Amid a dearth of any meaningful uplift in construction activity in SA, cement manufacturer PPC says it is implementing value-accretive decarbonisation initiatives across its southern African operations, which will offer it opportunities to innovate and reduce costs.
This comes as the group continues to grapple with input cost pressures, persisting energy reliability and stability risks, and cement imports, which it says remain a structural challenge.
On Wednesday, PPC — which recently appointed Matias Cardarelli as its new CEO for the next four years — said while no footprint expansion is being considered outside its primary markets of SA, Botswana and Zimbabwe, cost containment, disciplined cash allocation and implementing value-accretive decarbonisation initiatives would be the focus.
The group reported a surge in demand for its products in Zimbabwe as the construction of houses and government-funded infrastructure in that country drives demand.
The company, valued at about R4.5bn on the JSE, said in an operating update for the five months to the end of August that sales in Zimbabwe and Rwanda, which together generated 33.5% of revenue jumped 19% in rand terms as volumes were up 3%.
Breaking it down by country, cement sales in Zimbabwe jumped 42% and 13% in Rwanda, where exports were affected by greater competition and price increases of 6% could not offset all the input cost increases.
This is a bright spot for the industrial group that has been battling the fallout from an ambitious African expansion strategy in which it racked up debt totalling about R5.2bn by the end of September 2020. Its net debt was cut from R800m at the end of March 2023 to R648m at the end of August.
In SA and Botswana, which generated 55.6% of total revenue in its 2023 financial year, revenue grew 5% year on year because of 10% higher average selling prices, but the volumes sold were down 6%.
“Cement sales volumes in the inland region continued their decline, albeit at a significantly lower rate, while the coastal region saw a downturn in volumes following higher-than-usual rainfall and weak retail demand,” PPC said.
The company has been affected by the poor economic growth in SA and little spending on infrastructure by the government, while the business in Botswana was harmed by imports from neighbouring Namibia.
The group kept its target to reduce emissions at its operations by 10% to 680kg CO2/t cement product by 2025 unchanged.
Its Zimbabwe fly ash project and the Ciwerwa Alternate Fuels project in Rwanda are expected to play a central role in its decarbonisation journey.
Targeting a 44.1% combination of renewables, wind and solar in its energy mix, the construction materials maker is also deploying rooftop solar panels and wheeling agreements, which include solar and wind power to fire up its operations that are impeded by ongoing load-shedding.
While 1% of its renewable energy plan has been implemented, some of the energy projects will be commissioned in the 2025 and 2026 financial years and help it reduce reliance on embattled Eskom.
In a bid to optimise operations, PPC said cost containment and clinker factor reduction would form a large part of its strategy. Cement clinker is used to manufacture cement and can be extended using supplementary cementitious materials.
PPC said reducing the clinker factor would result in a lower overall CO2 footprint per tonne of cement produced and decrease the overall costs per tonne produced, while increasing the use of supplementary cementitious materials like fly ash, pozzolana, slags and calcined clay.
Over in Zimbabwe, where the company has zero debt and demand for PPC products remains high, PPC said it wants to introduce fly-ash-blended cement at its Bulawayo factory plant in the 2025 financial year, using fly ash from Hwange Electricity Supply Company (HESCO).
Fly ash, which is considered to be environmentally beneficial and cost-effective, improves the workability of plastic concrete and the strength and durability of hardened concrete.
The group will also aim to operate its kiln lines at its “best-demonstrated practice or better” while using waste tyres, and refuse-derived fuels as fuel alternatives and implement efficient run times to still sustain production volumes.
Enhanced automation and the use of high-level control systems and artificial intelligence are also in the pipeline for its Rwanda operations, it said.
PPC earmarked R664m of capex over the period to ensure it coud execute targeted goals. Its shares rose 3.15% to R2.95 on Wednesday, having climbed more than 30% since the start of 2023.
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