Executing on priorities in pursuit of stakeholder value FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2018

Transcription

1 Executing on priorities in pursuit of stakeholder value

2 CONTENTS 2 Strategic action plans 6 1 Key messages Operational review 5 2 Our investment case Group results Performance highlights E X E C U T I O N I N P U R S U I T O F S TA K E H O L D E R VA L U E 2

3 1.1 KEY MESSAGES CONTEXTUALISED 3 Resilient performance against the backdrop of a challenging environment Successful addressing of priorities creates the foundation for long term value for all stakeholders Portfolio effect bearing fruit Completion of three major greenfieldand expansion projects End of major capex cycle Abnormal / non-recurring items impacted the results Corporate action DRC and Ethiopia investments Restructuring cost Board and management changes Key priorities introduced to refocus financial, operational and human capital objectives 3

4 1.2 KEY MESSAGES FINANCIAL STABILITY 4 Improved Free Cash Flow 1. Net cash flow after investing activities improved by R1.8bn 2. Cash generated from operations up 23% from R1.9bn to R2.3bn 3. Capex reduced by R1.1bn, major capex spend has been completed (DRC and SK9) Improved Profitability 1. Revenue up by 7.0% supported by strong performances in Zimbabwe and Rwanda 2. Like-for-like EBITDA improved by 4% and margins maintained 3. Recurring EBITDA is 17% higher than reported after adjusting for corporate action and other non-recurring costs Strengthened Balance Sheet & Liquidity 1. Group gross debt reduced by R1.0bn from R5.7bn to R4.7bn 2. Strengthened balance sheet, net debt/ebitda 2.0x from 2.3x 3. Restructured SA debt and DRC funding repayment schedule 4

5 1.3 KEY MESSAGES CREATING VALUE FOR STAKEHOLDERS 5 Operational 1. All operating units had a stellar performance with continued focus on cost containment 2. PPC volume growth in SA better than industry average, price increases achieved 3. Strong performance from Rwanda and Zimbabwe, significant market share improvement 4. DRC and Ethiopia commissioned in challenging operating environments Regulatory & Processes 1. B-BBEE Contributor: Level 3 2. Focus on license to operate 3. Implemented value based management to guide capital allocation decision making 4. Board governance strengthened, enhanced depth of skills Human Capital & Sustainability 1. Alignment of our values to resonate with our brand 2. Water efficiency in the Western Cape, De Hoek consumption reduced by 40% 3. LTIFR reduced from 0.40 to 0.25 with no fatalities during the period 5

6 2. OUR INVESTMENT CASE

7 2.1 WHY INVEST IN PPC? 7 Licence to Operate Strategically positions PPC as good corporate citizen B-BBEE Contributor: Level 3 Cash flow Improved cash flow as major capex has ended Financial stability Improved liquidity and deleveraged balance sheet Our People Our main competitive advantage Asset base World class asset base, c.70% new capacity Growth markets Solid fundamentals for market demand SSA Footprint Well developed footprint, strong presence in southern & eastern Africa Portfolio effect RoA delivering good results 6 5 Market leader Leadership position in 80% of markets we operate in L O C AT I O N A S S E T S P E O P L E 7

8 3. PERFORMANCE HIGHLIGHTS

9 3.1 RESULTS HIGHLIGHTS SIGNIFICANT IMPROVEMENT IN PROFITABILTY AND LIQUIDITY 9 SOLID GROUP FINANCIAL PERFORMANCE IN A CHALLENGING ENVIRONMENT Revenue up 7% to R10.3bn EBITDA down 9% at R1.9bn, L-F-L up 4.0% Attributable net profit +60% Net debt improved by R900m Strong cash generation from operations of R2.3bn EPS +25% to 10c HEPS +114% to 15c DELIVERING LONG TERM SUSTAINABLE STAKEHOLDER VALUE Growth in revenue Improved profitability Improved debt and liquidity position Improved cash generation Delivered on key priorities *L-F-L comparison excludes once-off cost, exchange rate and DRC I M P R O V E D S TA B I L I T Y T H R O U G H S T R O N G C A S H F L O W 9

10 3.1 RESULTS HIGHLIGHTS SIGNIFICANT IMPROVEMENT IN PROFITABILTY AND LIQUIDITY (CONT.) 10 SOLID PERFORMANCE FROM REST OF AFRICA CEMENT MAINTAINED POSITION AS MARKET LEADER IN SOUTHERN AFRICA CEMENT RoA revenue up 30% to R2.8bn [L-F-L* +25%] EBITDA growth of 14% to R736m [L-F-L +23%] EBITDA margin achieved 27% [L-F-L 32%] Contribution to Group EBITDA 39% % Volumes Group cement Lime (kt) Aggregates (kt) Readymix ('000 m3) *L-F-L comparison excludes DRC +0.2% FY18 FY17 SA revenue flat at R5.5bn EBITDA down 3% EBITDA margin declined marginally to 21.8% +5.5% -11.1% D I V E R S I F I E D P O R T F O L I O I S PAY I N G O F F 10

11 4. GROUP RESULTS

12 4.1 KEY ITEMS IMPACTING THE RESULTS 12 Income statement 1. Non-recurring costs and currency R211m, includes corporate action of ~R61m 2. Ethiopia net operating loss of R61m, due to unrealised foreign currency devaluation 3. Currency impact average USD/R (2017: 14.08) DRC impact on income statement 1. Contributed revenue of R144m in the period 2. EBITDA loss of R105m, includes non-recurring expenses of USD6m (work in progress) 3. PPC Barnet (DRC) Contributed a net operating loss of R254m, impairment of plant of R165m 4. Finance costs of R117m and unrealised forex loss of R49m Free Cash Flow Improvement 1. Improvement in working capital due to favourable movement in receivables and payables 2. Cash tax increased by 11% 3. Capex reduced significantly, capex cycle peaked in Cash conversion ratio improved from 0.9x to 1.2x 12

13 4.1.2 QUALITY OF THE PERFORMANCE REFLECTED IN THE INCREASE IN CASH EARNINGS EARNINGS COMPARISON IN CENTS % % EPS HEPS Cash earnings FY18 FY17 EPS impacted by DRC plant impairment of R165m HEPS excludes the impact of the DRC impairment +114% Cash earnings benefited from the increase in cash available from operations of R577m 13

14 4.1.3 INCOME STATEMENT 14 Year ended Year ended 31 March 31 March % Change Rm Rm Revenue % Cost of sales % Gross profit % Administration and other operating expenditure % Operating profit before item listed below: % Empowerment transactions IFRS 2 charges % Operating profit % Foreign exchange gain/(loss) on foreign currency monetary items 143 (124) Finance costs % Investment income % Profit before equity-accounted earnings % Earnings from equity-accounted investments (60) 1 Impairments and other exceptional items (174) (10) Profit before taxation % Taxation % Profit for the year % Attributable to: Shareholders of PPC Ltd % Non-controlling interests (112) (66) EPS % HEPS % 1.REVENUE Revenue growth from Rest of Africa partly offset by lower revenue from the materials segment. Cement Southern Africa revenue was flat year on year 2.COST OF SALES Cost of sales increase from last year in line with revenue increase. Rest of Africa up 35% compared to last year, due to the inclusion of DRC cost of sales amounting to R173m (2017:R41m) 3.OVERHEADS Overheads impacted by once-off costs of R145m and DRC costs of R146m (2017: R37m) 4. FINANCE COSTS Finance costs below FY17 as a result of lower borrowing levels and non-recurrence of LAGFA fee, partly offset by interest expensed on DRC and Zimbabwe projects 5. EQUITY-ACCOUNTED INVESTMENTS Ethiopia net loss mainly due to unrealised forex losses on USD denominated loan due to currency devaluation by +30% 6.TAXATION Effective tax rate of 68% (excl equity-accounted investments) impacted provision for prior year taxes in Zimbabwe (USD5m), non-deductibility of corporate action costs and impairment of deferred tax assets 7.EPS AND HEPS Weighted average number of shares increased from 1 137m shares in the prior period to 1 510m 14

15 4.1.4 IMPACT OF DRC ON GROUP INCOME STATEMENT 15 DRC Income statement (Rm) FY18 FY17 %chng Revenue % Cost of sales % Gross profit (29) (16) 77% Administration and other operating expenditure % Operating profit before item listed below: (175) (53) 229% Empowerment transactions IFRS 2 charges - - Operating profit (175) (53) 229% Fair value and foreign exchange gains/(losses) (49) (113) -56% Finance costs % Investment income 11 - Profit before equity-accounted earnings (330) (174) 89% (Loss)/earnings from equity accounted investments - - Impairments and other exceptional items (169) - Profit before taxation (499) (174) 186% Taxation (115) (20) 462% Loss for the year (384) (154) 150% Non cash charges of approximately USD 20m (R236m) Finance charges of R117m Depreciation was R70m PPC Group (excluding DRC) Income statement (Rm) FY18 FY17 %chng Revenue % Cost of sales % Gross profit % Administration and other operating expenditure % Operating profit before item listed below: % Empowerment transactions IFRS 2 charges % Operating profit % Fair value and foreign exchange gains/(losses) 192 (11) % Finance costs % Investment income % Profit before equity-accounted earnings % (Loss)/earnings from equity accounted investments (60) % Impairments and other exceptional items (5) (10) -53.4% Profit before taxation % Taxation % Profit for the year % Two operations commissioned in the current year Contributed a loss of approximately R445m due to non-cash charges and ramp-up E X C L U D I N G T H E D R C P P C G R O U P M A D E R M P R O F I T F O R T H E Y E A R 15

16 4.1.5 RECURRING EBITDA 17% HIGHER THAN REPORTED EBITDA EBITDA margin 18% 1880 EBITDA margin 19% Group EBITDA Bridge (Rm) EBITDA margin 20% EBITDA margin 22% % + 7.0% + 5.0% 1500 FY18 EBITDA reported Forex impact FY18 EBITDA (constant curr.) Corporate action Restructuring Separation costs Project costs & other FY18 Recurring EBITDA DRC EBITDA FY18 L-F-L EBITDA 1 D R C r e p o r t e d E B I T D A i n c l u d e s R 7 8 m o f n o n - r e c u r r i n g c a p i t a l i s a t i o n c o s t s E B I T D A I M PA C T E D BY O N C E - O F F C O S T S A N D T H E D R C F O R F I V E M O N T H S 16

17 4.1.6 DIVERSIFIED QUALITY PORTFOLIO OF ASSETS 17 Revenue (Rm) FY18 FY17 % Change Movement Southern Africa % Rest of Africa % Rwanda % Zimbabwe % DRC % Other % Materials % Group % Southern Africa cement flat revenue growth in a tough market Robust contribution from rest of Africa driven by Zimbabwe EBITDA (Rm) FY18 FY17 % Change Movement Southern Africa % Rest of Africa % Rwanda % Zimbabwe % DRC % Other -1-4 Materials % Group Services % Group % Southern Africa marginally down Rest of Africa good growth DRC EBITDA lower due to once-off cost 17

18 4.1.7 DIVERSIFIED QUALITY PORTFOLIO OF ASSETS (CONT.) 18 Net Interest (Rm) FY18 FY17 % Change Movement Southern Africa % Rest of Africa % Rwanda % Zimbabwe % DRC % Other -1-0 Materials % Group Services % Group % Net interest for the group was 13% lower Att. Net Profit (Rm) FY18 FY17 % Change Movement Southern Africa % Rest of Africa % Rwanda % Zimbabwe % DRC % Other Materials % Group Services % Group % Southern Africa the key contributor to attributable profit 18

19 4.1.8 REVENUE CONTRIBUTION PER SEGMENT 19 20% 26% 21% 22% REVENUE CONTRIBUTION FY18 54% REVENUE CONTRIBUTION FY17 57% Southern Africa cement RoA ROA cement Materials Southern Africa cement RoA ROA cement Materials REVENUE Southern Africa cement volumes down 3% with selling prices up 3% Rest of Africa cement growth key driver of group revenue, contribution increased by 27% Rwanda volumes up 20%, with realised pricing marginally down Zimbabwe volumes up 46% and 3% selling price increase in USD R:USD strengthened by ~7% in the reporting period Materials division, below last year due to challenging market conditions R E S I L I E N T P E R F O R M A N C E I N A T O U G H O P E R AT I N G E N V I R O N M E N T 19

20 4.1.9 EBITDA CONTRIBUTIONS & MARGINS PER SEGMENT % 20.00% 0.00% 21.8% 22.4% Southern Africa cement EBITDA Margins 30.4% 26.7% 15.7% 9.5% 18.3% 21.4% ROA cement Materials PPC Group FY18 FY17 39% Geographic contribution FY18 61% Souther n Africa RoA EBITDA CONTRIBUTIONS Diversified portfolio paying off RoA margin within guidance excluding DRC SA margins flat despite tough environment Price increase in South Africa played a significant role Materials division impacted negatively 80.00% 60.00% 40.00% 20.00% 0.00% % 63.8% 59.8% Southern Africa cement EBITDA Contribution 39.2% 31.2% 15.3% 10.2% -13.2% -6.3% RoA cement Materials PPC Group FY18 FY17 31% Geographic contribution FY17 69% Souther n Africa RoA EBITDA MARGINS Growth driven by RoA SA marginally down from prior year Cost of sales and overheads well controlled Operational leverage in RoA business as route to market is embedded Product mix in Rwanda and Zimbabwe (introduction of bulk and SURECAST respectively) R O A 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 S D U E T O O P E R AT I O N A L L E V E R A G E 20

21 GROUP OVERHEADS IMPACTED BY CORPORATE ACTION % 571 Southern Africa Cement Group overheads (Rm) +28% +34% % % RoA Materials Group services Group FY18 FY17 Good cost control in SA cement RoA impacted by DRC costs of R146m Corporate action costs impacted group services C O S T L E A D E R S H I P C O N T I N U E D I N S A C E M E N T 21

22 FINANCE CHARGES FINANCE CHARGES (Rm) -9% Group finance costs FY18 In RSA, FY17 includes R128m which was incurred for the liquidity and guarantee facility raising fees (LAGFA) Restructuring of debt will result in ~2.0% reduction in finance charges In RoA, Zimbabwe Zimra interest DRC and Zimbabwe commissioning were not fully expensed in the prior year and included in the current year DRC finance interest rate charges increased as part of the restructuring of debt -41% % RSA FY17 RoA 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.0% RSA WEIGHTED AVERAGE INTEREST COSTS 12.3% FY % FY17 ROA WEIGHTED AVERAGE INTEREST COSTS 15.00% 10.00% 5.00% 0.00% 12.1% 12.1% 10.2% 9.7% 9.0% 9.0% Rwanda DRC Zimbabwe FY18 FY17 22

23 TAX RATE RECONCILIATION 23 Group effective tax rate FY18 Group Standard Reporting Rate 28.0% RSA permanent differences % RSA effective tax rate -77.9% RoA permanent differences 145.4% Group effective tax rate 67.5% Sustainable tax rate on a normalised basis between 32%-35% * Reconciliation expressed as % of Group Profit Before Tax Group effective tax rate South Africa reconciliation: Restructuring, corporate action (capital nature); and Excludes Botswana RoA reconciliation Additional assessments USD3m paid, relates to pre-2012 (Zimbabwe) 80.00% 60.00% 40.00% 20.00% 0.00% 36.5% 28.0% 32.6% 20.2% 73.3% 30.0% 41.3% 25.8% 46.9% 35.0% South Africa Rwanda DRC Botswana* Zimbabwe** Effective tax rate In-country standard rate *Standard rate is a blend between manufacturing 15% and non-manufacturing 22% ** Additional USD3m tax paid Country-by-country effective tax rate South Africa effect of corporate action and restructuring (capital nature); Botswana in-country adjustments & effect of blended rate of 15% (manufacturing enterprises) and 22% (non-manufacturing) Cimerwa effect of in-country non-deductibles Zimbabwe additional assessments USD3m; and DRC effect of non-deductible VAT and expatriate taxes 23

24 4.2 BALANCE SHEET March 31 March Rm Rm ASSETS Non-current assets Property, plant and equipment Goodwill Other intangible assets Equity-accounted investments Other non-current assets Deferred taxation assets Non-current assets held for sale Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to shareholders of PPC Ltd Non-controlling interests Total equity Non-current liabilities Provisions Deferred taxation liabilities Long-term borrowings Other non-current liabilities Current liabilities Short-term borrowings Trade and other payables Total equity and liabilities CASH AND CASH EQUIVALENTS Cash and cash equivalents decreased to R0.8bn Zimbabwe accounts for R0.5bn 2. GROSS DEBT Gross debt reduced from R5.7bn to R4.7bn (down R1.0bn) Significant progress on improving liquidity and maturity profile Strengthened balance sheet 24

25 4.2.1 CAPEX CYCLE PEAKED IN 2016 REDUCED BY R1.1BN IN FY CAPEX & PPE (RM) Capex guidance Capex guidance (Rm) FY FY19 FY20 FY R1.1bn Southern Africa RoA FY12 FY13 FY14 FY15 Pf FY16 FY17 FY18 FY19 FY20 FY21 Capex & PPE Min capex Max capex 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

26 4.2.2 GROSS DEBT PER REGION AND CURRENCY 26 GROSS DEBT BY REGION FY18 GROSS DEBT BY CURRENCY FY18 65% 35% RSA RoA ROA 57% 8% 35% ZAR USD RWF GROSS DEBT BY REGION FY17 GROSS DEBT BY CURRENCY FY17 8% 68% 32% RSA RoA ROA 60% 32% ZAR USD RWF D R C A C C O U N T S F O R 3 8 % O F G R O S S D E B T 26

27 4.2.3 CONTRIBUTION TO CASH BALANCE BY COUNTRY 27 CASH BY COUNTRY FY18 CASH BY COUNTRY FY17 1% 20% 29% 1% 2% 45% 62% 15% 17% 8% Southern Africa DRC Rwanda Zimbabwe Other Southern Africa DRC Rwanda Zimbabwe Other R o A O P E R AT I O N S C O N T I N U E T O I M P R O V E C A S H G E N E R AT I O N 27

28 4.2.4 LIQUIDITY AND IMPROVED MATURITY PROFILE Current debt maturity profile (Rm) The group has made significant progress in improving its liquidity RSA debt restructured to a maturity profile of between three and four years, coupled with reduced effective interest rate costs of ~2.0% RSA *Includes DRC capital repayment moratorium *Based on current RSA utilisation Capital structure Target capital structure (equity : debt) RoA Metric Target Group Gross debt/ebitda 3.0x 3.5x Target RSA Gross debt/ebitda 2.5x 2.8x 70:30 (Intrinsic value) The two-year capital holiday negotiated with lenders for the DRC project funding debt, will enable the group to achieve its optimal capital structure W E H AV E I M P R O V E D T H E G R O U P M AT U R I T Y P R O F I L E 28

29 4.2.5 GROUP GROSS DEBT REDUCED BY R1.0BN GROUP DEBT PROFILE (RM) Mar-16 Sept-16 Mar-17 Sept-17 Mar-18 Gross debt Net debt Gross debt/ebitda Net debt/ebitda Group gross debt reduced from R5.7bn to R4.7bn Group gross debt/ebitda from 2.8x to 2.5x Group net debt reduced from R4.7bn in March 2017 to R3.8bn in March 2018 Group Net debt/ebitda improved from 2.3x to 2.0x 29

30 4.2.6 DRC DERISKING CONTINUING TO PURSUE OPTIONS 30 UPDATE ON OPTIONS Negotiation with funders with regard to debt restructuring completed Negotiation with EPC contractor progressing well month extension of ~USD24m EPC contract retention fee 1) USD 42.5m paid to DRC in the period inline with guidance 2) Moratorium on capital repayments in the DRC 2 year capital repayment moratorium Next capital repayment scheduled for January 2020 New interest rate 6 month USD LIBOR plus 975bps Conversion of ~USD24m into equity subject to due diligence This has been funded from internal cash flows 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 30

31 4.3 CASH FLOW STATEMENT March 31 March Rm Rm Operating cash flows before movements in working capital Working capital movements 411 (230) Cash generated from operations Finance costs paid (592) (743) Investment income received Taxation paid (330) (296) Cash available from operations Dividends paid - (8) Net cash inflow from operating activities Cash flow from investing activities Acquisition of additional shares in equity-accounted investment (42) - Acquisition of additional shares in subsidiary - (18) Investments in intangible assets (6) (19) Investments in property, plant and equipment (921) (2 058) Proceeds from disposal of property, plant and equipment 29 4 Other investing activities 28 - Net cash outflow from investing activities (912) (2 091) Cash flow from financing activities Net borrowings repaid before repayment of the notes (597) (1 370) Proceeds from the issuance of shares following rights issue Proceeds from issuance of shares to strategic black partners in terms of the company's first BBBEE transaction Proceeds from the sale of nil paid letters by consolidated BBBEE entities Proceeds from the sale of shares held by the consolidated BBBEE entity 36 - Purchase of PPC Ltd shares in terms of the FSP share incentive scheme (16) (74) Repayment of notes - (1 614) Net cash (outflow)/inflow from financing activities (577) Net movement in cash and cash equivalents (59) 596 Cash and cash equivalents at the end of the year OPERATING CASH FLOW Decrease in operating cash flow before working capital due to decrease in non-cash items Finance costs paid reduced due to non-recurring LAGFA fees Positive working capital movement due to favourable movement in receivables and payables 2. INVESTING ACTIVITIES Outflow from investing activities reduced by R912m due to the reduction in capex spend 3. FINANCING ACTIVITIES Debt repayment of R597m is mainly from Rwanda, DRC and Zimbabwe Previous year was exceptional as bonds became due and payable as a result of the S&P downgrade Cash and equivalents of R0.8bn is due to good operational performance ~62% of cash is attributable to Zimbabwe 31

32 4.3.1 FREE CASH FLOW BRIDGE Free cash flow (Rm) (330) (592) 500 (921) Operating cash flow Working capital Cash tax Finance costs Capex Free cash flow P O S I T I V E F R E E C A S H F L O W G E N E R AT I O N A K E Y I N D I C AT O R O F F I N A N C I A L S TA B I LT Y 32

33 5.1 OPERATIONAL REVIEW

34 5.2 SOUTHERN AFRICA

35 5.2.1 PROGRESS MADE ON R50/TONNE IMPROVEMENT IN PROFITABILTY 35 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 Enhanced product portfolio Route to market strategy implementation Implement margin improvement strategies Entrench strategic partnerships Strategic cost reduction 40% - 60% Integration of Safika Cement Organisational restructure of Head Office and Operations Drive plant efficiencies to reflect operations requirements Integration of material businesses into Cement SA to ensure optimal structure Extract value from strategic partnerships and combine offering from integrated businesses Cost efficiencies 20% - 40% Embed tyre burning initiative in the Western Cape Hercules kiln 5 (HK5) mothballed Optimisation of logistics Slurry kiln 9 complex benefit realisation Embed the 3 mega plant strategy PE kiln 4 mothballed Implementation of alternative fuels targeted to all mega plants with special focus on Western Cape Implement optimised sourcing 2%- 3 % 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 35

36 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar CONTINUED PRICE RECOVERY IN A CHALLENGING TRADING ENVIRONMENT Average Selling Price (ASP) Trends Price increase 105 Price increase 100 Pricing bottomed Source: PPC Research ASP indexed from January 2015 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 36

37 Tons OPERATIONAL OVERVIEW SOUTH AFRICA 37 Realised cement pricing up 2.5% in this period Momentum on pricing recovery maintained Further price increase of 3% 5% implemented in Jan 2018 (targeting pricing per regional dynamics) Route to market strategy focused on improving margins 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 to the first half of the year Last quarter of FY18 volumes impacted by the contraction in GDP Portfolio effect of PPC s national footprint benefits the organisation to reach a wider natural zone of advantage Imports R/USD exchange rate has continued to strengthen since Jan 2016 Total imports have increased by 32% YoY Cape imports increased by 3% YoY Still well below the peak in Q4 2014, ~11% of total cement volumes The bulk of the imports have come from China The major port of entry has been Durban and PE and to a lesser extent Cape Town P R I C I N G A N D V O L U M E A R E I M P O R TA N T FA C T O R S I N S TA B I L I S I N G M A R K E T S Q Cement Imported by Port of Entry (Calendar Year) Q Q Q Q Q Q Q Q Q Q Q Q Q Durban Cape Town Port Elizabeth East London Richards Bay Other Q Q Q Sou 37

38 5.2.4 WE CONTINUE TO SHOW COST LEADERSHIP Fixed Costs of Production (Real Rm based to 100) Fixed costs of production (Rm) Rand per ton Cost of Production per tonne (based to 100) Rand per ton VCOP Rand per ton VDCOP Declining trend in fixed cost of production since 2010 Similar trend in variable cost of production (VCOP) and variable delivered cost of production (VDCOP) Improvements in operational efficiencies were mainly due to: Restructuring the business to meet operational requirements Multi-skilling and training of employees Optimising outbound logistics Improving energy efficiencies 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 T H R O U G H R 5 0 / T O N N E S A V I N G S I N I T A T I V E S 38

39 5.2.5 SA CEMENT OUTLOOK 39 The South African landscape remains an economically challenging trading environment, with minimal GDP growth projected for the next 12 months The regulatory regime is increasingly adding to compliance costs in the SA cement sector The cement business, with its focused R50/tonne savings initiatives, will continue its disciplined approach to growing price and volume, and driving operational efficiencies The business will continue to defend and maintain its leading position and competitive advantage from the perspectives of footprint, scale and efficiency W E L L P O S I T I O N E D T O M A I N TA I N L E A D E R S H I P P O S I T I O N I N S O U T H E R N A F R I C A 39

40 5.3 REST OF AFRICA

41 5.3.1 PROGRESS MADE ON FOH-FOUR PRIORITIES 41 What we said What we achieved What we did Next months Financial Renegotiated funding agreements in the DRC with 2-year capital holiday Liquidity challenges continue to prevail in Zimbabwe. The company has implemented strategies to mitigate the risk e.g. localised procurement and exports Reduce DRC fixed costs to align with ramp-up volumes Renegotiate funding agreements in Ethiopia Reduce DRC deficiency funding Ramp-up volumes in the DRC and Ethiopia Operations Improved efficiencies in Zimbabwe and Rwanda, through product optimisation and energy mix Entrenched route to market in Zimbabwe and Rwanda Secured local thermal energy source in Ethiopia Completed drilling of two prospective limestone deposits in Rwanda Drive plant efficiencies across all markets Implement alternative energy solutions in the DRC and Rwanda Entrench PPC systems across all markets Extract value from strategic partnerships and bundle offering from integrated businesses Human Capital Implemented effective structures in Zimbabwe, Rwanda and DRC Rolled-out Vital Elements of a Performing Organisation model in Rwanda, DRC Embed PPC culture across all markets Integrate skills development program across all regions Develop leadership pipeline Increased localisation of human capital across all markets Focus on recruitment of diaspora talent to strengthen in-country teams E X E C U T I N G O N O U R P R I O R I T I E S 41

42 5.3.2 RWANDA OPERATIONAL REVIEW 42 SPOT RETAIL PRICE (USD) FY18 OPERATIONAL UPDATE $ 400 $ 300 $ 200 $ 100 $ 0 20% Mar-16 Mar-17 Mar COST BREAKDOWN Energy 35% Maintenance Cement volumes increased by 20% compared to previous year due to: Execution of successful route to market strategy Significant increase in exports Sales volumes were constrained due to a planned maintenance shutdown towards the end of the reporting period Net realised price in Rwf remained stable YoY The retail price was distorted by cement shortage in the country towards the end of the reporting period Production costs were well controlled, ending slightly better YoY Exploration for additional limestone is progressing well, with two sites completed. Awaiting results Labour & overheads 17% 23% 5% Depreciation Raw materials & other BY M I D W E E X P E C T T O B E AT F U L L C A PA C I T Y 42

43 5.3.3 ZIMBABWE OPERATIONAL REVIEW 43 $ 400 $ 200 $ 0 20% SPOT RETAIL PRICE (USD) COST BREAKDOWN 10% 15% Energy 15% Mar-16 Mar-17 Mar % 5% Maintenance Labour & overheads Transport Other Depreciation FY18 OPERATIONAL UPDATE Overall domestic cement volumes increased by more than 40% compared to previous year due to: Increased volumes in the Northern region following commissioning of Harare mill Enhanced product portfolio Excellent service delivery Product consistency and technical support Increase in construction activity Net realised selling prices were 3.0% higher in dollar terms Variable costs improved YoY by 2% due to improved operational efficiencies Continuing to mitigate liquidity through export volumes and localised sourcing W E A R E A C H I E V I N G F U L L C A PA C I T Y O N C L I N K E R 43

44 5.3.4 DRC OPERATIONAL REVIEW 44 SPOT RETAIL PRICE (USD) $ 400 $ 200 $ 0 Mar-16 Mar-17 Mar COST BREAKDOWN 22% Energy 42% Maintenance Labour & overheads 14% Depreciation 14% 8% Other FY18 OPERATIONAL UPDATE The DRC was commissioned for IFRS from 1 November 2017 Included in the accounts for 5 months The market remains challenging Increased market share to between 20 30%, capacity equivalent market share ~40% 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, to meet financial capital commitments 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 44

45 5.3.5 ETHIOPIA OPERATIONAL REVIEW 45 $200 $100 $0 SPOT RETAIL PRICE (USD) Mar-16 Mar-17 Mar COST BREAKDOWN 26% 6% 10% 40% Energy Maintenance Transport Labour & OH Depreciation 12% 6% Other FY18 OPERATIONAL UPDATE Production during testing phase commenced in June 2017 Commissioned for IFRS from 1 January 2018 Included in the accounts for 3 months To date we delivered ~300kt of which 50 % is accounted for in the income statement and the remainder in the balance sheet Retail selling price reduced due to devaluation of Ethiopian BIRR against the USD The provisional acceptance certificate (PAC) has been completed in December 2017 Technical agreement between PPC and Habesha has been established to support ongoing operations Full ramp-up of Habesha will be in months 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 45

46 5.3.6 REST OF AFRICA CEMENT OUTLOOK 46 Zimbabwe The political landscape is improving in Zimbabwe, with elections scheduled for July PPC Zimbabwe is well positioned to benefit from improved growth prospects DRC Rwanda Ethiopia The Cimerwa plant has been modified to operate at optimal capacity and efficiency. Continued good growth in Rwanda s GDP should sustain demand, which currently appears to be exceeding supply In DRC, elections are scheduled for December We continue to ramp up in that country, despite being constrained by overcapacity and muted demand. According to International Finance Corporation (IFC) research analysis the DRC will be in a cement supply deficit by 2022 In Ethiopia, the political landscape is expected to improve, with strong projected growth in GDP of 7-8% supporting cement demand in the country 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 46

47 5.4 MATERIALS

48 5.4.1 MATERIALS AND LIME REVIEW 48 Aggregates Revenue flat on last year Increased sales in Botswana was offset by muted demand from mainly construction segment in Gauteng Per ton cost of sales improved by 3% YoY on the back of several savings initiatives EBITDA improvement of 18% on prior year Ready-mix Pricing and volumes remained under pressure due to a very competitive market Subdued demand in Gauteng as a result of a significant reduction in construction projects in this province Resultant reduction in EBITDA to breakeven level however pullthrough of cement remains strategically important for the group Ash Excellent volume growth of 40% mainly due to increased exports into Mozambique and great operational performance at the Kriel plant Average selling prices lower than prior year due to product mix Resultant increase of 38% in EBITDA on prior year Outlook Volumes in aggregates and ready-mix expected to grow on back of improved construction activity in SA and continuation of road projects in Botswana Optimisation of ready-mix footprint, further integration of the Pronto and 3Q businesses and operational positioning of SA aggregates will improve EBITDA performance Expansion of production capacity of Ash by approximately 20% through establishment of new facility in favourable location 48

49 5.4.1 MATERIALS AND LIME (CONT.) 49 Lime Pricing at similar levels to the prior period Volumes declined marginally due to Significant exposure to the domestic steel industry Major client plant shutdowns during the period Non-extension of milk of lime contract Outlook Volumes in significant steel industry to remain flat with SA customers operating in a very competitive market for at least the medium term Well positioned to expand volumes into agricultural and environmental related markets Pricing pressure in especially steel industry to remain Operational improvements and bolstering resilience to input cost pressures at the Lime facility in Northern Cape. EBITDA impacted by higher input costs but remains a strong cash flow generation business New depot established to improve customer service and market share Commissioned facilities to enable supply into acid mine drainage ( AMD ) treatment market Business remains exposed to the performance of the steel industry 49

50 6. STRATEGIC ACTION PLANS OPTIMISING OUR CAPITAL INVESTMENTS TO DELIVER LONG TERM SUSTAINABLE STAKEHOLDER VALUE

51 6.1 GROUP STRATEGIC ACTION PLANS 51 FINANCIAL LONG TERM VALUE CREATION FOR ALL STAKEHOLDERS FINANCIAL 1 Optimal capital structure review 2 Capital allocation priorities framework (VBM) 3 Free cash flow optimisation 4 Process enablers OPERATIONS 1 Defend market leadership 2 Optimise - relentless focus on performance 3 Grow - balance portfolio, disciplined growth 4 Manage from the centre HUMAN CAPITAL 1 HR Solutions HUMAN CAPITAL OPERATIONS 2 3 Talent management High performing organisation 4 Organisational culture 51

52 6.2 LONG TERM STRATEGIC PRIORITIES 52 OPERATIONS Defend Optimise Grow Market leadership Focus Defend markets we operate in Relentless focus on performance Function at full potential Route to market initiatives Balanced portfolio Disciplined growth Ambition 52

53 6.3 OUTLOOK 53 SA ROA GROUP SA s trading and regulatory environment remains challenging and will impact the revenue prospects for SA Cement, Ready-mix, Aggregates and Lime Disciplined approach to growing price and volume together with driving operational efficiencies should yield performance results Zimbabwe, DRC, and Ethiopia, political developments are encouraging and should give further confidence to the construction market Expect strong demand to continue in Zimbabwe and Rwanda and further ramp-up in DRC and Ethiopia Plant modifications in Rwanda will bolster growth through improved ability to meet demand Reduced capex, coupled with significantly lower interest rate charges, is expected to improve free cash flow G r o u p r e m a i n s w e l l p o s i t i o n e d t o b e n e f i t f r o m g r o w t h i n t h e r e g i o n s i n w h i c h i t o p e r a t e s C a s h g e n e r a t i o n p r o s p e c t s a r e e x c e l l e n t 53

54 APPENDIX 1 Investment Case 2 Finance 3 Operations

55 China India USA Turkey Indonesia Vietnam Egypt Brazil Russia Iran South Africa Zimbabwe Botswana DRC Rwanda Ethiopia 1.1 SOLID ECONOMIC FUNDAMENTALS DRIVING DEMAND 55 GDP growth (real %) Urbanisation % Cement consumption per capita (kg) Ethiopia Rwanda DRC Zimbabwe Botwana South Africa 0 0 Historic 4yr average 4 yr avg (2018F F) RoA portfolio of countries is expected to grow faster than the domestic market PPC is exposed to RoA countries with low levels of urbanisation Portfolio is exposed to low per capita consumption SSA markets Source: NKC, IMF Source: AfDB statistics 2016 Source: World cement report D E M A N D I S D R I V E N BY G D P G R O W T H, U R B A N I S AT I O N A N D S TA G E O F E C O N O M I C D E V E L O P M E N T 55

56 S e p t M a r c h INVESTED IN PORTFOLIO WITH A DIVERSIFIED FOOTPRINT 56 Countries 3 Countries 6 Doubled 6.5 Years Capacity (mtpa) 8.0 Capacity (mtpa) % Total assets R6.4bn Total assets R16bn ~2.5X Total equity R0.96bn Total equity R8bn ~8.3X RoA EBITDA contribution 17% RoA EBITDA contribution 39% ~2.3X S O L I D B A S E C R E AT E D T O D E L I V E R S U S TA I N A B L E R E T U R N S 56

57 1.3 WELL POSITIONED AS MARKET LEADER PORTFOLIO OVERVIEW Capacity (cement) 11.7 mtpa DRC 1.2 mtpa Ethiopia 1.4 mtpa Cement plants 18 plants Lime factories 1 factory (1mtpa) Botswana 450 ktpa (milling) 1 1 Rwanda 650 ktpa Aggregate quarries Readymix plants Flyash 4 quarries (4mtpa) 29 plants ( m 3 per month) 500 ktpa 1 1 Cement capacity replacement value ZAR USD 230 per annualised tonne South Africa 7.0 mtpa Zimbabwe 1.4 mtpa M A R K E T L E A D E R I N AT T R A C T I V E C O U N T R I E S A N D R E G I O N S 57

58 1.4 ROA PORTFOLIO NEW PLANTS 58 Capacity Country/Plant Technology Efficiency rating Comments 1.4 mtpa Zimbabwe Colleen Bawn 4 stage pre-heater ILC and grate cooler Harare mill (2017) Capex - USD74m 0.65 mtpa Rwanda - Cimerwa 5 stage pre-heater ILC and grate cooler Bugurama integrated plant (2015) Capex - USD168m 1.2 mtpa DRC - PPC Barnet 5 stage pre-heater ILC and grate cooler Kimpese integrated plant (2018) Capex - USD292m 1.4 mtpa Ethiopia - Habesha 5 stage pre-heater ILC and grate cooler Holeta integrated plant (2018) Capex - USD174m M O D E R N FA C I L I T I E S T H R O U G H O U T T H E G R O U P 58

59 1.5 MEGA PLANTS IN SOUTH AFRICA MODERNISED 59 Capacity Complex Technology Efficiency Comment 2.0 mtpa Slurry 6 stage preheater ILC and grate cooler SK9 latest kiln technology (2018) Capex R1.9bn 2.0 mtpa Dwaalboom + Hercules 6 stage preheater ILC and grate cooler VRM technology Capex R2.0bn 1.2 mtpa DeHoek 4 stage preheater and grate cooler Kiln upgrade Capex R500m Z A R 4, 4 b n M O D E R N I S AT I O N C A P E X S P E N T I N S A I N T H E L A S T D E C A D E P L A N T S I Z E A N D T E C H N O L O G Y M AT T E R W E H A V E B O T H P R I M E L O C AT I O N P R O X I M I T Y T O M A R K E T, S T R AT E G I C R A W M AT E R I A L S M A N U F A C T U R I N G F O O T P R I N T A N D E F F I C I E N C Y I N C L A LT E R N A T I V E F U E L T E C H N O L O G Y 59

60 2.1 RAND STRENGTH HAS MODERATED GROUP RESULTS 60 Exchange rates Closing rates Average rates FY18 FY17 %chng FY18 FY17 %chng ZAR:USD % % ZAR:RWF % % Rand:PULA % % ETB: USD % % CDF:USD % % Source: ETB and CDF rates IRESS ROA performance impacted by 7% strength in the ZAR:USD exchange rate Group net debt benefited by rand strength as 57% of group debt is in USD Income statement impacted by foreign currency translation reserve of R598m (R489m in FY17) Ethiopian Birr (ETB) depreciated against the USD by 18%, which resulted in unrealised forex losses when translated into rand The Congolese Franc (CDF) devaluation against the USD impacted DRC VAT receivable 60

61 2.2 EXCEPTIONAL ITEMS 61 Fair value and foreign exchange adjustments (Rm) FY18 FY17 Loss on ineffective portion of cash flow hedge - (9) Gain on remeasurement of DRC put option liability Gain on unlisted collective investments 5 1 Loss on translation of foreign-denominated currency monetary items (100) (116) Total 143 (124) 1) The decline in the liability follows the reduction in the EBITDA multiple applied, market dynamics putting pressure on volumes, selling prices and exchange rate 2) Includes a loss of R80 million (2017: R112 million), devaluations of the Congolese franc: USD and a fair value adjustment relating to the VAT receivable in the DRC 1 2 Impairments (Rm) FY18 FY17 Aggregate quarries of Botswana (17) - Property, plant and equipment (PPE) in DRC (165) (10) Impairment of DRC VAT receivable (3) - Profit on disposal of land in Botswana 11 - Total impairments (174) (10) The impairment of PPE in the DRC was as a result of the plant not operating as intended due to political and economic uncertainty in the country 61

62 2.3 LICENCE TO OPERATE: BEEIII STRATEGICALLY POSITIONS PPC IN SA 62 BEE 3 focuses on empowering our employees and improving the lives of the communities we operate in BEE III top-up transaction - size was calculated at 25.4% in order to achieve an effective 30% broad-based black economic empowerment shareholding in PPC South Africa Holdings Proprietary Limited ( PPC SA ) The transaction will become effective on the later of: Execution of all the transaction agreements giving effect to the transaction and Approval of the transaction by the Department of Mineral Resources B E E I I I I S A R 2. 1 B N T R A N S A C T I O N T H E T R A N S A C T I O N S T R AT E G I C A L LY P O S I T I O N S P P C I N S A F R O M A R E G U L AT O R Y A N D C O M M E R I C A L S TA N D P O I N T 62

63 2.4 TRANSACTION OVERVIEW (CONT.) 63 Participants General terms IFRS 2 and other costs Eligible employee s through an ESOP Trust 9.8% (70% allocated upfront and 30% reserved for future employees allocation for a limited period of up to 3 years), all employees of PPC SA to participate equally Communities through Community Development Trust 8.0%, at sites at our eligible operations Eligible Black entrepreneurs 7.6% (participants still to be finalised) Subscription price at a nominal value of 0.1 cent per PPC SA share Notional Vendor Funding ( NVF ) structure on the difference between Transaction value and subscription price Escalation rate is 7.75% which is linked to the SARS official rate There will be a 20% trickle dividend The trickle dividend will be used to purchase unencumbered PPC listed shares for eligible employees and black entrepreneurs at the prevailing market price The balance of 80% of any cash dividend or 100% of any other distribution which would have accrued to eligible entities will be suspended and taken into account in determining the number of PPC SA BEE Shares to be repurchased by PPC SA in terms of a defined Repurchase Formula at the end of the NVF Period Share Based Payments ( IFRS 2 Cost ) is calculated ZAR484m and represents ca.3.8% of the PPC Ltd market cap on the announcement date and will be recognised as follows: Total IFRS 2 charge R484m ESOP R272m Recognised equally over the duration of the transaction i.e R27m pa Black Entrepreneurs R212m Recognised on the effective date The IFRS 2 Cost is in line with market precedents for similar transactions of this nature and size 63

64 3.1 COST BREAKDOWN 64 8% 5% 8% 4% 23% Distribution Other* Salaries Electricity OTHER* Other includes explosives, spares, drill bits, lubricants, vehicle hire and pallet costs Depreciation 8% Material consumables Maintenance 11% 11% 22% Coal Packaging 64

65 3.2 ENVIRONMENTAL UPDATE CARBON TAX AND WATER SHORTAGE 65 CARBON TAX 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 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 Update on the Western Cape drought impact Cement manufacturing is not a water-intensive process. PPC operations are totally self-sufficient from own surface water sources to ensure continuity of operations. These can potentially last for several months De Hoek plant commissioned a reverse osmosis plant of litres per day at the end of January 2018 (use of old quarry seepage water) Full bouquet of both water conservation and augmentation measures implemented since mid-2017 We continue to engage with local government as construction is viewed as a priority economic sector N E W P R O D U C T S T R AT E G Y W I L L D E C R E A S E C L I N K E R FA C T O R 65

66 '000 tonnes 3.3 SUPPLY DEMAND DYNAMICS 66 Annual cementitous supply and demand in South Africa, Botswana, Lesotho & Swaziland PPC - Dwaalboom New entrant New entrant PPC SK % 80.0% % 40.0% 20.0% % % 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 66

67 QUESTIONS

68 INVESTOR CONTACTS 68 Anashrin Pillay Investor Relations

69 DISCLAIMER 69 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. 69