PPC in belt-tightening crusade

08 Feb, 2019 - 00:02 0 Views
PPC in belt-tightening crusade PPC Zimbabwe

eBusiness Weekly

Michael Tome
Cement producer, PPC Zimbabwe, is working on a cocktail of measures to ensure cash preservation and liquidity management to mitigate the prevailing economic situation in the country.

The company has set out a number of mitigation measures, which encompass increasing exports to regional countries as it is envisaged that cost saving methods will ensure that Ebitda (Earnings Before Interest, Tax, Depreciation and Amortisation) margins remain within previously guided ranges.

The cement manufacturing company intends to procure 90 percent of its raw materials locally as part of measures to contain the biting foreign currency challenges.

Government has in recent times been calling upon industry to find means of cutting imports through sourcing raw materials locally.

“PPC Zimbabwe management is implementing a number of initiatives to mitigate the impact of inflation and liquidity constraints on the business and on the broader PPC Group.

“Liquidity management and cash preservation measures include, focus on local procurement, with 90 percent of input costs sourced locally, increasing exports to neighbouring countries, continuing clinker imports from South Africa and share buy-back of PPC shares listed on the ZSE through subsidiary PPC Zimbabwe Limited,” said PPC in a statement.

However, the company’s volumes relatively surged as compared to the prior comparable year as operational impediments impede local industry.

“Volumes grew by low single digits compared to the prior year for the same period, due to operational challenges experienced in the third quarter of the financial year,” said PPC.

Meanwhile, the company has increased its prices consistently with inflationary pressures in a move that is expected to lower the product uptake on the market.

“Pricing has been aligned with local inflationary increases. Nonetheless, recent policy announcements regarding fuel price increases has placed consumers in Zimbabwe under strain.

“The impact of fuel increases and cost of living increases afforded to PPC Zimbabwe employees is expected to impact Ebitda margins by 1-2 percent,” said PPC.

Despite the difficult trading conditions, average cement prices in Southern Africa (including Botswana) increased by 1 percent to 2 percent for the period.

Cement volumes were down 2 percent to 3 percent up to December 2018, against the backdrop of estimated market contraction of 4 percent to 5 percent.

An uncharacteristically weak December retail segment and subdued construction activity contributed to the contraction.

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