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TRANSCRIPT
2
Contents
Introduction
Cement
Lime and Aggregates
Rest of Africa
Overview of PPC
and Strategy
South Africa,
Zimbabwe,
Botswana and
Mozambique
South Africa,
Botswana and
Exports
Status of projects
3
Introduction
South Africa Botswana Zimbabwe Mozambique
4
Company overview
1. Jupiter
2. Hercules
3. Slurry
4. Dwaalboom
5. Riebeeck
6. De Hoek
7. Port Elizabeth
8. Colleen Bawn
9. Bulawayo
10. Lime Acres
11. Laezonia quarry
12. Mooiplaas quarry
13. Kgale quarry
14. Gaborone
15. Saldanha
16. Quarries of Botswana
17. George
18. Maputo
19. Habesha
Rwanda
Overview of PPC’s Operations PPC at a Glance
• Established over 120 years ago and
listed on the JSE for 103 years
• PPC is SA and Zimbabwe’s largest
cement manufacturer
• PPC has the leading market positions in
SA, Botswana and Zimbabwe
• PPC is also the leading burnt lime and
dolomite producer in southern Africa
and has a strong presence in the
aggregates industry in Gauteng and
Botswana.
• In addition to serving the southern
African domestic markets, cement is
exported to other African countries
• For the 2012 financial year:
• Revenue R 7.3 bn
• EBITDA R 2.3 bn
• Operating profit R 1.9 bn
Burundi
20
20. Cimerwa
5
Product overview
Lime
Cement
PPC’s products include
unslaked lime, hydrated
lime and limestone and
burnt dolomite
South Africa
PPC’s product range includes Ordinary Portland Cement (OPC) for specialised application
in the infrastructural market (52.51), market-leading Surebuild (42.5) for general-purpose
application, and the new SureRoad brand for exclusive use in road construction
Botswana Surebuild, OPC, PMC and the Botcem (32.5) product is a popular ash-blended cement for
the retail market
Zimbabwe Surebuild, Unicem, an established 32.5 multipurpose cement and PMC (22.5) are distributed
from the Bulawayo factory
Mozambique PPC’s Surebuild (42.5) is distributed as the Força brand and Obras (32.5) a product
introduced during 2012
Aggregates Readymix Concrete (RMC)
Concrete stone, road stone,
crusher sand, river sand,
building sand, plaster sand,
Magalies silica, natural
base, sub-base, fill material,
dolomite and agricultural
lime
Pronto Readymix supplies
concrete as well as plaster
and mortar to the Gauteng
area. This includes standard
concrete mixes from 10MPa
– 50MPa, pumpable mixes
from 10MPa – 50MPa as
well as dual purpose dry
mortar and superflat
speciality plaster
1 Indication of strength category of cement
6
PPC’s strategies are:
1. Enhance our industry leader position in southern Africa
(“Keeping the home fires burning” strategy)
Excel in sales, marketing, customer focus, overall value offering
Efficient operations and optimised logistics
Renew/upgrade equipment, especially relating to customers or efficiency
Acquire businesses with good strategic fit
2. Expand our operational footprint into other parts of
sub-Saharan Africa (“Rest of Africa” strategy)
Grow revenue outside South Africa to >40% of group revenue by 2016
Invest where:
• High potential for infrastructure development
• Low per capita cement consumption
• Current cement shortages
• Within 250km of major population centres
• Avoid proximity to ports (threat of imports)
Strategy overview
7
Cement
South Africa Botswana Zimbabwe Mozambique
8
South African industry cement demand
Source: National Treasury, SA Reserve Bank, PPC calculations
0%
20%
40%
60%
80%
100%
-
50 000
100 000
150 000
200 000
250 000
300 000
2008/09 2009/10 2010/11 2011/12
Budget Actual % Spent
• Despite a weak Jul to Sept
quarter, sales volumes by SA
producers increased 3.9% for the
year ending Sept 2012
• PPC’s outlook for FY2013 is an
industry growth of ~4%
• Government’s % spend of
allocated budget rose in 2011/12
• However MTEF shows declining
public-sector infrastructure
expenditure of R827 billion
• Large portion of budget allocated
to Eskom and Transnet
• To assist in accelerating
infrastructure development, PPC
looking for new proactive ways for
private sector and government
partnerships
Public sector infrastructure expenditure (R billion)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1Q 2012 2Q 2012 3Q 2012
Private business enterprises Public corporations General government
Real gross fixed capital formation (% change)
9
South African industry cement demand
• Remain concerned about the
sustainability of demand growth
generated by social grants and
unsecured loans
• Imports • The volume of imported product
peaked in Q3 2012 but fell
markedly into Q4 2012
• Exchange rate weakened to
average R8.65/$ in the final
quarter of 2012
• PPC calculations suggest that for
2012, imports made up 6.5% of
demand
• Almost all imports from Pakistan
as those from India dried up as
currency weakened
±70%
± 15%
± 15%
*Source: SARS, DTI, PPC research
Ports of entry for imports (by volume)*
10
PPC’s South African cement market
• For the first five months of the
FY13, SA cement volumes have
exhibited positive growth
• Good recovery in the Western Cape
due to more building and road
projects
• Volumes in the Eastern Cape have
declined due to heavy rains and
imports
• Strongest growth areas: Rustenburg
and Nelspruit
• Despite work stoppages at Medupi,
demand growth in Limpopo
remained positive
• PPC put through a 4% price increase
1 Jan 2013
• Pricing environment remains
competitive
Demand Pricing
PPC express outlet
11
PPC’s South African cost inputs
• Improvements achieved from increased volumes and prices will be offset by the
sourcing challenges and cost increases experienced during PPC’s first quarter
• A technical issue resulted in lower than planned production output at the Dwaalboom
factory, resulting in customer demand being satisfied through suboptimal sourcing
• All technical issues have now been resolved and the factory is operating well
• Total cost inflation is in low double digits
• Energy (for the first five months of FY2013)
• Diesel - Rand per litre up 12%
• Electricity up ~15% (R/t).
• Coal costs flat (R/t)
• Maintenance costs flat (R/t)
• Salaries increased on average by 6.5%
for FY2013
Diesel Price
Source: I-Net Bridge
12
Carbon tax
• A carbon tax of R120 per ton CO2 emitted was proposed in the finance ministers
2012 budget speech
• This has been re-iterated in the 2013 budget but now with a commencement date
of 1 January 2015
• A tax-free exemption threshold of 60% will be set with allowances for emissions
intensive and trade-exposed industries
• An updated carbon tax policy paper will be published for further consultation by
the end of March 2013
• The 2012 draft suggested that the cement industry could be potentially exempt
initially for between 70 and 85% of CO2
• PPC remains concerned that the magnitude of the tax is out of line with other
emerging markets and puts local manufacturing industries at a further
disadvantage
13
South Africa capex and acquisitions
• Phase 1 – De Hoek Kiln 6
• Completed in 2012
• Significant improvement in stack
emissions
• ~5% improvement in heat consumption
and clinker production rate
• Phase 2 – New Riebeeck Kiln 3
• EIA approval obtained
• Slurry Finishing Mill 4
• FM4 commissioned in 1974
• Largest ball mill in the PPC group
• Mill separator and associated electrical
components have reached end of life
• R100m investment to improve mill
reliability, product quality and reduce
dust emissions
Western Cape Modernisation Acquisition of Pronto Holdings
Maintenance/Modernisation Capex
• Purchased at 5,6 times Pronto’s
EBITDA less net debt.
• First 25% (~R70m) paid at initiation of
the transaction
• Second 25% to be paid in June 2013
• Balance due June 2014
Estimated capital expenditure for 2013 financial year: R550m – R650m
14
Zimbabwe, Botswana and Mozambique
• Demand continues to increase • Strong volume growth but marginal
selling price increases
• Well controlled cost increases and
good production performance
• Productivity plan to get capacity up to
~1000ktpa from ~850ktpa
• Centenary • PPC Zimbabwe celebrated its
centenary in February 2013
• The demand and pricing
environment remains under
pressure
• Cautiously optimistic on the
outlook for government
infrastructure spending
• Volumes remain under
pressure in the southern
regions due to intense price
competition as a result of
imported cement products
Zimbabwe Botswana
Mozambique
15
Lime and Aggregates
South Africa Botswana Zimbabwe Mozambique
16
Lime and Aggregates
• SA volumes under pressure due to
weak demand from steel & alloys
industry
• Aggravated by production disruptions
at key customers
• Exports to Botswana, Zambia and
DRC continue
• SA aggregates volumes have fallen
due to a lack of projects in the
operating zone
• Similarly in Botswana, demand has
been weak due to poor market
conditions
• Costs under pressure due to
equipment failure at Kgale as well
as integration and upgrading costs
at Quarries of Botswana
Aggregates Lime
Weaker performance for Lime and Aggregates is anticipated for 1H2013
17
Rest of Africa update
South Africa Botswana Zimbabwe Mozambique
18
Rest of Africa update
DRC
RSA
Malawi Zambia
Morocco
Algeria
Cameroon
Nigeria
Madagascar
Egypt
Libya
Tunisia
Western Sahara
Mauritania
Niger Chad
Ethiopia
Somalia
Djibouti
Angola
Botswana
Senegal
Namibia
Sierra Leone
Burkina Faso
Mali
Liberia
Kenya
Central AR
Guinea
Sudan
South Sudan
Zimbabwe
Tanzania
Eritrea
Uganda
Rwanda
Burundi
Cement 2011 GDP
growth Cement 2016
million tons % million tons1
Current operating
areas 13 3.6 16
Current focus areas 20 4.1 30
Future focus areas 32 7.0 62
Total 65 5.4 108
E Guinea
Congo
Gambia
1PPC calculations and estimates
• Strategy continues to
focus on the countries
indicated in current and
future focus areas
Ghana
Gabon
19
Rest of Africa update
• Acquired a 51% equity stake in
Cimerwa for US$69.4 million
• The only cement producer in the
country for the past 28 years
• Current demand for cement in Rwanda
is estimated at 350,000 tons per
annum, with regional cement demand
projected to increase to 1 million ton
during the next decade.
• Current capacity of 100 ktpa cement
and constructing a new 600 ktpa
production line - commissioning 2014
• Cimerwa is in the process of finalising
US$104 million debt financing to
complete the expansion project
Cimerwa Limited, Rwanda Habesha Cement, Ethiopia
• PPC secured a 27% stake with an
equity investment of $12 million
• 53% of the company is owned by
16 000 local Ethiopians
• Construction of a 1.4 Mtpa facility is
envisaged
• Project cost is estimated to be $130
million one third of which is equity
funded and the remainder will be debt
funded
• Some delays due to finalising debt, but
not show stopper
• Plans are in place to double capacity
after the first line is commissioned
20
General investment
information
South Africa Botswana Zimbabwe Mozambique
21
General investment information
• FY 2012 net debt to EBITDA of 1.4x, committed to keeping this < 3x
• PPC remains committed to dividend policy cover range of 1.2 to 1.5 times
• PPC assigned SA national scale long-term and short-term credit ratings of
zaA+ and zaA-2, respectively by Standard & Poor’s
• Currently in the process of establishing a domestic medium term note
programme to optimise and diversify sources of funding
• Legal and operating corporate restructure (announced in 2012) underway:
• Streamline and optimise PPC’s SA and International business operations
• Facilitate improved ability to report segmentally
• More efficient tax structure
• Eight of ten old order mining rights converted to new order
22
Investor contacts
Ketso Gordhan Chief Executive Officer
Tryphosa Ramano Chief Financial Officer
Kevin Odendaal Investor Relations
Azola Lowan Investor Relations
Tel. +27 11 386 9000
www.ppc.co.za
24
Disclaimer
This document including, without limitation, those statements concerning the demand outlook, PPC’s expansion projects and its capital resources and expenditure, contain certain forward-looking statements and views. By their nature, forward-looking statements involve risk and uncertainty and although PPC believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment, other government action and business and operational risk management.
Whilst PPC takes reasonable care to ensure the accuracy of the information presented, PPC accepts no responsibility for any damages be it consequential, indirect, special or incidental, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and the information published in this document is unaudited.