PPC says Zimbabwe’s new currency measures are “positive” and may eventually help the company repatriate its funds from the country.
The cement maker needs to repatriate US$16 million in dividends and US$5 million from rights offer proceeds to PPC South Africa. The company has cash balances of US$60 million, around half of which will be converted at the new interbank rate, the company says in a presentation to a Merill Lynch investor conference in South Africa this week.
In an update, PPC said the new exchange market should result in a more efficient allocation of foreign currency, removing the distortions that were impacting the market, and facilitate the repatriation of cash in the medium to long term.
“We view the introduction of a formalised floating foreign exchange market as a positive development toward curbing the high inflation and excessive premiums created by the parallel exchange rates,” PPC said.
PPC Zimbabwe has kept its pricing in line with inflationary increases in the economy and demand remained strong, while EBITDA (earnings before interest, taxes, depreciation, and amortization) margins remained within the previously guided range of 30% to 35% for the financial year ending 2019.
“PPC Zimbabwe continues to follow a rigorous approach to liquidity management and cash preservation as highlighted in our update on 5 February,” the company said. “The business continues to implement strategies to protect its financial position and utilise regulatory channels to repatriate funds where possible.”
The failure of companies such as PPC to repatriate their funds was one of the sore points at talks between Zimbabwe and South Africa this week.
To manage cash, 90% of PPC Zimbabwe’s input costs are being sourced locally, exports to neighbouring countries will be ramped up, while the company will continue clinker imports from South Africa and buy more PPC shares on the Zimbabwe Stock Exchange.
“PPC Zimbabwe’s maintains a good relationship with the Zimbabwean monetary authorities and will persist in engaging the regulators and monitoring developments,” says the company.
PPC told investors that its Zimbabwe volumes grew by low single digits compared to the prior year for the same period. Operational challenges experienced in the third quarter.
Last year, PPC reported strong growth in the first half of the year, as the construction and housing market boomed. However, foreign currency shortages that worsened in the last half caused a serious shortage of cement on the market.
PPC has capacity of 1.4 million tonnes of cement at its plants in Bulawayo, Colleen Bawn in Gwanda and in Harare.