Struggling cement maker PPC’s shares surged more than 15 percent yesterday after it reported that a strong second quarter recovery in sales continued through October and November.
PPC, which is in the midst of a capital restructure and may also implement a rights issue, said in results for the six months to end September that cash flows from operations accelerated to R981 million from R503m in spite of the initial Covid-19 related trading restrictions. Operating profit was up a whopping 77 percent to R610m.
Chief executive Roland van Wijnen said it was possible that the rise in the share price was due to investors realising perhaps “the bottom has been reached” at PPC, and that the “revamp is delivering results that are stronger than expected”.
The share price generated Twitter commentary yesterday, with Herenya Capital remarking: “PPC up 20 percent today and 200 percent since two weeks ago. Well done if you held on to this. There was so much smoke and mirrors from management that we gave up on it.
“Watch this one for better cement prospects especially when infrastructure really gets going,” said tweeper “JSE guru @ SAstockpicks”.
Van Wijnen said the continuing growth in demand was due to “more cash in the system” from the low interest rates and government Covid-19 support measures, less spending on traditional discretionary spending items, and signs that the government’s proposed infrastructure development initiative was getting off the ground.
He said efforts to improve cost competitiveness and position PPC on a sound financial footing were yielding encouraging results, and good progress was being made on the capital restructuring.
Revenue increased by 1 percent to R5 billion. Headline earnings per share declined to 19 cents from 32 cents. No interim dividend was declared.
Cost of sales reduced by 4 percent to R3.9bn due to cost savings, the decline in volumes, and lower depreciation and amortisation.
Administration and other operating expenditure declined 10 percent to R492m.
Earnings before interest, tax, depreciation and amortisation increased15 percent to R996m.
Finance costs increased by 5 percent to R330m due to currency movements on foreign currency denominated debt.
South African finance costs decreased 5 percent to R106m.
Taxation decreased to R109m relative to R195m, restated in September 2019. After taking into account fair value adjustments and hyperinflation in Zimbabwe, earnings and headline earnings declined 37 percent to R287m.
PPC estimated that South African cement industry sales volumes were in line with the prior year despite the Covid-19 restrictions.
It said a shortage of extenders had impacted blender activity, and this had benefited integrated cement producers.
PPC closed 15.89 percent higher to close at R1.24 on the JSE yesterday.