BY FIDELITY MHLANGA
Pretoria Portland Cement (PPC) says volumes at its local unit grew by a single digit, compared to the same period last year due to operational challenges experienced in the third quarter of the financial year.
In an operational update for the nine months to December 2018, the South Africa-headquartered cement giant bemoaned the recent spate of price hikes, which it said placed consumers under strain.
Government last month increased fuel prices by 150%, resulting in the price of petrol surging from $1,43 a litre to $3,31, with diesel increasing from $1,38 to $3,11 per litre.
Last October, cement producers in the southern African country raised alarm, indicating that the industry was facing significant challenges in procuring spare parts from foreign suppliers due to lack of foreign currency.
“Pricing has been aligned with local inflationary increases. Nonetheless, recent policy announcements regarding fuel price increases have placed consumers in Zimbabwe under strain. The impact of fuel increases and cost of living increases afforded to PPC Zimbabwe employees is expected to impact EBITDA (darnings before interest, tax, depreciation and amortisation) margins by 1% to 2%,” PPC said in a statement on Tuesday.
The company said management would implement cost-cutting measures to mitigate the impact of inflation and ensure that EBITDA margins remained within previously guided ranges.
PPC also said it would focus on local procurement and increase exports to neighbouring countries.
The company envisions buying back its shares that are listed on the Zimbabwe Stock Exchange to preserve cash.
Despite difficult trading conditions, average cement prices in southern Africa (including Botswana) increased by between 1% and 2% during the period, the company reported.
Cement volumes for the entire group were down 2% to 3% during the period ending December 2018, against the backdrop of an estimated market contraction of 4% to 5%.
PPC said an uncharacteristically weak December retail segment and subdued construction activity contributed to the contraction.
“Despite the challenging trading environment, the group remains positive about its operational strength and customer support for its brand,” PPC said.
PPC operates 11 cement factories across the region, with annual capacity estimated around 11,5 million tonnes of cement volumes.