Displaying items by tag: PPC

South Africa: The Competition Tribunal has resumed hearings into allegations of cartel-like behaviour by Natal Portland Cement (NPC), Pretoria Portland Cement Company (PPC), Lafarge Industries South Africa (Lafarge) and AfriSam Consortium (AfriSam). It follows a referral by the Competition Commission following an investigation in 2015 that examined collusive conduct between the cement companies between 2008 and 2012. At the time PPC was granted conditional leniency and AfriSam and Lafarge settled with the Commission.

South Africa: Johan Claassen, the chief executive officer (CEO) of PPC, says he wants to take early retirement. He made the decision during a restructuring of the company’s board. It will now search for a replacement while Claassen stays in post until his successor is found.

Zimbabwe: South Africa’s PPC has revealed that it is unable to transfer US$64m in cash and cash equivalents out of the country due to local currency restrictions. The cement producer said in its half-year report that the funds were freely available to spend locally. However, the Zimbabwe Central Bank has introduced a foreign payments priority list and any foreign payments are dependent on the bank’s ranking criteria, including the bank having adequate funds placed with its foreign correspondent banks. Despite these problems the company’s local sales and earnings grew in the half-year period. Revenue increased by 31% year-on-year to US$77m due to ‘strong’ volume growth. Earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 42% to US$25m.

South Africa: PPC reports that its strategy to expand into the rest of Africa has started to bear fruit, despite continuing challenges in many markets. Johan Claassen, the chief executive of PPC said that the group's diversified portfolio had enabled the company to offset the weaker South African performance with robust growth in its rest of Africa segment.

"We are very pleased with our rest of Africa operations, which grew volumes by more than 34%, increased revenues by 36% to US$120m and improved earnings before interest, tax, depreciation and amortisation (EBITDA) by 18% to US$36.7m. "This performance was supported by robust volume growth in Zimbabwe and a positive contribution from the Democratic Republic of Congo (DRC),” said Claasen.

Claassen added that the first phase of PPC's Cimerwa plant upgrade in Rwanda, which involved de-bottlenecking the plant to increase production capacity, was successfully completed in the six months to September 2018 and that PPC began to realise the benefits towards the end of the reporting period when record volumes were achieved.

However, the revenue achieved by the Cimerwa plant declined to US$29.1m from US$31.9m in the prior period because of a 7% reduction in volumes. PPC’s Rwandan EBITDA slumped to US$6.7m from US$12.2m, because of unexpected maintenance associated with clinker imports costs. Claassen added that its operations in the DRC continued to encounter challenging market conditions, which were characterised by overcapacity and muted cement demand due to political uncertainty.

South Africa: PPC has started a cost cutting campaign at its head office following poor cement sales so far in 2018. A source quoted by Business Report told the newspaper that staff redundancies had taken place already. The fall in sales has been blamed on poor local economic growth, the impact of a value added tax (VAT) increase on consumer spending and problems in the construction industry, including a fall in large infrastructure projects and private non-residential building.

Earlier this year South Africa’s PPC commented on the drought facing Cape Town. It said that cement manufacturing was not water intensive, that its operations were ‘totally’ self-sufficient from its own surface water sources with capacity for several months and that it was working with the local government which viewed construction as an important economic sector. Point made!

Water conservation is an established part of the sustainability toolkit for cement producers. Yet recent weather patterns in the Northern Hemisphere may also test how well companies are doing. Above average temperatures have been recorded this summer, in some places accompanied by unusually dry conditions. A news story this week about Cemex Colombia being fined for using water from a river shows one aspect of the problems that can face industrial users. Another story that we’ve covered previously has been the legal action taken against producers using water from a site near to the Katas Raj Temples in Pakistan.

Wet process cement manufacturing uses more water than dry process but even modern plants use water for cooling equipment and exhaust gases, in emission control systems such as wet scrubbers. In addition, quarrying and aggregate production may require water, and concrete production also needs water. Issues also arise with quarry dewatering and discharging water into rivers and the like. Global Cement Directory 2018 data indicates that, where known, about 10% of integrated cement plants still use a wet production method.

Graph 1: Specific water consumption by selected cement producers in 2017. Source: Corporate sustainability reports.

As Graph 1 shows there is some variation between the major cement producers with regards to how much water they use. They all operate with different types of equipment and production methods in different geographical locations so the difference between the companies is to be expected. A cement plant in northern Europe that normally experiences high levels of rainfall will have a different approach to water conservation than one, say, in a water stressed area like the Middle East. Incidentally, the definition used to define a water-stressed or scarce area is one where there is less than 1000m³/yr per person. One other point to note here is that each of the companies has a higher consumption figure than the 100 – 200L/t that the Cement Manufacturers' Association of the Philippines (CeMAP) reckoned that an average dry-process cement plant used when it was promoting water conservation back in 2013.

Looking at specific recent success stories, India’s UltraTech Cement reported a specific water consumption of 54L/t of clinker at its Star Cement plant in Dubai, UAE in 2016 – 2017 following a dedicated initiative at the site. An another milestone that UltraTech Cement was keen to point out in its last sustainability report was that three of 13 integrated plants had achieved water sufficiency though the use of the company’s 360° Water Management Model with its use of rainwater harvesting and recharging groundwater. These plants are not dependent on any groundwater or fresh water sources. The other larger cement producers all have similar water management schemes with reduction targets in place.

Climate change models generally predict hotter and wetter weather but changing weather patterns and growing populations are likely to impact upon water management and consumption. Given the integral nature of water in the cement production process, many cement producers have realised the importance of it and treat it as an input material like fuel or limestone. Hence the highlighting of water conservation in company sustainability reports over the last decade. The test for the success of these initiatives will be how producers cope in drought situations where they may be seen as being in competition with domestic users. Thankfully in PPC’s case, Cape Town avoided having to ration water to the general public, as the rains returned in the spring.

South African cement producer PPC reported this week that its annual profits rose due to ‘strong’ performance in Rwanda and Zimbabwe. Unfortunately it had no such luck in the Democratic Republic of the Congo (DRC) where its new plant near Kimpese in Kongo Central province has suffered from political instability, lower cement demand and subdued selling prices.

As the group went on to describe the local market as ‘challenging’ with production capacity above market demand. Research from the International Finance Corporation (IFC) suggests that the country will only reach a cement supply deficit by 2022. On top of this the country’s elections have been delayed from December 2017 to December 2018, creating uncertainty in the construction market and delaying infrastructure projects. Following an impairment assessment PPC took an impairment cost of US$14m on the unit. Or in other words it concluded that the value it might gain from selling its new 1.2Mt/yr plant was less than the estimated US$280m it cost to build it.

This outcome is depressing given that the plant was only commissioned during the last quarter of 2017 and the fundamental need for development in the DRC. The unit is run by local subsidiary PPC Barnet DRC, a joint venture 69% owned by PPC, 21% owned by Barnet Group, with the remaining 10% owned by the IFC. The plant was 60% debt funded by the IFC and Eastern and Southern African Trade and Development Bank. In January 2018 PPC agreed with its lenders to reschedule debts from the project until 2020. Then in April 2018 it was reported that PPC was in talks with China National Materials (Sinoma) over selling its stake in the plant. PPC chief executive officer (CEO) Johann Claassen said that the deal was dependent on the price and the on going merger between Sinoma and China National Building Material (CNBM).

With the merger between the Chinese cement giants close but yet to be confirmed, PPC remains stuck with a cement plant it’s losing money on. No doubt also the Chinese producers will aim for a bargain on the unit, especially since Sinoma built the plant. This also raises one potential method how the merged Sinoma-CNBM might expand internationally by scooping up plants it builds that have subsequently gotten into financial trouble.

All in all it’s a cautionary tale about how fast cement companies are able to expand in Sub-Saharan Africa. The demographics are enticing to investors but if the market isn’t there or if competitors get there first then building cement plants can go wrong. A 1.8Mt/yr joint-venture plant run by Lucky Cement started up in late 2016 also in the Kongo Central province. On top of this neighbouring countries have targeted DRC for exports. A local ban on imports of cement was implemented in mid-2017 and reportedly renewed in the west of the country for another six months in February 2018. However, Nigeria's Dangote Cement said in its first quarter results for 2018 that its operations in the Republic of Congo were targeting exports at the DRC. As PPC has discovered, investing in Sub-Saharan African has its risks.

South Africa: PPC’s profit rose due to strong performance in Zimbabwe and Rwanda. Its gross profit rose by 3% year-on-year to US$174m in the financial year that ended on 31 March 2018 from US$169m in the same period in 2017. Its revenue grew by 7% to US$762m from US$715m. However, its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 9% to US$140m from US$153m.

"Our performance has been resilient against the backdrop of challenging economic and political environments in markets in which we operate. While our rest of Africa operations, particularly Zimbabwe and Rwanda, achieved good results, our materials division faced reduced demand and increased competition. Our results have also been impacted by a number of significant abnormal items: corporate action, impairment of Democratic Republic of the Congo (DRC) operations and restructuring costs,” said chief executive officer (CEO) Johan Claassen.

By region, the group’s sales in South Africa and Botswana fell slightly due to a fall in cement sales volumes of 2 – 3%. Imports rose by 32% although PPC said it was from a low base. Elsewhere in Africa, PPC’s sales volumes rose by over 50% supported by ‘robust’ volume growth in Rwanda and Zimbabwe. The group’s PPC Barnet cement plant in Democratic Republic of Congo was commissioned in November 2017.

PPC’s lime division increased its revenue by 2% to US$59m, with volumes and selling prices similar to 2017. Volumes were constrained by key steel-customer shutdowns and non-extension of a significant contract. Lime's EBITDA contracted by
18% after higher variable costs for maintenance and raw material inputs.

Rwanda: Upgrade work at Cimerwa’s plant at Bugarama has led to local cement prices rising by up to nearly 50%. The plant has been shut for nearly a month for improvements to its mill, heat exchanger bypass, clinker cooler plate, bag filter and limestone weigh feeder, according to the New Times newspaper. However, the work has been delayed by bad weather and delays waiting for imported parts to arrive.

The total cost of the upgrade project is US$3.3m. An unnamed German contractor has been involved with the work. The plant has a nominal production capacity of 0.6Mt/yr but it currently produces 0.5Mt/yr. Normal supply from the plant is expected to resume by the end of May 2018.

South Africa: PPC and China’s Sinoma Construction have successfully ignited the kiln at the Slurry Kiln 9 project in North West province. The new clinker production line will now undergo a three-month test period, according to the China Economic Daily newspaper. Once testing is finished, the 3300t/day line will be transferred to PPC to start commissioning.