PPC LIMITED - Summarised consolidated financial statements for the six months ended 30 September 2020

            
PPC
Summarised consolidated financial statements for the six months ended 30 September 2020

PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number: 1892/000667/06)
JSE ISIN: ZAE000170049
JSE code: PPC ZSE code: PPC
(PPC or the company or the Group)

SHORT FORM ANNOUNCEMENT - SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDED 30 SEPTEMBER 2020

SALIENT FEATURES
   - Group revenue: R5 006 million (September 2019: R4 948 million)
   - Group EBITDA: R996 million (September 2019: R868 million)
   - Earnings per share: 19 cents (September 2019: 32 cents, restated)
   - Headline earnings per share: 19 cents (September 2019: 32 cents,
      restated)
   - Cash flow generated from operations: R 981 million (September 2019: R
      503 million)
   - The Group did not declare a dividend in the current or previous period


Roland van Wijnen, chief executive officer, said:

After a difficult start to the financial year as a result of the COVID-19
related trading restrictions across the jurisdictions in which we operate,
I am pleased that we are once again able to serve our customers and play our
part in keeping the economy going. My gratitude goes to my colleagues who
have been working diligently to keep our operations running while observing
stringent health and safety protocols. Our business has benefitted from a
strong recovery in cement sales in all our markets post the easing of the
lockdown restrictions, and this has resulted in improved financial
performance for the Group. Our efforts to improve cost competitiveness and
reposition PPC on a sound financial footing are yielding encouraging results,
and we are making good progress on our capital restructuring project, which
remains a key priority for the Group."

GROUP PERFORMANCE
Despite the initial COVID-19 related trading restrictions, Group revenue
increased by 1% to R5 006 million (September 2019: R4 948 million) due to
robust cement sales post the easing of COVID-19 restrictions across the
jurisdictions in which the group operates.

Cost of sales reduced by 4% to R3 895 million (September 2019: R4
042 million, restated) compared with the previous year due to cost savings,
the decline in volumes, and a reduction in depreciation and amortisation.
Administration and other operating expenditure declined by 10% to
R492 million (September 2019: R548 million, restated) driven by the
successful efforts to improve cost competitiveness. Group EBITDA increased
by 15% to R996 million (September 2019: R868 million) with an EBITDA margin
of 19.9% (September 2019: 17.5%). Operating profits increased by 77% to R610
million (September 2019: R344 million, restated).
Fair value adjustments and foreign exchange movements resulted in a loss of
R366 million (September 2019: R120 million loss, restated), mostly as a
result of the revaluation of foreign-denominated intercompany loan accounts.
The fair value gain on the Zimbabwe financial asset of R139 million (September
2019: R113 million, restated) consists of intrinsic value gain of R202
million and credit risk fair value loss of R63 million (September 2019: R76
million). Zimbabwe blocked funds resulted in a fair value loss of R10 million
(September 2019: R212 million loss, restated). The application of IAS 29
Financial Reporting in Hyperinflationary Economies resulted in a net monetary
gain amounting to R326 million (September 2019: R514 million).

Finance costs increased by 5% to R330 million (September 2019: R313 million,
restated) due to currency movements on foreign currency denominated debt.
South African finance costs decreased by 5% to R106 million (September 2019:
R111 million, restated) while international finance costs increased by 11%
to R224 million (September 2019: R202 million). Excluding unfavourable
currency movements, international finance costs declined by 6%.

Taxation decreased to R109 million relative to R195 million, restated in
September 2019.

After taking into account the above fair value adjustments and
hyperinflation, earnings and headline earnings attributable to shareholders
of PPC Ltd declined by 37% to R287 million.

Net cash inflow from operating activities amounted to R769 million (September
2019: R244 million, restated). Cash generation benefitted from improvements
in EBITDA and a reduction in working capital absorption to R21 million
(September 2019: R342 million absorption). Cash generation and preservation
remain a key priority for the group. Capital investments in property, plant
and   equipment   decreased   by   26%   to   R166 million   (September 2019:
R225 million).

Gross debt amounted to R5 218 million at 30 September 2020 (September 2019:
R5 131 million). Gross debt declined by R582 million from 31 March 2020. The
currency impact on foreign currency-denominated debt is a reduction of
R304 million from 31 March 2020 to 30 September 2020.


CEMENT SOUTH AFRICA AND BOTSWANA

PPC experienced muted cement sales in April and May 2020 as a result of
COVID-19 related trading restrictions in South Africa. Cement sales have
since rebounded with double-digit year-on-year growth since June 2020. The
increase in volumes is primarily retail led. PPC is also beginning to
experience the positive impact of increased infrastructure spending.

Over the first six months of FY21, PPC South Africa and Botswana cement
volumes declined by 5% to 10% with declines in the coastal regions offsetting
growth in the inland areas. Q1 cement sales declined by more than 35%,
followed by a strong rebound of 20% to 25% in Q2. The sales momentum has
continued into October and November.
PPC estimates that the South African cement industry sales volumes were in
line with prior year despite the COVID-19 related sales restrictions. A
shortage of extenders has impacted blender activity, and this has benefitted
integrated cement producers such as PPC. The availability of non-conforming
cement in the market remains a concern for the industry over the medium term.

Cement imports continue to pose a threat to the sustainability of the South
African cement industry. Although imports of cement and clinker decreased by
approximately 6% to 621 609 tonnes in the current reporting period due to
the lockdown restrictions, this is likely to change as the global economy
reopens. PPC, in conjunction with The Concrete Institute (TCI) and other
industry players, have applied to the relevant authorities for relief against
unfair competition. All the necessary documentation and processes have been
completed. PPC has received a verification report confirming receipt of all
required information for the application process and is now awaiting the
initiation of an investigation by the regulator.

Revenue in South Africa and Botswana declined by 8% to R2 355 million
(September 2019: R2 555 million). Average realised selling prices were flat
on prior year as change in the product mix offset the impact of price
increases. EBITDA reduced by 8% to R337 million (September 2019: R367
million) with EBITDA margin of 14.3% (September 2019: 14.4%).

MATERIALS BUSINESS

Aggregates, readymix and ash

Revenue decreased by 20% to R514 million (September 2019: R645 million),
primarily as a result of reduced volumes in the aggregates division. Demand
for aggregates is beginning to benefit from increased infrastructure spend
with double-digit year-on-year volume growth in September. EBITDA decreased
to a loss of R6 million (September 2019: R35 million) due to the decline in
volumes.

Lime
The lime divisions revenue declined by 36% to R279 million (September 2019:
R434 million) with volumes and pricing under pressure due to the decline in
steel-related activity. The shut-down of operations by a major customer
further reduced demand for lime products. A number of initiatives have been
implemented to improve the performance of this business. EBITDA contracted
by 56% to R22 million (September 2019: R50 million) primarily due to a
similar decline in volumes. With the reported shortage of locally
manufactured steel, PPC expects demand to recover in the latter part of the
financial year.

INTERNATIONAL

Zimbabwe
Although trading conditions in Zimbabwe were characterised by a challenging
economic environment and the impact of COVID-19 related lockdown
restrictions, domestic cement volumes grew by 5% - 10%, supported by ongoing
infrastructure projects.
PPC Zimbabwe cement sales grew in the similar range, supported by an increase
in volumes of 35% to 40% in Q2. The positive sales momentum has continued
into October and November, albeit at a normalised rate.

Revenue increased by 60% to R797 million (September 2019: R497 million).
Cement pricing was adjusted to account for the increase in inflation and the
devaluation of the local currency. Realised selling prices in US$ increased
by 23%. EBITDA improved by 62% to R326 million (September 2019: R201 million)
and EBITDA margins improved to 40.9%, versus 40.4% in September 2019. PPC
Zimbabwe continues to meet its debt obligations in-country while remaining
financially self-sufficient, and recently declared a dividend to its
shareholders of US$6.6 million, of which PPC is entitled to US$4.7 million.
PPC received US$4.4 million after withholding tax.


Rwanda

In Rwanda, CIMERWA continues to benefit from robust cement demand, driven by
large infrastructure projects, growth in the retail market and export demand
from the eastern DRC.

Like the other jurisdictions in which PPC operates, cement sales were
affected by COVID-19 related restrictions imposed by the authorities. CIMERWA
cement sales in Q1 were broadly in line with prior year, with a strong
recovery in Q2. For the six months ended 30 September 2020, CIMERWA achieved
revenue growth of 28% to R659 million (September 2019: R514 million),
supported by a 10% increase in volumes, stable pricing in US$, and translation
gains. EBITDA increased by 35% to R211 million (September 2019: R156 million)
due to higher revenues and stringent cost control. EBITDA margins improved
to 32.0% from 30.4% in September 2019.

DRC
PPC Barnet in the DRC achieved revenue growth of 33% to R402 million
(September 2019: R303 million), driven by volume growth of 8%, higher pricing
in US$ and translation gains. EBITDA improved by 64% to R133 million
(September 2019: R81 million) with corresponding margins of 33.1%. EBITDA
benefitted from stringent cost control, entrenchment of our route to market
strategies, as well as the positive EBITDA impact of clinker and cement
inventory movements in the period.

The financial information contained in this announcement has neither been
reviewed nor reported on by the Company's external auditors.

RESTRUCTURING AND REFINANCING UPDATE
PPC continues to make good progress against key milestones in its
restructuring and refinancing project with the objective of implementing a
sustainable capital structure and improving the investment prospects of the
group.

In South Africa, PPC has signed facilities agreements with its two primary
South African lenders, who provide R1.85 billion of long term facilities and
R625 million of short term facilities. The final terms of these agreements
are substantially the same as those disclosed in note 36 to the audited
consolidated financial statements for the year ended 31 March 2020. PPC is
also finalising documentation relating to the provision of security,
including a security pool arrangement comprising immovable property, debtors
and inventory.

PPC has also agreed revised terms with its third South African lender for a
working capital facility of R175 million, which has now removed the
requirement of being part of the security pool arrangement.

In the DRC, PPC has signed a formal standstill agreement with its DRC lenders.
The final terms of the agreement are substantially the same as those of the
termsheet agreed at the end of August 2020, as disclosed in note 36 to the
audited consolidated financial statements for the year ended 31 March 2020.
PPC is actively engaging with the DRC Lenders, who have now appointed
financial and legal advisors, on a detailed restructuring plan.

Following a number of unsolicited approaches regarding PPC Lime, PPC has
decided to accelerate the sale of PPC Lime and appointed financial advisors
to manage a structured sales process of the business. PPC is targeting deal
certainty by the end of Q1 2021.

OUTLOOK
Although the group is experiencing positive sales momentum across most of
its markets, PPC remains cautious on the outlook for the rest of FY21 given
the ongoing health crisis and its resultant impact on economic activity. PPC
will remain focused on cash preservation and improving cost competitiveness
by lowering operational costs.

Management changes

During the first 6 months of the year, PPC restructured its Group
Administration functions with the aim to increase country responsibility and
reduce overhead costs. This resulted in the Group Human Resource department
being reduced whilst the Legal & Compliance and Company Secretarial
departments were merged. Consequently, the Group HR Executive, Ms.
Phindokuhle Mohlala and the Group Company Secretary, Ms. Kristell
Holtzhausen, have agreed to leave PPC. Mr. Kevin Ross has been appointed as
the Group Company Secretary effective 1 January 2021, in addition to his
responsibilities as Group Head Legal & Compliance. The Board wishes to thank
Ms. Mohlala and Ms. Holtzhausen for their dedicated service to PPC and wishes
them well in their future endeavours.

The Group CFO, Ms. Ronel van Dijk, has decided to step down with effect from
31 March 2021 to rebalance her other commitments. Ms. Brenda Berlin will
join PPC as Group CFO Designate from 15 February 2021 to formally take over
as Group CFO on 1 April 2021. Ms. Berlin is currently CFO and acting CEO at
MC Mining and will contribute a wealth of experience and knowledge to PPCs
Finance function. Prior to MC Mining, Ms. Berlin served as CFO of Impala
Platinum Holdings Limited (Implats) for seven years. To ensure a smooth
handover, Ms. van Dijk has agreed to assist the Company with the upcoming
year-end results and the audit process on a consultancy basis starting 1
April 2021. During her time at PPC, Ms. van Dijk played a pivotal role in
guiding the Company through one of its most difficult periods, which included
negotiations with lenders to address the impact of COVID-19 lockdowns. She
has also introduced various initiatives aimed at improving the Groups
reporting processes and internal controls. The Board appreciates the
dedication of Ms. van Dijk who has been instrumental in the delivery of the
2020 audited financial statements under very difficult circumstances. The
Board welcomes Ms. Berlin to Team PPC and looks forward to her contribution
in further strengthening the financial reporting and controls of the Company.


SHORT FORM STATEMENT

This short form announcement is the responsibility of the directors. It is
only a summary of the information contained in the full announcement and
does not contain full or complete details. Any investment decision should
be based on the full announcement accessible from Tuesday, 8 December 2020,
via the JSE link and also available on the Company's website at
https://www.ppc.africa/corporate/investors-media/financial-presentations-
reports.

The JSE link is as follows:
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/PPC/PPC30Sept.pdf

A copy of the full announcement is also available for inspection at the
company's registered office (by appointment, observing COVID-19
restrictions), and may be requested from the Company Secretary Kristell
Holtzhausen at Kristell.holtzhausen@ppc.co.za at no charge, weekdays during
office hours.

A live and recorded video webcast of the results presentation will be held
today at 11:00am (SAST) and can be accessed via this link:
https://presentations.corpcam.com/RegistrationPage.aspxid=PPCDecember2020



Sandton

8 December 2020

Sponsor
Merrill Lynch South Africa (Pty) Limited

Date: 08-12-2020 07:05:00
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