Ppc Limited · JSE:PPC
Ppc — FY2015 Earnings Presentation
56 slides from Ppc's earnings presentation, Nov 18, 2015
Slide 1: Final results for the year ended 30 September 2015
Darryll Castle - CEO Tryphosa Ramano - CFO Final results for the year ended 30 September 2015 18 November 2015
Slide 2: Agenda
Agenda Projects Outlook & Group Divisional Questions Overview Update Context Results 2
Slide 3: Key themes
Key themes • Significantly improved second half financial and operational performance • R212 million achieved through the Profit Improvement Programme (10% contribution to EBITDA) • Cash generated from operations up 5% to R2.7 billion • Covenants renegotiated in alignment with our capital structure,
Slide 4: A tale of two halves
A tale of two halves Revenue (Rm) Cost of Sales (Rm) +2% +3% 10000 7 000 9 039 9 227 6 437 6 266 6 000 8000 5 000 +9% -4% 6000 -7% 4 882 4 686 + 15% 4 541 4 000 4 157 3 473 3 206 3 231 4000 2 793 3 000 2000 2 000 H1 H2 FY H1 H2 FY 2014 2015 2014 2015 EBITDA (Rm) EBITDA margin (%) +0.2% 2 500 -3.5% 2
Slide 5: A tale of two halves
A tale of two halves Overheads (Rm) +10% Net Profit (Rm) -17% 840 1 200 1 130 800 1 030 698 1 000 -45% +23% +15% +5% 600 800 494 554 550 576 424 600 480 400 346 400 274 200 200 H1 H2 FY H1 H2 FY 2014 2015 2014 2015 Headline earnings per share (cents) Trend in consolidated overheads slows to -19% a
Slide 6: Market performance
Market performance Resilient PPC performance in tough operating environment Industry New entrant Imports Existing producers PPC Source: PPC Research - Based on PPC’s best estimate of market size for October 2014 – September 2015 6
Slide 7: Group results summary
Group results summary • Annual dividend declared of 57 cents after a final dividend declaration of 33 cents 7
Slide 8: What we said in May 2015
What we said in May 2015 Profit improvement programme consists of 3 pillars 1) Revenue 2) Cost 3) Strategic optimisation efficiencies cost reduction PIP Up to R130m Up to R150m Up to R120m Up to R400m Pricing strategy Logistics Innovation improvement in optimisation 3 years Regain market Supply chai
Slide 9: PIP value proposition
PIP value proposition Deliver short term reliable results Support strategic Drive cultural and positioning of Profit Improvement behavioural change that the business Programme benefits all stakeholders Deliver solutions for sustainable long term value creation 9
Slide 10: Progress report
Progress report Profit improvement programme 1) Revenue 2) Cost 3) Strategic optimisation efficiencies cost reduction PIP Up to R400m Up to R130 Up to R150 Up to R120 improvement in million in 3 years million in 3 years million in 3 years 3 years F2015 Achieved F2015 Achieved F2015 Achieved F2015 Ac
Slide 11: Contribution to income statement
Contribution to income statement Rm 2014 2015 PIP 2015 (Ex PIP) PIP Contribution Revenue 9 039 9 227 11 9 216 0% Cost of Sales 6 266 6 437 150 6 587 -2% Gross Profit 2 773 2 790 2 629 6% Admin & Op 1 030 1 130 51 1 181 -4% expenses EBITDA 2 358 2 362 212 * 2 150 10% PIP contributed R212 million or a
Slide 12: Analysis of overheads
Analysis of overheads Overheads (Rm) 1200 48 1 130 62 1 030 1 020 1000 -10 800 600 400 200 0 Sep 14 Savings Like for like Restructing and New business Sep 15 Corporate Action • On a like-for-like basis overheads decreased by 1% • Savings in excess of R50 million achieved at the Sandton head office 1
Slide 13: Our new vision
Old Vision Our new vision To grow PPC into a leading emerging market business VISION “To be a world class provider of materials and solutions into the basic services sector, taking a strategic approach to more than doubling our business every 10 years”
Slide 14: Why we exist
Our new strategic aspiration HIGHER PURPOSE OUR STRATEGIC ASPIRATION Ensuring a sustainable competitive excess return for all of our Why we exist stakeholders Achieving this strategic aspiration requires fundamentally changing our corporate culture
Slide 15: Our new strategy: the five pillars
Our new strategy WORLD CLASS EXCELLENCE IN ALL THAT WE DO OUR APPROACH THE FIVE PILLARS OF OUR STRATEGY • We will ensure a sustainable competitive advantage by committing to world class standards in all that we do • We strive for technical excellence that will manifest itself in a cost leadership ph
Slide 16: Our ambition
Our new strategy BECOMING A MAJOR PLAYER In Africa then Globally OUR AMBITION
Slide 17: Group results
GROUP RESULTS 17
Slide 18: F2015 – summary income statement
F2015 – summary income statement 2015 2014 % R million R million Change Variable delivered costs of sales down Revenue 9 227 9 039 2 2% in RSA Cement Cost of sales 6 437 6 266 (3) business 1 Gross profit 2 790 2 773 Administration and other operating expenditure 1 130 1 030 (10) 2 Success of PIP has
Slide 19: F2015 – revenue contribution
F2015 – revenue contribution Group revenue contribution Revenue (Rm)* 80% 10 000 73% 72% 9 039 9 227 9 000 70% 7 646 8 000 7 314 60% 7 000 50% 6 000 5 000 40% 4 000 27% 28% 30% 3 000 20% 2 000 817 871 576 1 042 1 000 10% - 0% Cement Lime Aggregates & Total Sep -14 Sep - 15 Readymix RSA ROA * Before
Slide 20: F2015 – summary balance sheet
F2015 – summary balance sheet 2015 2014 R million R million ASSETS Non-current assets Asset base increased Property, plant and equipment 10 648 7 223 1 by ~R3,5bn due to expansion capex Intangibles 1 026 949 Other non-current assets 528 766 Non-current assets held for sale 76 - Impact of foreign Cur
Slide 21: F2015 – optimal capital structure
F2015 – optimal capital structure • Debt projected to reach optimal levels of ~R10bn - R12bn in 2017 Debt levels (Rbn) 12 000 • In 2017, ~60% of debt will relate to RSA with balance 10 000 being rest of Africa debt • Revised covenants of recourse 8 000 debt to EBITDA of 3.3x 6 000 • Currently recour
Slide 22: F2015 – optimal capital structure
F2015 – optimal capital structure Gross debt by sources of funding Debt maturity profile (Rm) 3 500 Bonds 8% 3 000 BBBEE funding 2 500 29% 18% 2 000 Project Funding ROA 1 500 RSA Long-term 1 000 borrowings 500 15% Other short-term 30% borrowings - 2015 2016 2017 2018 2019 2020 • Average maturity is
Slide 23: F2015 – short term liquidity
F2015 – short term liquidity Sound liquidity buffer Rm Maturities < 12 months 6 000 Bond programme availability Unutilised uncommitted facilities 5 000 Unutilised committed bank 3 600 facilities 4 000 Restricted cash available for maturities < 12 months 3 000 Unrestricted cash Total liquidity BEE de
Slide 24: F2015 – capital expenditure
F2015 – capital expenditure Capex F2015 F2014 (Rm) (Rm) Capex before expansion projects 574 493 • RSA operating capex of R507m SK9 241 - • Project finance for DRC 1 721 445 expansion projects has been fully Rwanda 280 695 secured Zimbabwe 453 275 Total 3 269 1 908 Capex F2016 (March) F2017 Maintenan
Slide 25: F2015 – summary cash flow statement
F2015 – summary cash flow statement 2015 2014 Rm Rm Cash flow from operating activities R2.7bn cash generated despite Operating cash flows before movement in working challenging 2 416 2 472 environment capital Net investment in working capital 300 111 Cash generated from operations 2 716 2 583 1 Uti
Slide 26: F2015 – working capital management
F2015 – working capital management Rolling average working capital days Rm Net working capital Days 1 400 70 1 200 60 1 000 50 800 40 600 30 400 20 200 10 - - 2011 2012 2013 2014 2015 Net working capital Net days Optimisation of working capital continues (down > 10 days) Sustainable cash generat
Slide 27: F2015 – taxation
F2015 – taxation Tax rate reconciliation (%) 2015 2014 Effective tax rate 36.6 30.1 Tax refund 2.7 5.9 39.3 36.0 BBBEE and IFRS 2 (1.1) (0.8) Finance costs on BBBEE funding (2.1) (2.4) Other costs and impairments (7.0) (3.1) Withholding tax (1.1) (1.7) SA corporate tax rate 28 28 • Restructure of BB
Slide 28: Divisional overview
DIVISIONAL OVERVIEW 28
Slide 29: South African operating environment
South African operating environment Cement demand vs. GFCF vs. GDP growth 2011 - 2020 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F Cement Industry (incl. imports) GFCF GDP Growth Source: South Africa Revenue Services, IMF, Bureau for Econ
Slide 30: South African operating environment
South African operating environment Residential and non residential building Construction activity 14% 32% 29% Unrecorded Additions & Alterations Total Residential 50% Building 9% Total non Residential 25% 36% Building 5% Roads, streets, bridges Waterworks Sewerage Other construction Source: BMI Str
Slide 31: South African operating environment
South African operating environment Imported cement volumes by port of entry (tons) 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 - Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Source: South African Revenue Services, I-Net Bridge
Slide 32: South African operating environment
South African operating environment Resilient PPC performance in tough operating environment Industry New entrant Imports Existing producers PPC Source: PPC Research - Based on PPC’s best estimate of market size for October 2014 – September 2015 Competitive Economy Imports PPC Performance landscape
Slide 33: South African operating environment
South African operating environment F2015 Movement Comment Volumes • PPC’s South African cement volumes are down 1.2% • Competitor intensity has led to substantial customer churn • Worst affected areas: Mpumalanga and Polokwane • Volumes in the Gauteng area also declined however the construction and
Slide 34: SA cement input costs (core business)
SA cement input costs (core business) Key cost Proportion of Rand Coal and Oil Prices components cost of sales 120 Distribution 25% 100 Other 18% 80 Salaries 11% Electricity 10% 60 Depreciation 9% 40 Material 8% consumables 20 Maintenance 8% 0 Coal 7% Packaging 4% Rand Coal Price (based to 100) Rand
Slide 35: IDM bag migration
IDM bag migration • To complete the PPC offering, IDM bag now has more of the PPC DNA • Leverages off stronger PPC brand • Fills the PPC gap in the 32.5 retail space • A real PPC fighting brand in the 32.5 category 35
Slide 36: Introducing PPC Newlands
Introducing PPC Newlands • PPC has acquired naming rights of the iconic Newlands cricket stadium in Cape Town • The stadium’s new name and logo – PPC Newlands – was officially unveiled on 5 October 2015 • PPC has also partnered with JP Duminy and his non- profit organisation the JP21 Project • Throu
Slide 37: Zimbabwe, Botswana and Rwanda
Zimbabwe, Botswana and Rwanda Zimbabwe Movement Comment Volumes • Overall volumes declined by 4% • However, domestic volumes grew by 5% • The stronger US dollar, increased competitor and pricing pressure led to decreased exports • Export volumes have consequently halved to ~9% of overall volumes Pri
Slide 38: Lime, Aggregates and Readymix
Lime, Aggregates and Readymix Lime Movement Comment Volumes • Revenue up 7% after a 7% increase in burnt product sales volumes to major clients • EBITDA of R178 million increased by 31% due to the higher volumes and significant cost-saving initiatives Pricing • Improved performance occurred despite
Slide 39: Projects update
PROJECTS UPDATE 39
Slide 40: CIMERWA Ltd, Rwanda
CIMERWA Ltd, Rwanda • US$170 million, 600 000 ton per annum plant successfully completed within allocated budget • Provisional acceptance testing is well advanced • Outstanding testing on the raw mill, kiln and cement mills to be completed in the last quarter of calendar 2015 • Product from new plan
Slide 41: CIMERWA Ltd, Rwanda
CIMERWA Ltd, Rwanda About Rwanda 2015 Population (m) 11.4 Urbanisation (%) 15 GDP per capita (US$) 743 Cement consumption/capita (kg) 45 Real GDP growth (15 -18E) (%) 7.1 Cement retail price per ton (US$) 230 - 270 (inclusive of VAT) Current national cement 700 000 production capacity (tpa) Source:
Slide 42: Democratic Republic of the Congo
Democratic Republic of the Congo • Construction of US$280 million, 1 million ton per annum plant around 55% complete • Commissioning remains on track for end calendar 2016 • Major civil works and cement silos have been completed • Structural steel and mechanical erection began in August 2015 • Quarr
Slide 43: Democratic Republic of the Congo
Democratic Republic of the Congo About DRC 2015 Population (m) 81.7 Urbanisation (%) 42.5 GDP per capita (US$) 478 Cement consumption/capita (kg) 34 Real GDP growth (15 -18E) (%) 7.2 Cement retail price per ton (US$) 225 - 260 (inclusive of VAT) Current national cement 400 000 production capacity (t
Slide 44: Zimbabwe
Zimbabwe • Construction of US$85 million 700 000 ton per annum mill in Harare is proceeding well • Project ~50% complete and rail siding contract 32% complete • Design work is almost complete, with 95% of equipment manufactured and 65% delivered to site • Civil construction is 40% complete • Roads t
Slide 45: Zimbabwe
Zimbabwe About Zimbabwe 2015 Population (m) 13.4 Urbanisation (%) 29 GDP per capita (US$) 1 037 Cement consumption/capita (kg) 77 Real GDP growth (15 -18E) (%) 2.5 Cement retail price per ton (US$) 180 - 270 (inclusive of VAT) Current national cement 1.8m production capacity (tpa) Source: IMF, Cemne
Slide 46: Ethiopia
Ethiopia • Completed a review of the project and its schedule with the Habesha management team • The 1.4 million ton per annum plant will now be concluded at a capital cost of between US$170 million to US$180 million (previously US$140 million) • Commissioning is scheduled to be in the second calend
Slide 47: Ethiopia
Ethiopia About Ethiopia 2015 Population (m) 89.8 Urbanisation (%) 19.5 GDP per capita (US$) 702 Cement consumption/capita (kg) 61 Real GDP growth (15 -18E) (%) 8.0 Cement retail price per ton (US$) 130 - 140 (inclusive of VAT) Current national cement 11m production capacity (tpa) Source: IMF, Cemnet
Slide 48: Slurry kiln 9
Slurry kiln 9 • Slurry factory was granted authorisation by the Department of Environmental Affairs • PPC can now proceed to construct the new 1 million ton per annum kiln 9 for R1.5-1.7 billion • This equates to ~US$115 per ton capacity – cost effective benefit of brownfields investment • An EPC co
Slide 49: Outlook & questions
OUTLOOK & QUESTIONS 49
Slide 50: Outlook
Outlook • New strategy in place to guide the organisation • Having successfully renegotiated covenants, focus will now be on a BBBEE solution and associated capital restructure • Restructure of corporate and legal structure advanced and to be concluded early in 2016 • Alignment of our internal repor
Slide 51: Outlook
Outlook • PPC’s increasingly diverse operating portfolio reduces the impact of any weakness in our core cement SA business • PPC will remain focused on disciplined cost management, innovation and the efficient delivery of projects • Change management roll out will continue with the Profit Improvemen
Slide 52: Questions?
Questions? Now that is Strength beyond the bag. WN Find out enone ebout CIMERWA sot ) 3222 (toll free) @) [email protected] / [email protected] CIMERWA @® www.cimerwarw (@) PP
Slide 53: Disclaimer
Disclaimer This document including, without limitation, those statements concerning the demand outlook, PPC’s expansion projects and its capital resources and expenditure, contain certain forward-looking statements and views. By their nature, forward-looking statements involve risk and uncertainty a
Slide 54: Investor contacts
Investor contacts Azola Lowan Investor Relations Vuyo Nombila Investor Relations Tel. +27 11 386 9000 www.ppc.co.za 54
Slide 55: EBITDA profitability matrix
EBITDA profitability matrix Note: EBITDA margins are calculated hefore inter-segment eliminations 55. RENE RA | Comet | hime | Ag rogats &Reayin RSA Total EBITDA (Rm 1569 136k 13% 136 ee ee 16 |e 93% | 1790 |e Contribution togroup| 67% 58% ih 9H 6% 8h M% | WM % if 3% | 16% Th 4% EBITDA Margin 30% 28
Slide 56: F2015 – EBITDA
F2015 – EBITDA EBITDA (Rm) 2500 62 2 424 2 358 97 2 362 82 2 265 -175 2000 1500 1000 500 0 Sep 14 RSA ROA Like-for-like New businesses Reported EBITDA Restructuring and Normalised Sep 15 corporate action EBITDA 56