The country’s biggest cement manufacturer, PPC, says the continued dumping of cement imports in SA and Botswana is threatening the local industry’s ability to contribute to economic growth and job creation.
Outgoing CEO Roland van Wijnen told Business Day on Monday that in SA and Botswana, where markets have been weak, the challenge has been dealing with anticompetitive activities with dumped imports having increased year on year.
“So this year cement imports for the first nine months of the calendar are 9% higher than they were last year,” he said.
“It’s the equivalent of a full cement factory, so the impact is significant in a market that is already oversupplied, we don’t need it.”
Hit by a spate of imports from countries such as China, Vietnam and Pakistan, the local cement industry has for years lobbied the government to impose steep tariffs on low-cost imported cement that it blamed for crippling a local sector battling a construction downturn since the 2010 Fifa World Cup.
Van Wijnen said dumping of inferior materials has been rising as cash-strapped consumers substituted local produce for cheap imports.
“It’s not that the SA cement producers are not competitive,” the CEO said. “It is that these imports are being dumped on our shores based on variable cost plugs of people who also have overcapacity in countries like Vietnam. They push it down to the coast of SA.”
The Johannesburg-based construction materials group reported it slashed net debt from R765m at the end of March to R381m by end-September, despite overall cement sales volumes falling 4.7% in SA and Botswana.
PPC attributed muted volumes to subdued demand in coastal regions where excessive rain and large construction project delays had a negative effect, and in Botswana where increased Namibian imports were rife, driven by export incentives provided to producers in that country.
Van Wijnen, who will be replaced by Matias Cardarelli next year, said the rolling out of the SA government infrastructure development plans and the introduction of import tariffs to create a level playing field for domestic producers remain elusive.
“Fixed capital formation coming out of government spending is still at low levels and we all know there is a necessary boost required in terms of water, housing and infrastructure in general,” he said.
Average price rises of 8.8% over the period bolstered SA and Botswana cement, which recorded a 4.7% revenue rise to R3.1bn.
Group operating profit more than doubled to R675m in the six months ended September from R273m in the prior matching period. Group earnings before interest, taxes, depreciation, and amortisation (ebitda) rose 46.8% to R1.069bn as it benefited from expanded margins in the core southern African markets.
Headline earnings per share rose to 26c from a loss of 5c.
Earlier in November, PPC announced that its subsidiary PPC International agreed to a transaction whereby National Cement Holding, part of the Devki Group, would acquire PPC’s entire shareholding in Cimerwa for $42.5m cash.
On Monday, PPC said that if successful the transaction proceeds would be considered in line with PPC’s capital allocation priorities and optimal gearing levels.
Van Wijnen said that owing to PPC’s strategy to focus financial and human resources in Southern Africa the move to divest from Rwanada enabled Cimerwa to become a part of a group that is active in that region, “which they will be in the future”.
“And for us, it was the right step in our strategy at the right price to exit the region,” he said. “The proceeds will provide enhanced optionality for capital allocation decisions that deliver value to stakeholders.”
PPC’s share price rose 10.82% to R3.79 on Monday.
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