The unique challenges brought on by the Covid-19 crisis – lockdowns, remote work and social distancing – have provided a surprising boon for cement producers, says Njombo Lekula, the South Africa and Botswana managing director for cement company PPC.
There are also positive signs coming through from the government’s infrastructure drive, says Lekula.
In the second half of 2020, cement sales experienced a double-digit surge.
“One part of the upswing is influenced by me and you in terms of DIY and ordinary housing requirements – other than infrastructure. We think that is a result of people spending time at home and seeing all the improvements required,” Lekula tells The Africa Report.
The realities of Covid-19 pushed people to look at space requirement in their homes, with this area now serving multiple functions: work, school, play and entertainment.
“Also, the reduction in interest rates has put a significant amount of cash in people’s pockets. We saw a double-digit increase in the demand on the retail side, which gives you an indication it’s home builders pushing the demand,” Lekula explains.
Tills keep ringing
This correlates with building materials retailer Cashbuild’s second quarter update and trading statement.
During the second quarter, Cashbuild reports that “[transactions] through the tills for the group increased 10% to that of the comparative period, with existing stores increasing 7% and new stores increasing 3%”.
Furthermore, revenue was up 21%. “The 303 existing stores revenue increased 19% and the 14 new stores contributed 2%. This, combined with the growth reported in the first quarter, equates to an increase in revenue for the half year of 21% compared to the prior half year,” Cashbuild reported.
In addition to South Africa, Cashbuild has a presence in Botswana, Malawi and Zambia.
On 2 March, the group is scheduled to publish its interim results for the six months to 31 December 2020. The company projects that:
- Headline earnings per share are “expected to increase a minimum of 100% to 1,524.8c for the interim period, compared to 762.4c for the prior comparative period.”
- Earnings per share “are expected to increase a minimum of 100% to 1,496.0c for the interim period, compared to 748.0c for the prior period.”
Seizing the moment
PPC’s Lekula notes the second-quarter upswing pushed through to the end of the year, “which was not expected.”
“One of the positives for us is that when we stopped for the lockdown, we made sure we maintained our equipment. We were in a position of readiness. When there was this unexpected upswing in demand, we were ready to meet the demand,” explains Lekula.
He is frank about the fact that even prior to Covid-19 cement producers were having a tough time.
The lack of big infrastructure projects coming on stream and the ongoing threat of cheap cement imports flooding the market were contributing factors. The industry experienced a brief respite from the imports during the lockdown period.
“Covid-19 exposed a lot of projects that are in dire need, for instance, water reticulation [and] … roads. The government is [now] doing a lot of public-private partnerships with regard to affordable housing. There is a big drive towards that. We’ve seen projects coming through,” says Lekula.
However, cheap imports remain a problem. PPC reported in 2020 it had submitted paperwork to the regulator about the issue.
“The government has agreed now to designate cement, meaning every government project will have to be built with a locally produced product,” says Lekula.
“We welcome that. However, we are seeing imports starting to come back into the country,” he adds.
Overall, “it has been a mixed a year for us,” concludes Lekula.