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20 November 2019

Delivering on Strategic Commitments in a Challenging Environment

Delivering on Strategic Commitments in a Challenging Environment

- Group EBITDA of R868 million (Sept 2018: R1 039 million)
- Zimbabwe contribution impacted by currency devaluation and hyperinflation
- Positive operational performance in the DRC and Rwanda
- Price increases and initiatives implemented to ensure sustainable SA cement industry
- R65 costs savings per tonne of R70/tonne savings target realised

20 November 2019 – PPC Ltd. today announced its financial results for the six months ended 30
September 2019. The period was marked by positive operational results in Rwanda and the DRC
which partially offset difficult conditions in South Africa and Zimbabwe.Roland van Wijnen, PPC CEO commented: “The positive operational results in Rwanda and the
DRC partially offset difficult markets and competitive conditions in South Africa and
Zimbabwe. Against this backdrop, we have continued to focus on key strategic and
operational initiatives to drive greater competitiveness and improved efficiencies. These
included reducing Group overheads, lowering finance costs, delivering savings initiatives and
implementing necessary price increases in South Africa to lay the foundation for a sustainable
cement market.”Group revenue declined by 12% to R4.9bn (Sept 2018: R5.6bn) attributable to a 17% volume decline
in Group cement volumes, with Southern Africa cement and PPC Zimbabwe the main contributors to
the decline. Group EBITDA in the period is R868m versus R1 039m in Sept 2018, as a result of the
impact of Zimbabwe’s currency devaluation and hyperinflation accounting, as well as the difficult
trading environment in South Africa and once-off restructuring costs of R83m incurred during the
period under review.PPC Zimbabwe applied hyperinflationary accounting during the period as a result of the significant
currency devaluation and rampant inflation. The various accounting treatments had a material impact
on the Group’s performance. When excluding PPC Zimbabwe, Group revenue was marginally down
by 1% to R4.4bn with EBITDA 3% lower to R668m and EBITDA margins maintained at 15%.
Ronel van Dijk, PPC Interim CFO commented: “Our debt levels remained stable during the period
with finance costs 3% lower whilst we continue to assess opportunities to structure the
Group’s debt optimally. We also managed other costs carefully during the period with Group
overheads, excluding the once-off restructuring costs, decreasing by 19%. This was a key
driver in achieving R65/tonne towards our R70/tonne savings target for PPC South Africa.”CIMERWA, in Rwanda, achieved a 28% revenue growth to R514m and 70% EBITDA growth to
R156m due to a 20% volume growth and improved cost per tonne performance. In the DRC, PPC
Barnet DRC grew revenue by 26% to R303m supported by stable pricing and production output.
EBITDA grew 30% to R81m as stringent cost controls and the entrenchment of route to market
strategies in an oversupplied market were implemented. Progress is also being made on restructuring
its debt to reduce reliance on the Group.In Zimbabwe, the hyper-inflationary environment, sharp depreciation of the Zimbabwean Dollar,
power outages and a weaker cement market resulted in a 54% drop in revenue to R497m and
concurrent decrease in EBITDA of 43% to R201m, although EBITDA margins improved from 32% to
40%.“We are pleased by the results delivered in Rwanda and the DRC, with both businesses
showing healthy top and bottom line growth supported by sound operational performances. In
Zimbabwe, the team’s efforts have ensured that they remain financially self-sufficient,
maintain EBITDA margins and preserve cash by investing in inventory as well as accelerating
capital expenditure. The business remains well capitalised and is positioned to benefit from
future local infrastructure projects and regional growth,” said Mokate Ramafoko, MD PPC
International.Southern African cement revenue, which includes Botswana, realised an 8% to 10% rise in average
selling prices as necessary price increases were implemented to recover operational costs and
improve returns. PPC cement volumes declined by 15% to 20%, whereby the decline was less in the
Coastal region and higher in the Inland markets. PPC estimates the overall market decline to be
around 10% to 15% as consumer and construction sector demand continued to show signs of severe
pressure.Domestically, the performance was impacted by another 5% increase in imports and increased
blender activity in a low growth environment. Overall revenue from Cement Southern Africa declined
8% to R2.55bn.“We are co-operating with the industry for ITAC to recognise the impact that imports have on
the domestic cement sector overall. We are also engaging with the South African authorities to
ensure that blended cement meets the requisite standards after independent tests highlighted
extremely serious non-compliances. Our sector is strategically relevant for South Africa and
these measures are important to ensure that the cement industry is protected from unfair
competition and remains sustainable,” commented Njombo Lekula, MD PPC Southern Africa.The materials business, comprising the Aggregates, Ready-mix and Lime divisions, is an integral part
of PPC’s route to market strategy. The business delivered steady revenues, although profitability was
impacted by a very competitive market as well as higher fuel, maintenance and other input costs.“Although the profitability of the Group came under pressure, we continued to generate
positive free cash flow through price and cost management, with further opportunities to
optimize fixed and variable costs in Southern Africa. We expect trading conditions in Southern
Africa to remain difficult, but the improved growth in output and strong economic climate in
Rwanda, coupled with the DRC’s drive to maximise EBITDA, should support the resilience of
the Group for the remainder of the year. In the longer-term, we have initiated a strategic review
to determine the objectives that will drive sustainable value creation and look forward to
sharing the outcome in due course,” concluded van Wijnen.