PPC Zimbabwe has painted a bullish outlook despite posting a 54% decline in revenue recorded during the six months to 30 September 2019 due to severe weakening of the Zimbabwe dollar and power outages among other challenges.
PPC, a unit of PPC Limited, noted that the hyperinflationary environment and the weaker local cement market were responsible for the lower R497m revenue during the period compared to the R1.07bn recorded during the same period last year. Volumes for the cement manufacturer declined between 30% and 35% during the period in line with the decrease in the overall market.
“Revenue dropped to R497m against the backdrop of a hyperinflationary environment, severe weakening of the ZWL$, regular power outages and a weaker cement market. Cement pricing was adjusted on a weekly basis to contend with the rapid increase in inflation and the devaluation in currency,” said Roland Van Wijnen, the PPC chief executive.
“Our focus in Zimbabwe remains to deliver our customers premium products and solutions at stable or improved EBITDA margins, as well as to ensure financial self-sufficiency of the business against the backdrop of a challenging macroeconomic environment,” he continued.
“PPC Zimbabwe team has delivered on both these strategic imperatives.”
Earnings before interest, tax, depreciation and amortisation (EBITDA) for the company contracted by 43% to R201m from R352m with EBITDA margins showing a marked improvement to 40% versus 32% in September 2018. Van Wijnen noted that PPC Zimbabwe is financially self-sufficient and is preserving cash by investing in inventory and accelerating capital expenditure.
In Zimbabwe, the business is self-sufficient and will continue to focus on delivering to the market at stable EBITDA margins whilst managing cash and implementing strategies to preserve the longer-term value of the business.
Despite the challenging trading conditions, the business remains well capitalised and is well positioned to benefit from local infrastructure projects and growth in the region. Excluding PPC Zimbabwe, the Group’s revenue declined one per cent and cost of sales were maintained at R3.783bn.
EBITDA declined 3% to R668m compared to R687m, with margins maintained at 15%. The PPC Group results are impacted by the significant currency devaluation between the Zimbabwe dollar and the South African Rand and the application of the provisions of IAS 29 that complicates comparability at a group level.
PPC Zimbabwe applied hyperinflationary accounting from 1 April 2019 to 30 September 2019. The results, net assets and cash flows were then translated from Zim dollars into rand at a closing rate of 1 Zim dollar to R0.99 compared to 1 Zim dollar to R4.80 as at March 2019, which had a material impact on the results.