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REGIONAL cement maker PPC says its Zimbabwean unit grew revenues and earnings before interest, tax, depreciation and amortisation (EBITDA) in functional currency despite a difficult trading environment.

PPC operates a clinker plant at Colleen Bawn in Gwanda in the southern part of the country, as well as cement-milling plants outside Bulawayo and Harare.

Apart from South Africa and Zimbabwe, PPC also has units in Botswana, Ethiopia, the Democratic Republic of Congo (DRC) and Rwanda.

According to its audited consolidated annual financial statements for the year ended March 31 2021, the group said accounting for Zimbabwe in terms of IAS 29 — financial reporting in hyperinflationary economies — resulted in a net monetary loss of R200 million.

“Although trading conditions in Zimbabwe were characterised by high inflation and a shortage of foreign currency, PPC Zimbabwe grew revenues and EBITDA in functional currency. However, a 75% devaluation of the Zimbabwean dollar against the South African rand resulted in a reduced contribution to the group’s profitability,”

PPC said.

“The materials business could not recover from the impact of the lockdowns, although it experienced increased demand in some market segments.”

The group reported a net fair value gain on the Zimbabwe financial asset of R256m and a net fair value loss on the Zimbabwe blocked funds of R17 million.

PPC said cash available from operations amounted to R1 022m while cash generation benefited from improvements in EBITDA, reduction in working capital absorption, and lower finance costs paid.

Cash generation and preservation is a key performance measure for PPC.

Group revenue increased by 3% to R8 938m due to the recovery in cement sales, the report says.

Excluding Zimbabwe, group revenue increased by 7%.

Group EBITDA increased by 16% to R1 598 with an EBITDA margin of 17,9%.

EBITDA benefited from volume growth and stringent cost control.

Excluding PPC Zimbabwe, the group’s EBITDA from continuing operations increased by 66%.

Finance costs decreased by 19% to R283m due to lower average borrowings.

Earnings per share for the period for continuing operations increased to 65 cents, while headline earnings per share for continuing operations reduced to three cents.

Operating profit increased by 75% year-on-year from R600m to R1 051m.

Headline earnings from continuing operations, however, decreased from R787m to R77m due to the impact of non-cash pre-tax items on headline earnings.

The group said fair value adjustments and foreign exchange movements resulted in a loss of R376m, mainly due to strengthening of the South African rand against the US dollar during the year.

The South African rand depreciated against the US dollar in the prior year.

Gross debt amounted to R2 628m on March 31 2021.

It said the R3 172m decline in gross debt includes R2 482m relating to the DRC transferred to liabilities associated with assets held for sale and disposal.

“Despite the difficult trading conditions in most of our markets, our businesses have benefited from a recovery in cement demand, resulting in improved financial performance.

“The strategic repositioning of PPC as a leading cementitious player is progressing well, and we will redouble our efforts in the new financial year,”

PPC CEO Roland van Wijnen said.

“We also achieved significant milestones in our capital restructuring and refinancing project, which remains a priority for PPC. So far, we concluded an agreement with PPC Barnet’s lenders, which terminates their right to recourse to PPC.”

Wijnen said they signed agreements for the sale of PPC lime and their aggregates business in Botswana. He said they also agreed with their South African lending partners to defer the equity capital raise in South Africa from March 2021 to September 2021.

“We continue to engage with our lenders to find the most economically efficient way to recapitalise the South African business,”

he said.

On the outlook, PPC said despite the recovery in cement demand in most of its markets, it was mindful of the prevailing uncertainties around the COVID-19 pandemic and its impact on economic activity.

“PPC will remain focused on improving cost competitiveness and cash generation.

“PPC will take the necessary strategic and operational measures to ensure that it can continue to serve its customers, protect its employees and implement strategic initiatives to ensure financial sustainability through all demand cycles,”

it said.

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