Zimbabwe turmoil weighs down PPC

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SOUTH African cement producer, PPC, says its revenue for the half-year to September 2019 declined by 12 percent due to subdued performance of its Zimbabwean subsidiary, PPC Zimbabwe.
The group’s revenue declined to R4,9 billion from R5,5 billion recorded in the prior comparable period.
“The decline is attributable to a 17 percent decline in overall cement volumes to 2,6 million tonnes,” Roland Van Wijnen, PPC’s chief executive said.
“Southern Africa cement and PPC Zimbabwe were the main contributors to the decline,” he said.
Excluding PPC Zimbabwe, the group’s revenue declined by one percent.
Van Wijnen said the group’s results were also adversely affected by the devaluation between the Zimbabwean dollar and the South African Rand and the application of the provisions of IAS 29 – Financial Reporting in Hyperinflationary Economies, which was recently adopted in Zimbabwe.

Included in the group’s fair value adjustment loss of R270 million for the period was an estimated credit loss of R307 million relating to Zimbabwe financial assets, “R76 million of which was raised against the PPC Zimbabwe financial asset arising as a result of the PPC Zimbabwe debt being settled by the Reserve Bank of Zimbabwe”.
He said the positive operational results in Rwanda and the DRC, however, partially offset difficult and competitive market conditions in South Africa and Zimbabwe.
Van Wijnen said PPC Zimbabwe volumes declined by 30 to 35 percent, which was in-line with the decrease in the overall market.
“Whilst cement pricing was adjusted on a weekly basis to contend with the rapid increase in inflation and the devaluation in currency, revenue declined by 54 percent to R497 million against the backdrop of a hyperinflationary environment, severe weakening of the Zim dollar, regular power outages and a weaker cement market,” he said.
Still, the company says the Zimbabwean business is self-sufficient and it will continue to focus on delivering to the market at stable profit margins while managing cash and implementing strategies to preserve the longer-term value of the business.
“The PPC Zimbabwe team has delivered on both these strategic imperatives.
“Despite the challenging trading conditions, the business remains well-capitalised and well-positioned to benefit from local infrastructure projects and growth in the region,” Van Wijnen said.