HARARE – PPC South Africa says its Zimbabwean unit will increase exports to neighbouring countries to sail through the impact of inflation and liquidity constraints on the business.
The regional cement maker said other liquidity management and cash preservation measures will include the share buy-back of PPC shares listed on the Zimbabwe Stock Exchange through subsidiary PPC Zimbabwe and continuing clinker imports from South Africa.
PPC volumes increased by low single digits at its Zimbabwean operation compared to the prior year for the same period, due to operational challenges experienced in the third quarter of the financial year.
“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 and increasing exports to neighbouring countries,” the group said in its trading update for the nine months to December 2018.
PPC said pricing has been aligned with local inflationary increases.
The group’s pricing is to hedge against rising inflation in the wake of runaway United States dollar (USD) parallel market rates and the Reserve Bank’s inability to meet the cement maker’s foreign currency requirements.
“Nonetheless, recent policy announcements regarding fuel price increases have 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 earnings before interest, tax, depreciation and amortisation (EBITDA) margins by one to two percent,” PPC said.
The firm said cost saving measures will ensure that EBITDA margins remain within previously guided ranges.
PPC said despite the challenging trading environment in the country, it remains positive about its operational strength and customer support for its brand.
Recently, PPC said its Zimbabwe business has invested its dividend in government bonds, amid indications the company is failing to repatriate about $60 million in dividends as the firm has not been spared from the effects of the prevailing foreign currency shortages.
PPC is the largest cement producer in Zimbabwe, with total capacity of 1,4 million tonnes from its plants in Bulawayo, Colleen Bawn in Gwanda, and at its new $82 million Harare factory.