PPC Africa’s latest financial report shows the dilemma of many companies invested in Zimbabwe; the good news is there is sales growth, but the bad news is that the currency crisis remains a blot on the books.
The Zimbabwe unit of the cement company outperformed its regional peers on volume growth, but it dragged down the rest of the group on profitability because of one old Zimbabwean story; the currency crisis.
In its annual results for March announced on Monday, PPC reported that headline profit from continuing operations fell more than two thirds.
The group’s revenue fell by 13% to R1.6 billion from R1.8 billion in March last year. Hyperinflation accounting and a 75% depreciation of the Zimbabwean dollar against the South African rand reduced PPC Zimbabwe’s contribution to the group’s financial performance. This was due to currency changes introduced over the past year by the Zimbabwe government, under which the local currency was devalued.
In Zimdollar terms, PPC Zimbabwe’s EBITDA – a measure of a company’s overall financial performance – increased by 173%, but EBITDA in rand dropped by 32%. Profit margins fell to 29.6% from 38.0% last year.
PPC has US$17 million stuck in Zimbabwe, and reports that the “Reserve Bank of Zimbabwe continues to honour its obligation to settle PPC Zimbabwe’s debt from legacy funds with a further US$11.2 million paid during FY21”.
The company expects the debt to be fully repaid during the end of this financial year.
PPC’s solid good news…
But, while Zimbabwe’s books are a drag on the books of the group, PPC Zimbabwe is in fact one of the group’s best performers in terms of sales. In the past year, PPC actually saw more volumes growth in Zimbabwe than it did its other markets.
For the full year, Zimbabwe grew sales by 10%. This came after a strong 40% growth in the second quarter and a 24% rise in same in the third quarter. In comparison, for the year, South Africa and Botswana grew 6%, while Rwanda was up 8%.
Zimbabwe volumes growth was above the group average of 7% for the year.
According to group CEO Roland van Wijnen, infrastructure projects in Zimbabwe are behind that growth.
“Despite the challenging economic environment and the impact of COVID-19 related lockdown restrictions on sales, PPC Zimbabwe cement volumes increased by approximately 10%, supported by ongoing infrastructure projects,” says van Wijnen.
Earlier this month, PPC’s Zimbabwe MD, Kelibone Masiyane, laid out where what he described as “phenomenal demand” for cement was coming from. It is a mix of retail demand mostly from farmers, as well as public infrastructure, he said.
In the housing segment, tobacco farmers were behind the sale growth last year, “and we also anticipate further surge continuing as we see that maize harvest is looking great”.
PPC is also benefiting from cement demand from public infrastructure. The projects that PPC is supplying include; the Hwange power station expansion, the recently completed Muchekeranwa Dam, Gwayi-Shangani Dam, the new Manyame Air Base Hospital, National University of Science and Technology (NUST) student accommodation, RG Mugabe International Airport, the Beitbridge-Harare highway and the Beitbridge Border Post expansion.
“We are working with local contractors to make sure that there is adequate supply to complete these projects,” said Masiyane.
PPC is also working to secure power supply for two of its plants. The company has secured a partner to build and operate a 32MW solar park to power up operations at Colleen Bawn and Bulawayo. An announcement on the project is pending.
The two plants have capacity to produce 760 000 tonnes of cement a year. In total, adding output from the company’s Harare plant, PPC has capacity to produce 1.4 million tonnes annually. In total, Zimbabwe has installed capacity of 2.6 million tonnes.