Merrill Lynch Sun City Conference March 2018

Transcription

1 Merrill Lynch Sun City Conference March 2018 T h i s i s o u r s t o r y o f r e s i l i e n c e i n t h e p u r s u i t o f s h a r e h o l d e r v a l u e E X E C U T I N G O N P R I O R I T I E S

2 CONTENTS 2 1 Our investment case Strategic action plans 5 2 Delivering on strategic priorities 6 Operational review 4 3 Strengthened group financial position E X E C U T I O N I N P U R S U I T O F S H A R E H O L D E R VA L U E 2

3 1. Our investment case 1.1 Our investment case 1.2 PPC is well positioned as a market leader 1.3 PPC has exposure to regions with solid economic fundamentals 1.4 Strong management team appointed 1.5 BEE III transaction summary

4 1.1 OUR INVESTMENT CASE 4 Quality asset base with ~40% capacity being new Strong leadership and senior management team with combined expertise of more than 100 years Well developed footprint in Africa with strong presence in southern & East Africa Market leader in more than 80% of markets we operate in Improved liquidity and deleveraged balance sheet P P C i s w e l l p o s i t i o n e d to d e l i v e r l o n g te r m s u s ta i n a b l e s h a r e h o l d e r va l u e Improving free cash flows as major capex has ended RoA delivering good results, especially Zimbabwe and Rwanda POSITION ASSETS MANAGEMENT 4

5 1.2 PPC IS WELL POSITIONED AS A MARKET LEADER Market leader in southern Africa In top 4 in the markets in which we operate DRC Capacity 1.2m tpa Ethiopia Capacity 1.4m tpa Revenue (March 2017) R9.6 billion EBITDA (March 2017) R2.1 billion 1 1 Capacity (cement) 11.7 mtpa Botswana Rwanda Capacity tpa Plants Lime factories 18 plants 1 factory (1mtpa) Aggregate quarries 4 quarries (4mtpa) 1 1 Readymix plants 29 plants ( m 3 per month) South Africa Capacity 7.0m tpa Zimbabwe Capacity 1.4m tpa Cement capacity replacement value (EV) per tonne M A R K E T L E A D E R I N S O U T H E R N A F R I C A I N T O P 4 I N E M E R G I N G R o A M A R K E T S 5

6 Consumtpion per kg 1.3 PPC HAS EXPOSURE TO REGIONS WITH SOLID ECONOMIC FUNDAMENTALS Population growth Consumption per capita Urbanisation Countries of operation Cement consumption per capita (kg) for selected countries Vietnam 605 South Africa India Botswana Brazil 82 Zimbabwe Germany 91 Ethiopia 49 Rwanda 34 0 DRC 10,000 20,000 30,000 40,000 50,000 60,000 70, GDP per capita (US$) 333 Australia 391 Cement consumption per capita (kg) UK US 292 P P C I S W E L L P O S I T I O N E D T O TA K E A D V A N TA G E O F O P P O R T U N I T I E S I N E M E R G I N G M A R K E T S A S P I R AT I O N I S T O B E A N A F R I C A N C H A M P I O N 6

7 1.4 STRONG MANAGEMENT TEAM APPOINTED 7 Combined expertise of more than 100 years CEO Johan Claassen CFO Tryphosa Ramano MD Southern Africa Njombo Lekula MD International Mokate Ramafoko S U P P O R T E D B Y A N E X P E R I E N C E D A N D W E L L D I V E R S I F I E D M A N A G E M E N T T E A M

8 1.5 BEE III TRANSACTION SUMMARY SENS ANNOUNCEMENT 14 DECEMBER Top-up transaction to achieve an effective 30% BEE shareholding The transaction will be a 24.6% top-up transaction at PPC SA Holdings (a wholly-owned subsidiary housing South African operations) Transaction participants include employees, communities and black entrepreneurs Funded through a notional vendor financing (NVF) structure as used for BEE II Vests after 10 years, but communities component will be perpetual Taking into account the residual BEE shareholding of 4.3% at PPC Ltd (BEE % and BEE2 2.47%), the effective BEE shareholding in respect of SA operations will be 30% post implementation As BEE II transaction will mature in December 2019, the 24.6% top-up transaction will cushion the company from doing another top-up should the currently promulgated 26% BEE ownership requirement be retained The IFRS 2 charge is in line with similar transactions of this nature A fairness opinion which will be made available for public inspection B E E I I I T R A N S A C T I O N I S E X P E C T E D T O B E I M P L E M E N T E D B Y E N D O F F Y 1 8 8

9 2. DELIVERING ON STRATEGIC PRIORITIES 2.1 FOH FOUR strategic priorities (Group) Priority action plans in November Progress on key priorities

10 2.1 FOH FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS 10 Group HUMAN CAPITAL OPTIMISATION FINANCIAL OPERATIONS FINANCIAL F 1 2 Liquidity O H 3 4 OPERATIONS HUMAN CAPITAL Optimal capital structure Financial discipline BEE III southern Africa Cement R50/tonne improvement to profitability Rest of Africa Cement operationalise businesses with key focus on ramp up and route to market (RTM) Materials maintain cash generation and entrench value chain Adopt value based management principles HR solutions Talent management High performing organisation Organisational culture D E L I V E R S U S T A I N A B L E S H A R E H O L D E R V A L U E 10

11 2.2.1 PRIORITY ACTION PLANS IN NOVEMBER Priorities November months progress months progress Finalise debt re-structuring to lengthen and the smooth Group maturity profile Finalise DRC debt restructuring BEE III implemented Implement R50/tonne improvement to profitability (PIP Phase II) Optimise RTM, raw materials and plant efficiencies in RoA Grow and develop globally competent teams (fit for purpose) Ensure value based management philosophy will create long term sustainable success 11 W E H A V E S U C C E S S F U L L Y E X E C U T E D O N K E Y P R I O R I T I E S

12 2.2.2 PROGRESS ON KEY PRIORITIES WHAT WE HAVE ACHIEVED 12 What we said What we achieved Financial What we said What we achieved Operational What we said What we achieved Human Capital Optimal capital structure Significant progress made with Group debt funding package Group net debt to EBITDA at 2.1x (Sep 2018) balance sheet deleveraged SA Cement Alternative fuel initiatives progressing well Cost optimisation programme underway to deliver targeted savings of R50/tonne Progressed with integration of Safika into SA Cement Overall good cost control HR Solutions Improve systems and resources Review & harmonising of policies across Group Liquidity Completed re-structuring of DRC funding 24 month capital payment holiday Negotiations with EPC contractor to acquire an equity holding is progressing well Significant progress in lengthening and smoothing maturity profile Rest of Africa Operationalising of businesses progressing well Implementing RTM strategies Localisation of input cost progressing well Energy mix progressing well with Rwanda cost of production down Talent Focus on development of leadership and young talent Entrench succession planning Financial discipline Developed tax risk matrix across Group Developed funding and liquidity framework Materials Rationalisation and integration underway Entrench value chain through cement pull through High Performance Organisation Recognition of performance Focus on the well-being of employees Fit for purpose BEE III Significant progress on BEE III structure On track to announce terms structure before March 2018 Adopt Value Based Management Project underway to align the Group Measurements and metrics being established Organisation Culture Leadership to set the tone at the top Ensure that the behaviour of employees resonate with the ethos of PPC A L I G N I N G O U R O P T I M I S AT I O N T O E N S U R E D E L I V E R Y

13 3. STRENGTHENED GROUP FINANCIAL POSITION 3.1 FOH FOUR strategic priorities (Group Finance) 3.2 Investment in a diversified portfolio of assets 3.3 DRC de-risked steps taken to reduce balance sheet impact 3.4 Deleveraged balance sheet and improved maturity profile 3.5 Key drivers of free cash flow

14 3.1 FOH FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS 14 Group Finance FINANCIAL F 1 FINANCIAL 2 3 Optimal capital structure long term gearing target, maturity profile, liquidity Financial portfolio optimisation cost of capital & hurdle rates vs returns, capital allocation priorities, dividend framework Free cash flow generation OPTIMISATION O OPERATIONS Financial disciplines and processes which include: Embedding ERP systems across the Group Entrenching governance structures Entrenching standardised policies and procedures HUMAN CAPITAL H 1 Implementing BEE III 2 Developing centres of excellence across the Group HUMAN CAPITAL OPERATIONS 3 Performance culture geared towards shareholder value G R O W I N G S U S TA I N A B L E S H A R E H O L D E R VA L U E T H R O U G H E F F E C T I V E A N D E F F I C I E N T F I N A N C I A L S T R AT E G Y 14

15 3.2 INVESTMENT IN A DIVERSIFIED PORTFOLIO OF QUALITY ASSETS Capex E (Rm) % 518 Capex guidance FY18 still expected to be within guidance range Capacity build-up (mtpa) Rest of Africa capacity increased to 4.7mtpa Capacity in Rwanda* Capacity in *Change in product mix Capex guidance (Rm) Zimbabwe mill 1.2 DRC* +34.9% Ethiopia Capacity in FY FY18 FY19 FY20 SK9 +8.6% Capacity in FY14 FY15 PF MAR 16 FY17 1H17 1H18 FY18 FY19 FY20 Actual capex & PPE Lower range High range Southern Africa RoA P P C H A S I N V E S T E D > $ M S I N C E I N A Q U A L I T Y A S S E T P O R T F O L I O P E A K C A P E X I N F Y

16 3.3 DRC DERISKED STEPS TAKEN TO REDUCE BALANCE SHEET IMPACT 16 2 UPDATE ON OPTIONS Negotiation with funders with regard to debt restructuring completed Negotiation with EPC contractor progressing well month extension of ~US$24m EPC contract retention fee 1) Moratorium on capital repayments in the DRC 2 year capital repayment moratorium Next capital repayment scheduled for January 2020 New interest rate 6 month US$ LIBOR plus 975bps PPC support for DRC for FY18 within previous guidance This has been funded from internal cash flows Conversion of ~US$24m into equity subject to due diligence S U C C E S S F U L D E R I S K I N G O F P P C s B A L A N C E S H E E T 16

17 3.4 DE-LEVERAGED BALANCE SHEET AND IMPROVED MATURITY PROFILE 17 1 Current debt maturity profile (Rm) 12,000 Group debt profile (Rm) 6.0 7, ,000 Mar-16 Jun-16 Mar-17 Jun-17 Sep-16 Sep Gross debt (lhs) Net debt Gross debt/ebitda (rhs) Net debt/ebitda 2,500 2,000 1,500 1, Post re-structure debt maturity profile* (Rm) FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 RSA *Based on current RSA utilisation *Includes DRC capital repayment moratorium RoA Group debt continues to reduce as PPC is not drawing on debt facilities As at end Jan 2018 Net debt below R4.0bn (R4.4bn Sep 2017) Gross debt below R5.0bn (R5.4bn Sep 2017) Group Gross debt/ebitda 2.1x 2.3x (2.6x Sep 2017) Group Net debt/ebitda 1.7x 1.8x (2.1x Sep 2017) Restructuring of SA debt Effective cost of funding is expected to reduce from ~13% -14% to 10% - 11% Capital structure Target capital structure (equity : debt) Metric Target Group Gross debt/ebitda 3.0x 3.5x Target RSA Gross debt/ebitda 2.5x 2.8x 70:30 (Intrinsic value) Through the cycle W E H A V E I M P R O V E D G R O U P M AT U R I T Y P R O F I L E A N D L O W E R E D B O R R O W I N G C O S T S 17

18 3.5 KEY DRIVERS OF FREE CASH FLOW 18 1 CAPEX Major capex spent in prior years FY18 capex spend within guidance 2 FINANCE CHARGES Reduced debt levels RSA effective funding rates reduced 3 CASH TAX Section 12 Incentive and 12 C allowance of the income tax act results in approximately R700m R900m tax deduction in the year of production in South Africa 4 DRC DE-RISKING Reduction in deficiency funding E X E C U T I O N T O D E L I V E R I M P R O V E D F R E E C A S H F L O W S 18

19 4.1 OPERATIONAL REVIEW O P T I M I S AT I O N O F R T M A N D P L A N T E F F I C I E N C I E S I M P R O V I N G C O S T R E D U C T I O N A C R O S S O U R O P E R AT I O N S D E L I V E R O N R o A B U S I N E S S P L A N S

20 4.2 SOUTHERN AFRICA FOH FOUR outlook (southern Africa) Continued price recovery in a difficult trading environment Operational overview Imports Supply demand dynamics Three mega plant strategy capitalises on our footprint Slurry kiln 9 project update Slurry complex overview Operational efficiencies PIP Phase Carbon tax

21 4.2.1 FOH FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS 21 southern Africa FINANCIAL F 1 2 FINANCIAL 3 4 R50/tonne improvement in profitability Realise SK9 benefits Financial discipline Implement value based management principles OPTIMISATION O H OPERATIONS 1 Supply chain optimisation 2 Optimise RTM 3 Alternative fuel and plant efficiency 4 Safika cement integration HUMAN CAPITAL 1 Structure optimisation 2 Talent management HUMAN CAPITAL OPERATIONS 3 Organisation culture C O S T O P T I M I S AT I O N T O D E L I V E R M A R G I N I M P R O V E M E N T 21

22 4.2.2 CONTINUED PRICE RECOVERY IN A DIFFICULT TRADING ENVIRONMENT 22 Average Selling Price (ASP) Trends Price increase Price increase Pricing bottomed ASP indexed from January 2015 I M P R O V E M E N T I N V O L U M E S N O T W I T H S TA N D I N G P R I C E I N C R E A S E S 22 Source: PPC Research

23 4.2.3 OPERATIONAL UPDATE PRICING BOTTOMED IN SOUTHERN AFRICA 23 SOUTH AFRICA 9 MONTHS FY18 OPERATIONAL UPDATE Realised cement pricing up 2% in this period Pricing momentum maintained Further price increase of 2% 5% implemented in Jan 2018 Cement volumes Estimate that the industry declined by 3% 4% for calendar 2017 PPC volumes declined 1% - 2% for 9 months to Dec 2017, improvement compared with interim performance Portfolio effect of PPC s national footprint Update on the Western Cape drought impact PPC operations have been secured from water input perspective to ensure continuity of supply Cement manufacturing not a water-intensive process Operations totally self sufficient from own surface water sources. These can potentially last for at least several months Full bouquet of both water conservation and augmentation measures implemented since mid-2017 De Hoek plant commissioned a reverse osmosis plant of litres per day at the end of Jan million litres utilised to date We continue to engage with local government as construction is viewed as a priority economic sector P R I C I N G I S A N I M P O R TA N T FA C T O R I N S TA B I L I S I N G M A R K E T S 23

24 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan IMPORTS INCREASED BUT STILL WELL BELOW THE 2014 PEAK 24 Total Imports (t) 600, , ,000 0 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Durban PE&EL CPT Total imports have increased by 23% for Jan Dec 2017 Western Cape imports increased by 18% Still well below the peak in Q4 2014, ~11% of total cement volumes The bulk of the imports have been from China The major port of entry has been Durban and PE and to a lesser extent Cape Town R/US$ exchange rate has continued to strengthen since Jan R/US$ exchange rate

25 '000 tonnes SUPPLY DEMAND DYNAMICS 25 Annual cementitous supply and demand in South Africa, Botswana, Lesotho & Swaziland 20,000 18,000 PPC - Dwaalboom New entrant New entrant PPC SK % 80.0% 16,000 14,000 12,000 10, % 40.0% 20.0% 8, % 6, % Industry demand Industry demand locally produced Industry Capacity (with SK9) Annual % change in demand SK9 PROVIDES PPC WITH NEWEST TECHNOLOGY IN THE DOMESTIC INDUSTRY IN 2020 AN ESTIMATED 3MTPA OF INDUSTRY CAPACITY WILL NOT MEET EMISSIONS REGULATIONS AFTER 2020 THE INDUSTRY WILL BE RUNNING AT HIGH CAPACITY SUGGESTING ADDITIONAL CAPACITY WILL BE REQUIRED 25

26 4.2.6 THREE MEGA PLANT STRATEGY CAPITALISES ON OUR FOOTPRINT 26 PPC footprint enables: Integrated plants and depots to serve key markets Portfolio effect delivering profitability Ability to deliver at lowest cost through optimal sourcing Key PPC * Grinding plant only PPC Grinding plant (3) PPC Mega plant (3) Saldanha * 1 Cape Town Botswana Gaborone Lichtenburg 3 * Johannesburg Polokwane Nelspruit Newcastle Richards Bay Durban Port Shepstone De Hoek East London Riebeeck Port Elizabeth WESTERN CAPE 1mtpa * Well positioned for alternative fuel Favourable proximity to market SLURRY 2mtpa* SK9 newest technology Increased optimal sourcing opportunities, increased competitiveness DWAALBOOM 2mtpa* Pioneered six stage pre-heater technology in South Africa Modernised plant Waste product substitution Increased energy efficiency *cement capacity P P C H A S T H E M O S T D E S I R A B L E C E M E N T D E L I V E R Y F O O T P R I N T I N S O U T H A F R I C A 26

27 4.2.7 SLURRY KILN 9 PROJECT UPDATE 27 The R1.7bn SK9 project is 90% complete and scheduled for commissioning in 2Q 2018 SK9 is a new 3000tpd production line utilising the latest cement technology This project will be delivered on time and within budget The efficient Slurry complex will be able to deliver 2.0mpta S K 9 W I L L E N H A N C E P P C S C O M P E T I T I V E P O S I T I O N T H R O U G H C O S T, T E C H N I C A L A N D E N V I R O N M E N TA L E F F I C I E N C I E S 27

28 4.2.8 SLURRY COMPLEX OVERVIEW 2.0MTPA CAPACITY 28 New Old Old with upgrades Coal, clinker, gypsum storage Overhead crane 3 kt Road and rail Clinker dispatch system upgrade Coal feeding system 90kt (3x30kt) Clinker silos SK9 6 stage, pre-calciner, grate cooler tpd 900 ktpd Total Clinker 1.6mtpa SK tpd 720 ktpa Water injection upgrade on GCT to work with bag filter Raw meal 9,5kt Blending Bins Raw meal extraction system GCT RM5 RM4 Bag filter <30mg/Nm 3 Proportioning plant Feeds both RM4 and RM5 raw materials feed per mill Stacker and Reclaimer sized for the complex Additive material storage New limestone reclaimer and new limestone Limestone Reclaimer 2 x 60kt limestone Raw material receiving station Quarry limestone, shale Shale conveying system Clinker dispatch Finishing Mills (4x mills) Packing Plant 2x rotary packers 2x palletisers Cement Weigh bridge New weighbridge for raw materials T H E S L U R R Y C O M P L E X I S A B R O W N F I E L D S E X PA N S I O N W H I C H C O S T ~ U S $ 7 0 U S $ 9 0 / T O N N E 28

29 4.2.9 WE CONTINUE TO DRIVE OPERATIONAL EFFICIENCIES 29 Fixed Costs of Production (Real Rm based to 100) Cost of Production per tonne (based to 100) Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 0 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Based to 100 Fixed costs of production (Rm) Rand per ton Logistics savings on a R/tonne basis Rand per ton VCOP VCOP Variable Cost of Production VDCOP Variable Delivered Cost of Production PIP phase I exceeded R650m Improvements in operational efficiency were mainly due to: Restructuring the business to meet operational requirements Multi-skilling and training of employees Optimising outbound logistics Improving energy efficiency Rand per ton VDCOP W E C O N T I N U E T O E X E C U T E O N D R I V I N G E F F I C I E N C I E S 29

30 PIP PHASE 2 - PROGRESS MADE ON R50/TONNE SAVINGS 30 What we said Target saving based on R50/tonne What we achieved What we did Next months Revenue Enhancement 10% - 20% Implemented price increases in August 2017 and January 2018 Secured volumes by enhanced value added technical support 20% Enhanced product portfolio Product strategy implementation Price escalation strategy Entrench strategic partnerships Strategic cost reduction 40% - 60% Integration of Safika Cement Organisational restructure of Head Office and Operations 30% Complete Safika Cement integration Drive plant efficiencies to reflect operations requirements Cost efficiencies 20% - 40% Embed tyre burning in the Western Cape Hercules kiln 5 (HK5) mothballed Optimisation of logistics 65% Slurry kiln 9 complex coming online Embed the 3 mega plant strategy PE kiln 4 mothballed Implementation of alternative fuels in the Western Cape Implement alternative route to market sourcing B A S I S P O I N T I M P R O V E M E N T I N E B I T D A M A R G I N O V E R T H E N E X T 2-3 Y E A R S 30

31 CARBON TAX UPDATE 31 OVERVIEW 2018 budget speech indicated that the carbon tax will be implemented from 1 January 2019 The current tax structuring proposes R120/tonne applied to CO2 emissions PPC qualifies for the basic allowance of 60%, and other allowances including process allowances, carbon budget and trade exposure (once regulated) which increases the basic allowance PPC anticipates that the impact of carbon tax is likely to be in the region of ~R80 R100m for cement and lime per annum PPC is continually looking to reduce its carbon emissions Mega plant strategy use of efficient kilns SK9 modern efficient technology commissioned in Q Use of alternative fuels replacement of coal ACCOUNTING IMPACT Carbon tax will be treated as an excise tax which is an indirect tax No direct impact on the PPC s income statement same treatment as VAT which is also an indirect tax Accrual on the balance sheet until payment is made Ideally this tax should be passed on to the consumer 31

32 4.3 Rest of Africa FOH FOUR strategic priorities Overview Key drivers PPC positioned to benefit from rapid urbanisation Some key projects driving demand Progress made on key priorities Route to market overview Rwanda operational review Zimbabwe operational review DRC operational review Ethiopia operational review S T R O N G P R E S E N C E I N G R O W I N G U R B A N C E N T R E S O F T H E C O N T I N E N T

33 4.3.1 FOH FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS 33 Rest of Africa FINANCIAL FINANCIAL F 1 Renegotiation of funding agreements 2 Value based management principles 3 4 Improve liquidity to meet foreign payment obligations Financial discipline to align to the Group OPERATIONS O 1 2 Operational efficiencies in all markets Optimise RTM strategy in all markets OPTIMISATION 3 Energy mix optimisation in Rwanda, DRC & Ethiopia 4 Optimise raw materials sourcing (coal, gypsum) & packaging HUMAN CAPITAL H 1 Structure optimisation across all regions HUMAN CAPITAL OPERATIONS 2 3 Skills development and talent management in the local market Embed organisational culture inline with Group, incorporating local requirements L E V E R A G I N G G R O W I N G A F R I C A N M A R K E T S W I T H L O W E R P E R C A P I T A C E M E N T C O N S U M P T I O N 33

34 4.3.2 OVERVIEW OF REST OF AFRICA CEMENT 34 Annualised capacity utilisation EBITDA margin at steady state Average retail pricing US$/tonne 1.4mtpa 50% - 60% 30% - 35% Zimbabwe Rwanda 0.65mtpa 60% - 70% 30% - 35% Ethiopia 1.4mtpa Ramp - up 30% - 35% DRC 1.2mtpa Ramp - up 30% - 35% W E L L P O S I T I O N E D T O G A I N M A R K E T S H A R E I N E M E R G I N G M A R K E T S 34

35 4.3.3 REST OF AFRICA KEY DRIVERS 35 Real GDP growth % Net FDI % of GDP 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% E 2018F 2019F 2020F Ethiopia Rwanda DRC Zimbabwe REAL GDP Strong growth in Ethiopia and Rwanda Zimbabwe recovering 35 FDI FLOWS Strong FDI flows in Ethiopia and Rwanda Zimbabwe stabilising Source: NKC

36 4.3.4 PPC IS IDEALLY POSITIONED TO BENEFIT FROM RAPID URBANISATION 36 URBAN POPULATION % 80% OF WORLD GDP IS DRIVEN BY CITIES* PPC PRESENCE Source: AfDB statistics 2016 P P C I S I D E A L L Y P O S I T I O N E D A R O U N D F A S T G R O W I N G C I T I E S * World cities report

37 4.3.5 SOME KEY PROJECTS DRIVING DEMAND (CURRENT AND FUTURE) 37 CITE DU FLEUVE village project in Kinshasa Ancillary infrastructure development (access roads and rail upgrade into interior) Inga project Ethiopia Goods and passenger railway between Addis Ababa and Djibouti Grand Ethiopian Renaissance Dam on Nile river Approximately US$2billion allocated to Road projects in 2018 Geothermal power project (1000 MW) Koysha Hydro-dam (2000 MW) in the South of Ethiopia starting 2018 DRC Rwanda Hwange thermal power station Victoria Falls shopping mall project Gwayi/Shangani Dam Beitbridge Masvingo highway Caledonia affordable housing Batoka Gorge hydro power station 37 Zimbabwe New Bugasera International airport Inland Port Magerwa HQ Power peat plant IDP model villages and affordable housing projects Expansion of Rubavu airport Ancillary infrastructure development (access roads, warehouses etc.)

38 4.3.6 PROGRESS MADE ON KEY PRIORITIES 38 ZIMBABWE Liquidity management Identified export opportunities to neighbouring countries Local sourcing of key input materials in progress Packaging material and consumables Operational efficiencies Entrenched RTM strategy in the north of Zimbabwe to support volume growth (>40%) Diversifying product mix with SURECAST representing 10% - 15% of volumes, none in the previous year ETHIOPIA RTM strategy Concluded agreements for alternative energy source In place to gain market share and grow volumes Export strategy developed to gain forex Operational efficiencies Identified thermal energy inputs to be sourced locally and preserve forex Implementing business architecture to support growth in volumes Identified alternative extender to optimise product mix RWANDA Raw material optimisation Identified 4 potential deposits to extend limestone reserves from 11.5 to approx. 16 years. Drilling is in progress to quantify. Completed 2 sites, await results Also identified larger deposits in the eastern DRC, with ongoing engagements Operational efficiencies Localising raw material inputs progressing well, diversified sources for gypsum and coal Project to localise thermal energy costs with methane gas is in progress DRC RTM strategy Entrenching strategy with market share > 20% Operational efficiencies Renegotiating electricity tariff structure Power planning to reduce maximum demand charge Multi-skilling and job rotation to increase productivity Right-sizing at all levels Funding Renegotiation of funding agreements progressing well with additional capital holiday imminent E X E C U T I N G O N O U R P R O M I S E S 38

39 4.3.7 ROUTE TO MARKET STRATEGIC OVERVIEW 39 RAMP-UP PHASE RAMP-UP PHASE Ethiopia DEFEND AND GROW DRC DRC Rwanda DEFEND AND GROW Zimbabwe 39

40 4.3.8 RWANDA OPERATIONAL REVIEW 40 RWANDA DOMESTIC MARKET SHARE 9 MONTH FY18 OPERATIONAL UPDATE SPOT RETAIL PRICE (US$) COST BREAKDOWN Cement volumes increased by 20% - 30% compared to previous year due to: Successful route to market strategy Excellent service delivery Product consistency and technical support Significant increase in exports Retail cement pricing remained fairly stable B Y M I D W E E X P E C T T O B E A T F U L L C A P A C I T Y 40

41 4.3.9 ZIMBABWE OPERATIONAL REVIEW 41 65% 60% 55% 50% ZIMBABWE DOMESTIC MARKET SHARE Mar 16 Sept 16 Sept 17 SPOT RETAIL PRICE (US$) COST BREAKDOWN Raw materials & other 19% Dep 14% Energy 15% Maintenance 7% 9 MONTH FY18 OPERATIONAL UPDATE Overall domestic cement volumes increased by 30% -40% compared to previous year due to: Enhanced product portfolio following launch of Surecast in March 2017 Excellent service delivery Product consistency and technical support There has also been an upsurge in construction activity as citizens are on a drive to convert their monetary investments to property Net realised selling price marginally higher in dollar terms Transport 18% Labour & overheads 27% W E A R E A C H I E V I N G F U L L C A P A C I T Y O N C L I N K E R 41

42 DRC OPERATIONAL REVIEW 42 DRC RAMP-UP VOLUMES 9 MONTH FY18 OPERATIONAL UPDATE SPOT RETAIL PRICE (US$) COST BREAKDOWN Dep 14% Other 22% Labour & overheads 14% Maintenance 8% Energy 42% The DRC operation commenced with sales in April 2017 Increased market share to 25 30% Proven route to market strategy implemented to grow volumes with key focus on: Building strategic partnerships Technical support to customers Enhance service delivery Excellent product quality Focus on construction and CPM segments Alignment of fixed cost to plant ramp-up completed Key focus is for DRC to generate positive cash flow G A I N I N G M A R K E T S H A R E I N A C H A L L E N G I N G M A R K E T 42

43 ETHIOPIA OPERATIONAL REVIEW 43 ETHIOPIA RAMP-UP VOLUMES 9 MONTH FY18 OPERATIONAL UPDATE SPOT RETAIL PRICE (US$) COST BREAKDOWN Production commenced in June 2017 To date presold ~300kt of which slightly more than 50% has been dispatched Retail selling price reduced due to devaluation of Ethiopian BIRR against the USD The provisional acceptance certificate (PAC) has been completed in December 2017 Other 26% Energy 40% Technical agreement between PPC and Habesha has been established to support ongoing operations Dep 6% Full ramp-up of Habesha will be in months Labour & OH 10% Transport 12% Maintenance 6% Expected to account for profit and loss for 3 months in FY18 U N L O C K I N G O P P O R T U N I T I E S I N D E V E L O P I N G M A R K E T S 43

44 4.4 Materials FOH FOUR strategic priorities Aggregates & Readymix, Lime 44

45 4.4.1 FOH FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS 45 Materials FINANCIAL F 1 2 FINANCIAL Financial discipline through integration Value based management principles 3 Focus on cash generation and working capital management OPTIMISATION O H OPERATIONS 1 Improve operational efficiencies through integration 2 Entrench the value chain through cement pull-through HUMAN CAPITAL 1 Structure optimisation 2 Skills development and talent management HUMAN CAPITAL OPERATIONS 3 Organisation culture in line with Group C A P I TA L I S I N G O N O P P O R T U N I T I E S I N Z O N E S O F N AT U R A L A D VA N TA G E G O O D P L AT F O R M F O R C E M E N T VA L U E C H A I N O P P O R T U N I T I E S T O R E P L I C AT E M O D E L I N R o A 45

46 4.4.2 AGGREGATES & READYMIX, LIME - 9 MONTH OPERATIONAL REVIEW 46 Aggregates & Readymix Pricing Under pressure due to a competitive market Reduction in volumes due to Exposure to the Gauteng market Significant reduction in construction projects in Gauteng Aggregates exposure to the readymix market Lime Pricing At similar levels to the previous period Volumes declined marginally due to Significantly exposed to the domestic steel industry Major client shutdowns during the period Non-extension of milk of lime contract 46

47 5. STRATEGIC ACTION PLANS O P T I M I S I N G O U R C A P I TA L I N V E S T M E N T S TO D E L I V E R LO N G T E R M S U S TA I N A B L E S H A R E H O L D E R VA LU E

48 5.1 STRATEGIC ACTION PLANS 48 6 MONTHS 6-12 MONTHS MONTHS 1. Capital portfolio optimisation & implementation 2. Commissioning of SK9 3. Optimisation of the Rwanda plant 4. Implementation of VBM* Principles *Value Based Management Principles **Refuse Derived Fuels 1. Implementation of BEE III 2. Full integration of Safika Cement 3. Implementation of RDF** supply pipeline in the Western Cape 4. Actively pursue the repatriation and utilisation of funds in Zimbabwe 1. Optimisation of Dwaalboom 2. Implementation of the de-risking options in the DRC 3. Entrenchment and optimisation of business processes across the Group 4. Measurement and monitoring of VBM Principles 48

49 Questions

50 INVESTOR CONTACTS 50 Anashrin Pillay Investor Relations

51 DISCLAIMER 51 This document including, without limitation, those statements concerning the demand outlook, PPC s expansion projects and its capital resources and expenditure, contains certain forward-looking statements and views. By their nature, forward-looking statements involve risk and uncertainty and although PPC believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment, other government action and business and operational risk management. Whilst PPC takes reasonable care to ensure the accuracy of the information presented, PPC accepts no responsibility for any damages, be they consequential, indirect, special or incidental, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and the information published in this document is unaudited. 51