building the nation s future

Transcription

1 Pretoria Portland Cement Company Limited Audited preliminary report for the year ended 30 September 2007 building the nation s future

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3 Audited Annual Results 30 September Pretoria Portland Cement Company Limited Audited Preliminary Report

4 Agenda Highlights Financial review Operational review Cement demand outlook BBBEE, Strategy and Prospects 2 2 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

5 Financial Highlights HEPS 16% Revenue 19% Operating profit 17% Operating margin 39.1% (2006: 39.7%) Cash generated from operations 8% Total dividend cps (+20.7%) 3 Pretoria Portland Cement Company Limited Audited Preliminary Report

6 Strategic Highlights Unbundled from Barloworld on 16 July PPC shares per BAW share following 10:1 split BBBEE transaction nearing finalisation Identified capital re-structuring options Has to follow the BBBEE transaction Evaluated risks and timing of options 4 4 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

7 Cement Industry Environment Cement demand driven by activity in all market segments Increasing pressure on rail and power infrastructure Costs increasing above PPI inflation Energy, logistics, maintenance and manpower Skills constraints widespread across most industries Demand expected to remain strong beyond 2010 Competitors adding capacity to meet projected future demand NPC (0.6mt/yr early 2008), Lafarge (1.0mt/yr 2009) Orascom announced (2mt/yr) - Sephaku slated (2mt/yr) both Pretoria Portland Cement Company Limited Audited Preliminary Report

8 Operating Highlights Operations run hard to meet 10% regional cement demand growth China and Zimbabwe imports supplemented local cement supply Significant improvement in Aggregates and Lime Divisions operating performance Capacity expansion and upgrade projects on track 6 6 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

9 Financial Review Peter Esterhuysen 7 Prretoria Portland Cement Company Limited Audited Preliminary Report

10 Cash Flow Highlights 2007 R million 2006 R million Cash flow from operating activities Operating cash flows before movement in working capital Net investment in working capital Cash generated from operations Net investment income Taxation paid Cash available from operations Dividends paid Net cash inflow from operating activities Net cash outflow from investing activities (includes R953 million capex) Net cash inflow from financing activities (178) (743) (1 207) 223 (772) (8) (608) (1 059) 379 (243) Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

11 Capital Expenditure Cash Impact R million 2007 Dwaalboom (Batsweledi) expansion project Hercules (Ntšhafatso) expansion project Other expansion projects Sub-total expansion projects Other replacement projects TOTAL Projected (R million) - Dwaalboom (Batsweledi) expansion project - Hercules (Ntšhafatso) expansion project Expected average annual replacement capital expenditure (R million) Pretoria Portland Cement Company Limited Audited Preliminary Report

12 Income Statement Highlights R million % Change Revenue Operating profit Finance costs Income from investments Profit before exceptional items Exceptional items 14 - Share of associates retained profit 7 - Profit before taxation Taxation Net profit from continuing operations Net profit from discontinued operation - 8 Net profit HEPS (cents) DPS (cents) Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

13 Strong Performance Over Six Years R million % 6, , , ,000 2, , Revenue Operating profit Operating margin 11 Pretoria Portland Cement Company Limited Audited Preliminary Report

14 Operating Margin Remains Strong Imported cement about 5% of total volume and resulted in overall margin erosion Negligible margin on imports Operating margins are being impacted by higher energy, logistics maintenance and manpower costs Team PPC goes the extra mile in a very challenging year Cost and efficiencies remain our key focus New equipment will improve efficiencies especially energy Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

15 Dividends Strong cash generation allows for increased dividends Final 166 cps Special 61 cps Total final and special 227 cps (+21.4%) Historically dividend cover between 1.5 and 1.6 times Dividend cover reviewed by the board Target dividend cover amended to a range of 1.2 to 1.5 times Will consider distribution of excess cash to requirements 13 Pretoria Portland Cement Company Limited Audited Preliminary Report

16 High Dividend Payouts Cents per share Ordinary dividend per share Special dividend per share Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

17 Balance Sheet Highlights ASSETS Non-current assets Property, plant and equipment Other Current assets Inventories Trade and other receivables Cash and cash equivalents Other TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Non-current liabilities Current liabilities Short-term borrowings Trade and other payables Other TOTAL EQUITY AND LIABILITIES 2007 R million R million Pretoria Portland Cement Company Limited Audited Preliminary Report

18 Gearing Strong cash flows and current low level of borrowings will enable the company to take on higher levels of debt Future capital expenditure will be funded through borrowings Balance sheet structuring is a key focus A debt to equity ratio is not appropriate Special dividends have eroded the equity More appropriate measures are Gross Debt/EBITDA and interest cover Gross Debt/EBITDA multiple around 2 Interest cover around 5 times Current capacity of approximately R5 billion debt Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

19 Operational Review Orrie Fenn 17 Pretoria Portland Cement Company Limited Audited Preliminary Report

20 Main Operations Hercules 2. Jupiter 3. Slurry 4. Dwaalboom 5. Riebeeck 6. De Hoek 7. Port Elizabeth 8. Lime Acres 9. Mooiplaas 10. Laezonia Note: Cement plant in Zimbabwe & grinding depot in Botswana Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

21 Cement Overview Regional cement sales up 10% Gauteng sales particularly strong Western Cape flat / Port Elizabeth area sales 6% growth Botswana economy - steady growth after several years decline 330kt of Surebuild cement imported from China Mozambique, Port Elizabeth and Cape Town Around 260kt cement supplied in the inland region Ex Porthold and Cape factories Exports constrained by local demand requirements 19 Pretoria Portland Cement Company Limited Audited Preliminary Report

22 PPC Investing For Growth Batsweledi (Dwaalboom) new kiln line 1,25 mt/yr additional capacity Plant commissioning April 2008 Within budget, on time Excellent safety record to date Ntshafatso (Hercules) mill upgrade 330 kt/yr additional capacity Construction underway Expected commissioning July 2009 Se Kika (Riebeeck West) new 1,25mt/yr factory Nett additional capacity 700 kt/yr Pre-feasibility stage: EIA in process Studies underway for next inland region expansion 4 brown/greenfield options Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

23 Incremental Volumes: Year Incremental Volume (kt)* * Note: Additional to 2007 achieved output Assuming Market growth sufficient to accommodate incremental volume Growth must include Western Cape where surplus capacity exists All kiln lines operational and meeting availability/utilisation targets Porthold tons excluded as supply not guaranteed 21 Pretoria Portland Cement Company Limited Audited Preliminary Report

24 Porthold Zimbabwe Conditions continue to deteriorate Harsh price regime Frequent power outages, coal, rail, diesel & water shortages Logistics constraints Skills flight to South Africa Introduction of Indigenisation Bill Plant upgrades in process and planned Focus on exports to SA and neighbouring countries Voted top company in national safety awards Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

25 Lime Division Significant increase in operating profit Full impact of renegotiated long-term supply agreements Local demand down on last year due to plant maintenance at major customers Coal pithead prices doubled Successful R20 million kiln filter upgrade 23 Pretoria Portland Cement Company Limited Audited Preliminary Report

26 Aggregates Division Strong increase in operating profit 400kt/yr mobile crushing plant relocated to Mooiplaas quarry (Gauteng) R38m capacity expansion project underway at Laezonia quarry (Gauteng) Additional 340kt/yr capacity - July 2008 Botswana Readymix business exited Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

27 Cement Demand Outlook John Gomersall 25 Pretoria Portland Cement Company Limited Audited Preliminary Report

28 Key Demand Drivers Infrastructure Neglected for 15 years GFCF % of GDP 25% - 30% Fixed Investment %ge of GDP required for developing countries Infrastructure erosion <20% Source: SA Reserve Bank (based on current prices) Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

29 Key Demand Drivers Infrastructure Development is Key Government has political will to develop infrastructure & create jobs Government targeting 4.5% to 6% GDP growth per annum Infrastructure led: > 50 billion over 8 years Government targeting Gross Fixed Capital Formation (GFCF) of 25% of GDP by 2014 Requires GFCF growth of 9 10% p.a. over the next 8 years Low cost housing projects largest part of expected cement growth Infrastructural projects next largest contributor 2010 Soccer World Cup will also have a positive 3 year effect 27 Pretoria Portland Cement Company Limited Audited Preliminary Report

30 Demand Outlook to 2014 PPC s Industry Regional Demand Forecast Mt Current Industry Capacity (extenders included) TREND LINE FORECAST Growth % 00 0 Growth 01 % Demand Increased 50% in 4 years Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

31 Key Demand Drivers Projects under Construction or Planned CEMENT DEMAND FOR MAJOR INFRASTRUCTURE PROJECTS (kt) Investment Project Value Total 3 return to service mothballed coal plants 2 base load coal fired plants (Bravo & Medupi) Eskom 16bn 2 base load nuclear units complete OCGT's in Atlantis & Mossel Bay Arnot upgrade & Kriel refurbishment Transmission upgrade Richard Bay dry bulk terminal expansion Durban: Terminal expansions & harbour entrance widening Transnet 8bn PE: Completion of Port of Ngqura (Coega) Cape Town: Terminal expansion & berth deepening Saldanha: Upgrade iron-ore line & expansion of handling facility Gautrain 2.5bn Rapid rail network linking Pretoria & Jhb Rapid rail network linking Sandton & O R Tambo International Airport FIFA Est 2bn Construction of 5 specially built stadiums Minor & major upgrades to 5 existing stadiums SANRAL Meduim term 489 national road projects in the pipeline Est 3bn Focus over next decade is road preservation, strenghthening & capacity Housing Build 211k houses & 3.5k flats on average from Est 3bn Increase housing delivery to 624k units from OR Tambo: New terminal complex incl a phase 2, International Pier, parkade & apron upgrades ACSA 1.8bn CT Airport: New domestic terminal building, parkade & apron upgrade New airport at La Mercy (Durban) Runway refurbishments DWAF Est 2bn 4 Dams (De Hoop, Spring Grove, Vioolsdrift & Nwamitwa) Water transfer scheme & inter basin transfer scheme > 50m Approved Planned Sources: Engineering News-Projects in Progress (February 2007); Hatch (SA Division) - Presentation to Cement Producers of SA Research report for the Infrastructure Inputs Sector Strategy; Financial Mail Report - Infrastructure 2007 (22 June 2007); In-house research 29 Pretoria Portland Cement Company Limited Audited Preliminary Report

32 Cement Segment and Sector Sales 4% 7% 1% 1% 16% 20% 5% 17% 50 % 30% 48% Mining Concrete Product Manufacturers Readymix Producers Resellers Civil Construction Building Construction Blenders Other Residential Non-Residential Civil/ Mining Const ruct ion Source: 2007 LHA Survey (2006 figures) Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

33 BBBEE, Strategy and Prospects John Gomersall 31 Pretoria Portland Cement Company Limited Audited Preliminary Report

34 Broad Based Black Economic Empowerment Unbundling from Barloworld had to be completed first Broad-based empowerment transaction incorporating: Strategic business partners Employee, community, education and industry association trusts 15% of equity as the first step Funding involving loans, PPC facilitation and small owner equity Transaction at advanced stage Shareholder approval likely to be early next year Appointment of further black non-executive directors A black chairman to be announced in due course Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

35 Capital Restructuring Evaluating all options with advisors Borrowing to fund all capex-spend too drawn out Share buy-back out of borrowings too costly to shareholders More complex options under consideration Large distributions in Pretoria Portland Cement Company Limited Audited Preliminary Report

36 Prospects Market From low-cost housing projects and migration from townships Higher interest rates not a major collapse in residential All sectors still talking full order books some areas supply constrained Only 1% shift from bagged to bulk over the last year growth in civils Infrastructural projects growing rapidly Botswana demand recovering rapidly after three years decline from calendar 2003 peak of tons (2007 Fin. Year + 20%) Trendline outlook is strong to 2014 major dependency on government achievement of 1 million low-cost houses p.a. by Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

37 Prospects Costs/Margins Cash costs tracking slightly above PPI Abnormal logistics movements costs until Batsweledi commissioning Global energy cost increases a concern in worldwide cement All new PPC equipment significantly less energy consuming Cash costs/ ton of new capacity will be lower when fully commissioned Higher EBITDA margins unlikely at this stage 35 Pretoria Portland Cement Company Limited Audited Preliminary Report

38 Prospects New Competition Never take competitors lightly Used to competing against #1 & #2 in the world Have the best geographical spread Have the best logistics and customer service reputation Welcome more competition and believe it is good for the industry Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

39 Prospects Financial Earnings/ Cash Flow / Dividends/ Capex Strong earnings outlook Good growth from incremental manufactured volumes over next three years High conversion into cash flow and therefore dividends high yield Borrowings to fund all major capex Targets and ratios Will be communicated to be based on post BBBEE and capital restructuring Cash is king 37 Pretoria Portland Cement Company Limited Audited Preliminary Report

40 Strong Investment Case Leading market position Geographical spread Strong infrastructural demand outlook to 2014 Capacity growth Cash generative Strong balance sheet Experienced management team Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

41 Contacts John Gomersall Peter Esterhuysen Orrie Fenn Tel Chief Executive Officer Chief Financial Officer Chief Operating Officer 39 Pretoria Portland Cement Company Limited Audited Preliminary Report

42 Disclaimer Certain statements contained in this presentation including, without limitation, those concerning the demand outlook, PPC s expansion projects and its capital resources and expenditure, contain certain forward-looking views regarding PPC s financial condition. 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 have been correct. Accordingly, results could differ materially from those set out in the forwardlooking 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 and other government action and business and operational risk management. While PPC takes reasonable care to ensure the accuracy of the information presented, it shall not be held responsible for losses or liabilities arising from the use of this information Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

43 SENS DOCUMENT for the year ended 30 September 2007

44 Financial Highlights Continued growth in cement sales volumes Revenues up 19% to R5,6 billion HEPS up 16% to 263 cents Cash generated from operations up 8% to R2,2 billion Batsweledi expansion project within budget and on time with commissioning planned for 2nd calendar quarter 2008 Final dividend of 166 cents per share plus a special dividend of 61 cents per share

45 CEO John Gomersall said: This is another good set of results on the back of continued growth in cement volumes with all of our production units running at very high utilisation levels to meet the high cement demand. We remain focused on maximising our effi ciencies though this has not been without its challenges due to increased energy and transport costs and a higher level of maintenance cost occasioned by these high utilisation levels. We are on track to commission the new Batsweledi capacity at Dwaalboom early next year which will increase our output during the second half and therefore reduce the need to import. We are confi dent about achieving another improved performance next year. Pretoria Portland Cement Company Limited Audited Preliminary Report

46 Commentary Group revenue increased 19% to R5,6 billion whilst operating profit rose 17% to R2,2 billion. Cement margins were impacted by the dilutionary effect of imports at little or no margin, and by increased energy, transport and maintenance costs. Finance costs increased in line with increased levels of borrowings to fund the capital expansion projects. Income from investments reflected higher levels of surplus cash on deposit and dividends from unlisted investments. The effective tax rate is 35% and represents an effective company normal tax rate of 28% together with STC on dividends. The impact of the STC charge on special dividends of 10 cents per share is in line with that of the prior year. Headline earnings per share increased by 16% to 263 cents per share. Cash generated from operations increased by 8% to R2,2 billion. Capital expenditure amounted to R953 million (2006: R396 million) and related mainly to the Batsweledi expansion. There were also environment-focused plant upgrades of R30 million and expenditure of R30 million on expanding some of our limestone quarries and plant upgrades at the Laezonia aggregate quarry, the balance being attributable to routine plant replacements. Capital expenditure related to expansion projects will continue to be funded through borrowings. Strong cash flows and the current low level of borrowings relative to interest and EBITDA cover ratios will enable the company to take on higher levels of debt going forward. Cash flow related to expansion projects is forecast at R607 million for the coming year. The directors have reviewed and amended the target dividend cover to a range of 1,2 to 1,5 times. In addition, in any given year, the directors will consider an additional distribution to the shareholders of cash that is surplus to requirements. The directors have declared an increased final dividend of 166 cents per share (2006: 110 cents per share) and a special dividend of 61 cents per share (2006: 77 cents per share), effectively distributing all the current year earnings to shareholders. Cement Regional cement sales volumes grew 10% over last year with the residential and non-residential construction sectors performing strongly. The Inland market experienced particularly strong growth, and to meet the market shortage supply was supplemented by our Porthold and Western Cape factories. Coastal cement supply was supplemented with tons and Mozambique tons, of Surebuild cement manufactured to our specifications and imported from China. This effectively freed up tons of our Inland production for the Inland and Botswana markets. We note that these imports accounted for around 5% of our total cement sales and were at the lower end of our expectations mentioned last year. The logistics associated with movement of product around the country increased costs. All factory kilns and mills ran at high utilisation levels, resulting in the need for increased maintenance costs as a result of both equipment age and higher stress on machinery. Profit margins will continue to feel pressure from these additional costs whilst we continue to run these older production lines. In addition, more frequent replacement and upgrade of minor equipment will be required to lower maintenance cost and improve efficiencies. Rail and coal energy cost increases also continued substantially above PPI inflation. Growing international energy demand will continue to put pressure on the availability of the appropriate coal quality for cement manufacture. The spiraling international fossil fuel prices and concerns over the consequent upward pressure on global cement prices is being voiced internationally. Inventory levels increased as higher levels of maintenance and consumable stores, coal and raw materials and imported cement stocks are necessary at this time of higher output levels and logistics complexities. Following the launch of the company s Behaviourial-Based Safety initiative in October 2006, the safety environment has shown a continued pleasing improvement. Our Lost Time Injury Frequency Rate (LTIFR) for the year declined to only 0.4 which compares very favourably to international benchmarks. There were no fatalities. We are proud of this achievement given the pressures the team has been working under this past year. Zimbabwe cement Operating and trading conditions became increasingly more difficult as the country reeled under inflation rates increasing into the thousands. As an emergency measure, in June 2007 the Zimbabwe Government decreed a price roll-back and freeze on all goods manufactured or sold in the country. Whilst there has been some relaxation of these harsh measures, ongoing shortages of production inputs and a Zimbabwe selling price which is insufficient to cover production costs require us to increasingly focus on exports to sustain operations. On a positive note, the ability to earn foreign exchange from these exports has allowed the company to continue with capital projects that will address production bottlenecks in the future. The ongoing inability to exercise effective control justifies the continued non-consolidation of this company s results. Other operations Lime revenue and operating profit improved significantly over the prior year as the benefits of renegotiated long-term supply agreements flowed through for the full year. Local demand reduced mainly due to an extended Mittal blast furnace shut-down, 2 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

47 but this was fortunately off-set to some degree by exports. Significant input cost increases, particularly coal and the railage thereof, will impact margins over the next few months, until such time as contractual price adjustments kick in. Aggregate operations reflected good profit growth and a capacity expansion of tons per annum to 1,34 million tons is currently underway at the Laezonia quarry in Gauteng. Broad based black economic empowerment (BBBEE) social transformation The company remains committed to transformation and fully embraces the objectives of the Mining Charter and the Department of Trade and Industry BBBEE transformation guidelines. The company is proud of its progress and track record in this regard. In line with the transformation goals of the company, the board approved the principles of the structure and likely funding of our BBBEE empowerment transaction which will also meet the Mining Charter s 15% initial equity ownership target allowing conversion of old order mining rights to new rights. The scheme comprises two elements, namely, equity ownership by employees, communities and industry associations through the establishment of various trusts, and a strategic partner element involving a number of strategic black partners including an education provider. The broad-based nature and complexity of the transaction is such that we were not able to meet the original self-imposed deadline of 30 September. However, significant progress has been made and we are in the final phase of concluding the transaction. Shareholder approval of the scheme is anticipated to be sought early next year. Board resignations and appointments Messrs WAM Clewlow, AJ Philips and CB Thomson resigned from the board effective 23 January Mr DG Wilson resigned from the board effective 16 July Ms ZJ Kganyago and Ms NB Langa-Royds were appointed to the board on 17 October 2007 as independent non-executive directors. Mr EP Theron retired from the board following the board meeting on 29 October Mr Theron had earlier this year expressed his intention to retire after the completion of the unbundling and related matters. Prospects The recent continued rise in interest rates is likely to have some impact on residential construction in the coming year. We believe that low-cost housing projects will continue growing. In addition, the level of infrastructural investment planned by Government, Eskom and other sectors is gathering momentum, and we therefore expect continued demand growth in the year ahead. These views are confirmed by construction and engineering customer groupings who all talk of full order books. As a result of positive indications that industry growth will continue well past 2010, most local cement manufacturers are busy with or have announced expansion projects to increase capacity. In addition, Orascom, an Egyptian cement company announced plans to establish a cement plant near Mafikeng in the Northwest Province of South Africa by late Indications are that these investments will allow industry demand to be met by local producers from 2011 onwards, and this will eliminate or reduce the need for imports. The Batsweledi capacity expansion at Dwaalboom is planned to be commissioned during the second calendar quarter of 2008 and should ramp up to full production by the financial year-end. Consequently the benefit of additional cement production will be limited to the second half-year dependent on how quickly the ramp-up is achieved. In the meantime, we will continue to supplement any cement shortfall with imported Surebuild product, albeit at little or no margin. Additional cement milling capacity will also come on stream during 2009 in the Inland region. In February 2007 the board approved this R604 million project for a new milling facility at the Hercules factory in Pretoria. The Riebeeck West expansion and modernisation project study for the Western Cape is progressing well but has been delayed by the environmental impact assessment and regulatory approval process. Whilst this delay is unfortunate, we have continued with the specification of equipment, plant layout and engineering design. Over the last year there has been no growth in cement demand in the Western Cape and therefore this delay should not have any major impact on either the project or our ability to supply the cement requirements in the province over the medium term. The positive market outlook, combined with incremental cement output in the second half of 2008, should enable the company to report improved performance and a strong operating cash flow for the ensuing year On behalf of the board MJ Shaw JE Gomersall Chairman Chief executive offi cer 29 October 2007 Pretoria Portland Cement Company Limited Audited Preliminary Report

48 Consolidated income statement Year ended Audited Audited % Rm Rm Change Continuing operations Revenue Cost of sales (22) Gross profit Non-operating income 1 1 Administrative expenditure Other operating expenditure Operating profit Fair value gains on financial instruments 1 Finance costs (62) Investment income Profit before exceptional items Exceptional items 14 Share of associate s retained profit 7 Profit before taxation Taxation (13) STC on net dividends paid (17) Net profit from continuing operations Discontinued operation Net profit from discontinued operation 8 Net profit attributable to shareholders Earnings per share (cents)* From continuing and discontinued operations basic and fully diluted From continuing operations basic and fully diluted Ordinary shares (000)* in issue weighted average number of shares diluted weighted average number of shares Dividends per share (cents)* special 61,0 77,0 (21) final 166,0 110,0 51 interim 38,5 33, ,5 220,0 21 *Restated for effect of the 10:1 share subdivision. 4 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

49 Condensed consolidated balance sheet Audited Audited Rm Rm ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in non-consolidated subsidiary Other non-current assets Investment in associate company 10 Current assets Inventories Accounts receivable Short-term investment 2 98 Asset classified as held for sale 130 Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital and premium Other reserves Retained profit Total equity Non-current liabilities Long-term borrowings Deferred taxation liabilities Provisions and other non-current liabilities Current liabilities Short-term borrowings Liabilities directly associated with asset held for sale 112 Accounts payable and provisions Total equity and liabilities Net asset value per share (cents)* *Restated for effect of the 10:1 share subdivision. Pretoria Portland Cement Company Limited Audited Preliminary Report

50 Condensed statement of changes in equity Year ended Audited Audited Rm Rm Total equity Balance at beginning of year Revaluation of investments (net of deferred taxation) (3) (1) Net movement on equity settled share incentive scheme (29) 1 Foreign currency translation reserve and other movements (6) (15) Cash flow hedge reserve (net of deferred taxation) (33) 36 Net profit for the year Dividends declared (1 212) (1 059) Balance at end of year Condensed consolidated cash flow statement Year ended Audited Audited Rm Rm Cash flow from operating activities Operating cash flows before movements in working capital Net increase in working capital (178) (8) Cash generated from operations Net investment income Taxation paid (743) (608) Cash available from operations Dividends paid (1 207) (1 059) Equity settled share incentive scheme payment (30) Net cash inflow from operating activities Net cash outflow from investing activities (772) (243) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (181) 897 Cash and cash equivalents at beginning of year Effects of exchange rates on opening cash position 1 Deconsolidation of subsidiary company (8) Cash and cash equivalents at end of year Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

51 1. Basis of preparation The condensed group annual financial statements have been prepared using accounting policies compliant with International Financial Reporting Standards (IFRS), and are in compliance with IAS 34: Interim Financial Reporting, the JSE Limited s listing requirements and the South African Companies Act. For a better understanding of the group s financial position, the results of its operations and cash flows for the year, this summarised preliminary report of annual results should be read in conjunction with the annual fi nancial statements from which this summarised preliminary announcement of annual results was derived. The accounting policies and methods of computation used are consistent with those applied in the preparation of the annual financial statements for the year ended 30 September The group has adopted the following new or revised accounting pronouncements in the current period, which did not have a material impact on the reported results: AC 503: Accounting for BEE transactions IAS 1 Amendment: Presentation of financial statements IAS 21 Amendment: The effects of changes in foreign exchange rates: Net investment in a foreign operation IAS 23 Amendment: Borrowing costs IAS 39 Amendment: Financial instruments, recognition and measurement IFRIC 4: Determining whether an arrangement contains a lease IFRIC 10: Interim financial reporting and impairment IFRIC 11: Group and treasury transactions IFRIC 12: Service concession arrangements IFRIC 13: Customer loyalty programmes IFRIC 14: The limit on a defined benefit asset, minimum funding requirements and their interaction Audited Audited Rm Rm 2. Profit before taxation Included in profit before taxation are: Amortisation of intangible assets 4 4 Depreciation Finance costs Bank and other borrowings Financial lease interest Unwinding of discount on rehabilitation provisions Interest capitalised to property, plant and equipment (8) Pretoria Portland Cement Company Limited Audited Preliminary Report

52 (continued) 4. Headline earnings per share (cents)* basic and fully diluted Determination of headline earnings per share* Earnings per share (cents) Adjusted for (after taxation): Profit on disposal of property, plant and equipment, investments and intangible assets (3) *Restated for effect of the 10:1 share subdivision Audited Audited Rm Rm Headline earnings Net profit attributable to shareholders Profit on disposal of property, plant and equipment, investments and intangibles (15) Impairments Investments Listed and unlisted investments at fair value Directors valuation of unlisted investments Asset classified as held for sale In line with IFRS 5 (Non-current assets held for sale and discontinued operations), Afripack (Pty) Limited was consolidated as an asset classifi ed as held for sale for the year ended 30 September During October 2006, the preference shares were redeemed and Afripack (Pty) Limited s results deconsolidated. The results of Afripack (Pty) Limited as at 30 September 2006 were as follows: Revenue 177 Operating profit 44 8 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

53 7. Non-consolidation of Portland Holdings Limited (Porthold) Consistent with 2006, the results of Porthold, a wholly-owned Zimbabwean subsidiary, have not been consolidated into the group. There are significant constraints impacting on the normal operation of Porthold and the PPC board concluded that management does not have the ability to exercise effective control over the business. In view of the circumstances, the results of Porthold have continued to be excluded from the group results in the current year and have been accounted for on a fair value investment basis. The summarised results of Porthold, adjusted for hyperinflation and converted to rands, using the official rate of exchange of ZWD4 189,89: ZAR, were: Year ended ^ Rm Rm Revenue Operating profit Loss before taxation (28) (21) Taxation (17) (2) Loss after taxation (11) (19) Total assets Total liabilities The effects of not consolidating Porthold are as follows: Headline earnings per share (cents) as reported Porthold impact on group results (2) (4) Earnings per share (cents) as reported Porthold impact on group results (2) (4) ^Restated for the effects of applying hyperinflationary accounting. Due to extreme volatility in both the inflation and exchange rates during the year, comparison of Porthold s results against prior reporting periods is not meaningful. Pretoria Portland Cement Company Limited Audited Preliminary Report

54 (continued) Audited Audited Rm Rm 8. Contingent liabilities Guarantees for loans, banking facilities and other obligations to third parties Commitments Contracted capital commitments Approved capital commitments Capital commitments Operating lease commitments These commitments will be met from surplus cash generated from operations and borrowing facilities available to the group. 10. Borrowings During the year, the group increased its short-term borrowing facilities with external financial institutions following the unbundling from Barloworld. Part of these facilities were utilised to fund capital expansion programmes and investment in working capital. The borrowings bear interest at prevailing market rates. The company s borrowing powers are not restricted. 11. Segmental analysis The board considers the cement operations to be the predominant activity of the company and as a result, no segmental reporting has been included. 12. Post-balance sheet events There are no post-balance sheet events that may have an impact on the group s reported financial position at 30 September Auditors review The auditors, Deloitte & Touche, have issued their opinion on the group s financial statements for the year ended 30 September A copy of their unqualified report is available for inspection at the company s registered office. 10 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

55 Dividend announcement Notice is hereby given that the following dividends have been declared in respect of the year ended 30 September 2007: number 207 (final dividend) of 166 cents per share number 208 (special) of 61 cents per share These dividends will be paid out of profits as determined by the directors, to shareholders recorded as such in the register at the close of business on the record date Friday, 4 January The last date to trade to participate in the dividends is Thursday, 27 December Shares will commence trading ex-dividends from Friday, 28 December The important dates pertaining to these dividends for shareholders trading on the JSE Limited are as follows: Last day to trade cum dividends Thursday, 27 December 2007 Shares trade ex dividends Friday, 28 December 2007 Record date Friday, 4 January 2008 Payment date Monday, 7 January 2008 Share certificates may not be dematerialised or rematerialised between Friday, 28 December 2007 and Friday, 4 January 2008, both days inclusive. Zimbabwe The important dates pertaining to these dividends for shareholders trading on the Zimbabwe Stock Exchange are as follows: Currency conversion date* Friday, 4 January 2008 Shares trade ex dividends Friday, 28 December 2007 Last day to register to receive the dividends Thursday, 27 December 2007 Payment date Monday, 7 January 2008 The register of members in Zimbabwe will be closed from Friday, 28 December 2007 to Friday, 4 January 2008, both days inclusive, for the purpose of determining those shareholders to whom the dividends will be paid. * The dividends will be paid in Zimbabwe Dollars at the rate quoted by Stanbic Bank Zimbabwe Limited as the official market buying rate of the SA Rand against the Zimbabwe Dollar at or about 11:00 am on Friday, 4 January 2008 or the first business day thereafter on which foreign currency dealings are transacted. By order of the board Barloworld Trust Company Limited Secretaries Per AR Holt 29 October 2007 Pretoria Portland Cement Company Limited Audited Preliminary Report

56 Directors: MJ Shaw (Chairman), JE Gomersall* (Chief executive officer), O Fenn* (Chief operating officer), S Abdul Kader, RH Dent, P Esterhuysen, ZJ Kganyago, AJ Lamprecht, NB Langa-Royds, J Shibambo, EP Theron *British Registered office 180 Katherine Street, Sandton, South Africa PO Box , Sandton, 2146, South Africa Transfer secretaries Link Market Services SA (Pty) Limited 11 Diagonal Street, Johannesburg, South Africa PO Box 4844, Johannesburg, 2000, South Africa Transfer secretaries Zimbabwe Corpserve (Private) Limited 4th Floor, Intermarket Centre, Corner 1st Street/Kwame Nkrumah Avenue, Harare, Zimbabwe PO Box 2208, Harare, Zimbabwe These results and other information are available on the PPC website: 12 Pretoria Portland Cement Company Limited Audited Preliminary Report 2007

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58 Pretoria Portland Cement Company Limited (Incorporated in the Republic of South Africa) (Company registration number 1892/000667/06) JSE code: PPC ISIN: ZAE