterday.

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