PPC Plans to Double Size in Decade on African Cement Growth

  • Company achieved half of $28 million profit-improvement goal
  • Shares gain most in six months even as FY profit declines

PPC Ltd., South Africa’s largest cement maker, said rising demand for the building material on the world’s least-developed continent would help it double the size of the company every decade. The shares rose the most in six months.

PPC expects “massive growth” in African cement demand over the next 35 years, driven by a growing population, rising wealth and greater ease of doing business, Chief Executive Officer Darryl Castle said in an interview on Wednesday. The company will create a new unit for its expanding non-cement building materials and services operations, which will help further PPC’s African growth plan, he said.

If PPC holds on to its market share in Africa, the company “can more than double every 10 years at least,” Castle said. The doubling refers to a combination of metrics, including revenue, assets and profitability, he said.

PPC, which is grappling with tough competition and falling prices in its home market, is seeking to reduce costs while expanding elsewhere in the continent. The company has achieved more than 50 percent of a 400 million-rand ($28 million) profit-improvement target announced in May, and a goal of generating 40 percent of revenue from the rest of Africa by 2017 is “within reach,” it said.

PPC shares gained as much as 7.5 percent, the most since May 21, and traded 4.1 percent higher at 15.88 rand as of 11:15 a.m. in Johannesburg, paring the year’s decline to 42 percent. That values the company at 9.6 billion rand.

The company started a new cement plant in Rwanda in August and projects in the Democratic Republic of Congo, Zimbabwe and Ethiopia are all more than 50 percent complete, PPC said. The company’s South African business has been pressured by increasing competition, a sluggish economy and low-priced imports, Castle said.

’Difficult Period’

“It’s been a difficult period and we are doing the right things in the company in terms of improving our efficiencies and cutting our costs in the face of a more competitive and slowing environment,” Castle said.

PPC is assessing prospects for future projects, and will also seek expansion opportunities for the new, non-cement unit, Castle said. The company is working on a “bolt-on” acquisition to expand that offering and will look for more similar deals, he said.

Full-year earnings per share excluding one-time items were 1.45 rand in the year through September, compared with 1.79 rand a year earlier, the company said on Wednesday. Sales gained 2 percent to 9.2 billion rand.

Before it's here, it's on the Bloomberg Terminal.