Cement producer PPC reported a record revenue contribution of 28% from its Africa operations during the interim period to March 31, 2015, and CEO Darryll Castle indicated that the contribution from the rest of the continent should continue to rise amid difficult South African trading conditions.

The JSE-listed group reported mixed results for the period. Sales volumes rose 5%, revenue increased by 9% to R4.5-billion and costs were contained. However, selling prices declined in South Africa and profit for the period fell 43% to R281-million, with headline earnings slumping to 60c a share from 96c a share.

Strong demand from PPC’s African businesses helped offset lower demand from the South African business, with the group forecasting subdued conditions in its home market for the remainder of the financial year.

To mitigate the effects of the weaker South African market, PPC confirmed that it would be pursuing a R400-million profit improvement programme, which would have a strong focus on revenue optimisation, strategic cost reductions and operational efficiencies.

By contrast, strong growth was being forecast for the other African markets, with the 600 000 t/y Rwanda plant expected to begin making a “meaningful contribution” during the second half of 2015.

“We still think that the African contribution will rise to in the region of 40% by 2017,” Castle told Engineering News Online in an interview, adding that the group was maintaining a “watching brief” on opportunities across the continent, including some export prospects.

However, owing to a significant debt burden, PPC was unlikely to pursue any new greenfield or brownfield projects in the rest of Africa until 2017, when it expected to begin paying down its debt “at quite a significant rate”.

PPC’s debt was likely to peak at between R10-billion and R12-billion in 2017 and Castle said it was engaging with its bankers on the structure of the debt covenants, which currently failed to take account of the company’s undertaking project-financed projects outside of South Africa.

“The most logical time for us to look at starting up a new project would be in 2017. Having said that, if great opportunities arise between now and then, we certainly would consider them.”

Besides Rwanda, PPC was also pursuing developments in Zimbabwe, the Democratic Republic of Congo and Ethiopia. “We will focus on what we have and make sure we deliver them and get our investors to really believe that we can deliver projects in Africa successfully.”

Castle welcomed the recent imposition of antidumping duties on imports from Pakistan, after imports rose to around 1-million tons in 2014 in an overall market estimated at 14-million tons.

He said a recovery in the South African market would depend heavily on higher levels of economic growth and infrastructure investment. But the additional capacity developed would also need to be absorbed, while the fight against unfair import competition would also need to be sustained.

“When these factors converge, we believe we will be in a strong position to take back market share,” Castle added.