In pursuit of stakeholder value INTERIM RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2018
CONTENTS 2 Governance and leadership 07 01 Key messages (CEO: Johan Claassen) Outlook (CEO: Johan Claassen) 06 02 Our investment case (CEO: Johan Claassen) 05 Operational review (MD SA Njombo Lekula) 03 Performance highlights (CEO: Johan Claassen) 04 Group results (FD: Tryphosa Ramano) 2
1.1 KEY MESSAGES l OPERATING ENVIRONMENT REMAINS CHALLENGING 3 1 2 3 4 5 COUNTRY/BUSINESS MUTED GROWTH RECOVERY GROWTH South Africa Cement Lime Aggregates Ready-mix Ash Zimbabwe PPC Zimbabwe Rwanda Cimerwa DRC PPC Barnet Ethiopia Habesha 1. South Africa Consumer under pressure VAT and fuel increases has put more pressure on consumers Infrastructure spend lagging behind Overcapacity 2. Zimbabwe Liquidity challenges In-country cement shortages 3. Rwanda High cement demand Increased infrastructure spend 4. DRC Political uncertainty impacting growth Overcapacity 5. Ethiopia Country in economic reform Increased construction spend B U T P O R T FO L I O E F F E C T B E A R I N G F R U I T 3
1.2 KEY MESSAGES OUR RESPONSE TO KEY CHALLENGES 4 SA Cement DRC Zimbabwe Consumer under pressure Challenges VAT and fuel increases have put more pressure on consumers Infrastructure spend lagging behind Political uncertainty impacting growth Overcapacity Liquidity challenges In-country cement shortages Overcapacity Impact on PPC Margin squeeze Constrained volume growth Slower price recovery Deficiency funding from PPC group to support business Lower capacity utilisation Inability to repatriate funds Risk to business continuity and sustainability Supply constraints PPC response Launched enhanced products Embedded R50/tonne profitability initiative Started lobbying government to impose tariffs on cement imports Reviewed the capital structure of the DRC Reduction in operating costs Established a solid support base with government PPC dividend invested in government bonds Increased local procurement and exports Clinker imports from South Africa 4
2. OUR INVESTMENT CASE
2.1 OUR LONG TERM INVESTMENT CASE 6 Our people Experienced management team 6 1 SSA Footprint Well developed portfolio in growing markets Financial strength Balance sheet Cash Flow 5 2 Asset base World class asset base, c.70% new capacity Portfolio effect RoA delivering good results 4 3 Market leader Leadership position in 80% of markets we operate in A L I G N S TO O U R FO H - FO U R S T R AT E G I C P R I O R I T I E S 6
3. PERFORMANCE HIGHLIGHTS
3.1 RESULTS HIGHLIGHTS IMPROVED ATTRIBUTABLE PROFIT AND GOOD CASH FLOW GENERATION 8 SOLID GROUP FINANCIAL PERFORMANCE IN A CHALLENGING ENVIRONMENT DELIVERING LONG TERM SUSTAINABLE STAKEHOLDER VALUE GROUP CEMENT VOLUMES IMPROVED BY 4.0% Revenue up 8% to R5.6bn Attributable net profit +6% EBITDA down 13% Positive free cash flow of R202m EPS +5% to 21c HEPS +11% to 21c Strong revenue growth Portfolio effect EBITDA decline due to SA operations and Cimerwa upgrade Maintained positive free cash flows Execution of strategic priorities 3 500 3 000 2 500 2 000 1 500 1 000 500 0 +4.0% 3 129 2 999 Group Cement (kt) -4% 281 292 Lime-burnt product (kt) +3% 1 545 1 499 Aggregates (kt) 342-1% 346 Readymix ('000 m3) Net debt to EBITDA 2.3x Debt and liquidity position within target range 1H19 1H18 8
4. GROUP RESULTS
4.1.1 KEY ITEMS IMPACTING THE RESULTS 10 Cash a Key Focus Area Income Statement Balance Sheet & Liquidity Position Continue to Drive Operational Performance 1. Cash earnings of 38c compared to HEPS of 21c 2. Maintained positive free cash flow momentum, R202m generated 3. Cash on hand up 50% to R1.3bn (R836m: March 2018) 4. Currency impact - average R/USD R13.42 (R13.06 : Sept 2017), closing R14.15 (R11.82 : March 2018) 1. Strong revenue growth of 8%, cost of sales up 16%, overheads up 6% 2. Group EBITDA margin 19% (23%: Sept 2017), impacted by SA operations and Cimerwa plant upgrade 3. Finance costs up 18% due to DRC inclusion, like for like reduced by 31% 4. Taxation substantially reduced, credit of R9m due to incentives 1. Group net debt position increased to R4.0bn (R3.8bn: March 2018), currency fluctuations caused debt to increase by R588m 2. RoA reduced total debt to US$221m (US$233m: March 2018) 3. Net debt to EBITDA of 2.3x (2.0x : March 2018) 4. NAV per share increased by 13% to 580c (513c : March 2018) 1. Diversified portfolio continues to deliver - underpinned by RoA growth 2. SA Cement volume growth recovering and price increases implemented SURERANGE successful launch 3. Zimbabwe delivered robust performance, Rwanda is catching up in a strong demand environment 4. DRC delivered revenue of R240m, EBITDA of R60m, EBITDA margin 25% 10
4.1.2 EARNINGS PER SHARE COMPARISON 11 PER SHARE COMPARISON IN CENTS 70 60 50 40 30 20 10 0-34% 58 38 +5% +11% 21 20 21 19 EPS HEPS Cash Earnings 1H 19 1H 18 EPS & HEPS benefited from improved RoA performance and tax credit Like for like EPS and HEPS was 14 cents per share Cash earnings impacted by negative working capital movement and higher interest charge due to DRC 11
4.1.3 INCOME STATEMENT 12 30 September 2018 Rm 30 September 2017 Rm % change 1.REVENUE Revenue increase attributable to RoA and materials Revenue 5 597 5 188 8% Cost of sales (4 494) (3 859) 16% Gross profit 1 103 1 329 (17%) Administration and other operating expenditure (580) (549) 6% Operating profit before item listed below: 523 780 (33%) Empowerment transactions IFRS 2 charges (16) (17) (6%) Operating profit 507 763 (34%) Foreign exchange gain/(loss) on foreign currency monetary it 38 (1) Finance costs (336) (285) 18% Investment income 62 20 210% Profit before equity-accounted earnings 271 497 (45%) Earnings from equity-accounted investments (19) - Impairments and other exceptional items (1) - Profit before taxation 251 497 (49%) Taxation 9 (193) (105%) Profit for the year 260 304 (14%) Attributable to: Shareholders of PPC Ltd 312 294 6% Non-controlling interests (52) 10 260 304 EPS 21 20 5% HEPS 21 19 11% 2.COST OF SALES Cost of sales increase mainly attributable to the DRC plant commissioning which contributed R226m Cimerwa as a result of clinker imports and maintenance costs incurred during the plant upgrade period R33m Kiln shutdown and unplanned downtime in South Africa accounted for R26m 3.OVERHEADS Overheads mainly impacted by the commissioning of the DRC plant 4. FINANCE COSTS On a like for like basis finance costs reduced by 31%. The restructuring of RSA debt contributed to the decreased like for like interest charge 5. EQUITY-ACCOUNTED INVESTMENTS Ethiopia incurred a loss of R19m in the period 6.TAXATION Significantly reduced tax charge due incentives 12
4.1.4 PORTFOLIO EFFECT l RoA OFFSETS WEAKER SA PERFORMANCE 13 1 250 1 200 EBITDA margin 23% 1,193 Group EBITDA Bridge (Rm) EBITDA margin 19% EBITDA margin 20% 72 1,189 1 150 78 1 100 1 050 105 52 32 1,039 1 000-8 950 900 850-259 -76-13% +14% 800 1H18 reported EBITDA SA cement Zimbabwe Rwanda DRC Materials Group services 1H19 reported EBITDA *Note R4m of Mozambique included in group services SK9 Commissioning & SA plant downtime Rwanda upgrade (est.) 1H19 recurring EBITDA E B I T D A I M PA C T E D BY S A O P E R AT I O N S A N D R W A N D A U P G R A D E 13
4.1.5 KEY DRIVERS BEHIND THE SA CEMENT PERFORMANCE 14 KEY DRIVER Volume Cost of sales (R/tonne) % CHANGE -3.0% +4.0% COMMENT Industry volumes estimated to be down between 5-6% Inland market experienced flat volume growth Domestic volumes improved from 1Q19 to 2Q19 Volumes impacted by drought and imports in the Western Cape Phasing of kiln shutdowns and unplanned downtime Higher mining and logistics costs due to fuel price increases Fuel prices increased by 12% YoY compared to the comparable period Overheads (R/tonne) +1.0% Restructuring of head office R50/tonne profitability initiative R50/tonne profitability initiative has realised total savings of R22/tonne Enabled the company to restrict costs to below inflation 14
4.1.6 DIVERSIFIED QUALITY PORTFOLIO OF ASSETS 15 Revenue (Rm) 1H19 1H18 % Change Movement Southern Africa 2 772 2 893 (4%) Materials 1 107 1 036 7% REVENUE CONTRIBUTION 1H 2019 20% Southern Africa cement Rest of Africa 1 718 1 259 36% 50% RoA cement Rwanda 402 433 (7%) Zimbabwe 1 077 820 31% 30% Materials DRC 240 - n/a Mozambique 6 REVENUE CONTRIBUTION 1H 2018 Group 5 597 5 188 8% 20% Southern Africa cement Southern Africa cement revenue impacted by volume declines and SK9 commissioning Robust contribution from RoA driven by Zimbabwe and DRC Rwanda lower due to volume loss during plant upgrade Materials - good growth in lime and aggregates 24% 56% ROA cement Materials 15
4.1.7 DIVERSIFIED PORTFOLIO OF QUALITY ASSETS 16 EBITDA (Rm) 1H19 1H18 % Change Movement Southern Africa 481 740 (35%) Materials 100 108 (7%) Rest of Africa 499 422 18% Rwanda 92 168 (45%) Zimbabwe 352 247 42% DRC 60 8 650% Mozambique (5) (1) (400%) Group Services & other (41) (77) 47% Group 1 039 1 193 (13%) Southern Africa impacted by combination of revenue contraction and higher input costs RoA continued good growth in Zimbabwe DRC contribution of R60m Rwanda impacted by plant upgrade Materials lower due to lime and readymix EBITDA MARGINS 1H19 33.5% 29.0% 1H18 25.6% 23.0% 17.4% 18.6% 9.0% 10.4% Southern Africa cement RoA cement Materials PPC Group EBITDA CONTRIBUTION 62.0% 46.3% 48.0% 35.4% 10.0% 9.0% 1H19 1H18-4.3%-6.4% Southern RoA cement Materials Group Africa cement services other GEOGRAPHIC CONTRIBUTION 1H19 48% 52% GEOGRAPHIC CONTRIBUTION 1H18 35% 65% Southern Africa RoA Southern Africa RoA 16
4.1.8 DIVERSIFIED PORTFOLIO OF QUALITY ASSETS (CONT.) 17 Finance costs (Rm) 1H19 1H18 % Change Movement Southern Africa 109 123 (11%) Materials 28 4 575% Rest of Africa 225 101 122% Rwanda 56 58 (3%) Zimbabwe 26 40 (35%) DRC 143 3 Group Services & other (26) 57 (146%) Group 336 285 18% Att. Net Profit (Rm) 1H19 1H18 % Change Movement Southern Africa 261 317 (18%) Materials 21 45 (53%) Rest of Africa 111 73 52% Rwanda (15) 17 (188%) Zimbabwe 240 69 248% DRC (111) (11) Mozambique (3) (2) Group Services & other (81) (141) 43% Group 312 294 6% Finance costs for the group was 18% higher On a like for like basis excluding the impact of the inclusion of the DRC in 1H19, interest costs reduced by 31% Attributable net profit improved by 6% benefiting from Zimbabwe profit improvement 17
4.1.9 OVERHEADS COST LEADERSHIP 18 OVERHEADS (Rm) 700 +6% 600-6.0% 580 549 500 400 423 448 300 +55% 200 100 157 101 - RSA RoA Group 1H19 1H18 Head office restructuring, R12/tonne in as part of R50/tonne profitability initiatives RoA impacted by the full inclusion of DRC and marketing costs in Zimbabwe of ~US$1.5m 18
4.1.10 RSA REDUCED BORROWING COSTS 19 FINANCE CHARGES (Rm) RSA WEIGHTED AVERAGE INTEREST RATES 400 350 300 250 200 150 100-40% 111 184 RoA includes R143m for DRC in 1H19 225 +123% 101 336 +18% 285 11.8% 9.5% 1H19 1H18 RoA WEIGHTED AVERAGE INTEREST RATES 12.9% 11.8% 12.2% 9.6% 8.5% 8.3% 50 0 RSA RoA Group 1H19 1H18 Rwanda DRC Zimbabwe 1H19 1H18 19
4.1.11 TAX RATE RECONCILIATION 20 Group effective tax rate 1H19 Group Standard Reporting Rate 28.0% RSA permanent differences (66.4%) RSA effective tax rate (38.4%) RoA permanent differences 35.3% Group effective tax rate (3.1%) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% 49.4% 28.0% 25.0% 33.1% 35.0% 30.0% 25.8% 21.9% 20.2% -13.8% South Africa Botswana Rwanda Zimbabwe DRC * Reconciliation expressed as % of Group Profit Before Tax Effective Tax rate In-country standard rate *This is based on In-country profit before tax Reasons for variance with in Country statutory tax rate South Africa lower effective tax rate as a result of tax incentives Botswana is driven by In-country non-deductible expenditure and non recognition of a deferred tax asset Rwanda effect of in-country non-deductibles Zimbabwe reversal of US$3m interest previously assessed by ZIMRA DRC effect of the impairment, non-deductible VAT and deferred tax asset not recognised 20
4.2 BALANCE SHEET 21 30 September 31 March 2018 2018 Rm Rm ASSETS Non-current assets 14 000 12 910 Property, plant and equipment 12 403 11 393 Goodwill 236 230 Other intangible assets 566 557 Equity-accounted investments 196 182 Other non-current assets 323 303 Deferred taxation assets 276 245 Non-current assets held for sale 41 34 Current assets 3 917 3 262 Inventories 1 255 1 182 Trade and other receivables 1 405 1 244 Cash and cash equivalents 1 257 836 Total assets 17 958 16 206 EQUITY AND LIABILITIES Equity attributable to shareholders of PPC Ltd 8 782 7 768 Non-controlling interests 162 120 Total equity 8 944 7 888 Non-current liabilities 6 552 5 909 Provisions 533 526 Deferred taxation liabilities 1 149 1 042 Long-term borrowings 4 595 4 079 Other non-current liabilities 275 262 Current liabilities 2 462 2 409 Short-term borrowings 641 603 Trade and other payables 1 821 1 806 Total equity and liabilities 17 958 16 206 1. CASH AND CASH EQUIVALENTS Cash and cash equivalents increased to R1.3bn due to Zimbabwe 2. GROSS DEBT Increased from R4.7bn in March 2018 to R5.2bn Forex impact increased gross debt by R588m Ratios within targeted levels. 21
4.2.1 CAPEX CYCLE PEAKED IN 2016 CAPEX WELL WITHIN GUIDED RANGE 22 2 892 3 038 Capex guidance 2119 2 058 Capex reduced by 27% to R377m in 1H19 609 964 518 921 377 1 150 1 100 1 000 750 900 700 FY12 FY13 FY14 FY15 FY16 FY17 1H18 FY18 1H19 FY19 FY20 FY21 Capex guidance (Rm) FY FY19 FY20 FY21 Southern Africa 650-950 800-900 600-800 RoA 100-200 100-200 100-200 Capex & PPE Min Capex Max Capex P P C H A S I N V E S T E D > $ 7 5 0 M S I N C E 2 0 1 4 I N A Q U A L I T Y A S S E T P O R T F O L I O 22
4.2.2 GROSS DEBT PER REGION AND CURRENCY 23 GROSS DEBT BY REGION 1H 2019 GROSS DEBT BY CURRENCY 1H19 8% 67% 33% RSA RoA ROA 57% 35% ZAR USD RWF GROSS DEBT BY REGION 1H 2018 GROSS DEBT BY CURRENCY 1H18 8% 68% 32% RSA RoA ROA 60% 32% ZAR USD RWF D R C A C C O U N T S FO R 3 8 % O F G R O S S D E BT 23
4.2.3 CONTRIBUTION TO CASH BALANCE BY COUNTRY 24 CASH BY COUNTRY 1H19 CASH BY COUNTRY 1H18 11% 2% 0% 7% 4% 1% 16% 23% 80% 56% Southern Africa Zimbabwe Rwanda DRC Other Southern Africa Zimbabwe Rwanda DRC Other R o A O P E R AT I O N S C O N T I N U E TO I M P R O V E C A S H G E N E R AT I O N 24
4.2.4 LIQUIDITY AND IMPROVED MATURITY PROFILE 25 1 500 Current debt maturity profile (Rm) The group has made significant progress in improving its liquidity 1 000 500-2019 2020 2021 2022 2023 2024 2025 RSA RoA *Includes DRC capital repayment moratorium *Based on current RSA utilisation RSA debt restructured to a maturity profile of between three and four years, coupled with reduced effective interest rate 9.5% (Sept 2017: 11.8%) The two-year capital holiday negotiated with lenders for the DRC project funding debt, is progress towards achieving an optimal capital structure Capital structure Target capital structure (equity : debt) Metric 70:30 (Intrinsic value) Target Group Gross debt/ebitda 3.0x 3.5x Target RSA Gross debt/ebitda 2.5x 2.8x 25
4.2.5 STRONG BALANCE SHEET POSITION 26 GROUP DEBT PROFILE (Rm) CHANGES IN GROSS DEBT (Rm) 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Mar-16 Sept-16 Mar-17 Sept-17 Mar-18 Sep-18 Gross debt Net debt Gross debt/ebitda Net debt/ebitda 5500 5000 4500 4000 3500 3000 4,682 FY18 reported debt 102 452 5,236 SA debt RoA debt 1H19 reported debt -588 Forex impact on RoA debt 4,648 Constant currency 1H19 debt PPC upgraded by S&P Global ratings for SA long-term South African national scale rating to zaa- from zabbb Gross debt has increased during the period due to a weaker R/US$ exchange rate The Rand has depreciated by 20% from R11.82 in March 2018 to R14.15 in September 2018 against the US$ Gross debt decreased on a constant currency basis since March 2018 26
4.3 CASH FLOW STATEMENT 27 30 September 30 September 2018 2017 Rm Rm Operating cash flows before movements in working capital 1 069 1 211 Working capital movements (110) 59 Cash generated from operations 959 1 270 Finance costs paid (312) (248) Investment income received 22 20 Taxation paid (88) (172) Cash available from operations 581 870 Dividends paid - - Net cash inflow from operating activities 581 870 Cash flow from investing activities Acquisition of additional shares in equity-accounted investment - (40) Acquisition of additional shares in subsidiary - - Investments in intangible assets (3) (4) Investments in property, plant and equipment (377) (518) Proceeds from disposal of property, plant and equipment 1 - Other investing activities 15 (13) Net cash outflow from investing activities (364) (549) Cash flow from financing activities Net borrowings repaid before repayment of the notes 48 (323) Proceeds from sale of shares held by consolidated BEE entities 7 - Net cash (outflow)/inflow from financing activities 55 (323) Net movement in cash and cash equivalents 272 (2) 1. OPERATING CASH FLOW Working capital absorption due to timing of debtor collections Higher finance costs as a result the DRC 2. INVESTING ACTIVITIES Significant reduction in capex within guidance Cash and cash equivalents at the end of the period 1 257 1 003 27
4.3.1 FREE CASH FLOW BRIDGE 28 FREE CASH FLOW (Rm) 1200 1000 800 600 400 200 0 1,069 (110) (88) (290) 202 (379) Operating cash flow Working capital Cash tax Net finance costs Net capex Free cash flow P O S I T I V E F R E E C A S H F LO W G E N E R AT I O N A K E Y I N D I C ATO R O F F I N A N C I A L S TA B I LT Y 28
4.4 BEE III UPDATE COMPLIANCE WITH THE NEW MINING CHARTER 29 Existing Mining Rights Pending Mining Right Applications New Mining Right Applications Achieved and maintained 26% shareholding - shall be recognised for the duration of the mining right Achieved a minimum of 26% and whose BEE partner has exited shall be recognised for the duration of the mining right, such recognition will not be applicable on renewal Pending applications shall be processed and granted in terms of the requirements of the of the 2010 Mining Charter with a minimum of 26% shareholding A right holder of a pending mining right must supplement the BEE shareholding to a minimum of 30% within 5 years from the effective date of such mining right New applications must meet the requirements of the 2018 mining charter A minimum of 30% BEE shareholding with prescribed participants WE ARE CURRENTLY ENGAGING THE DMR POST THE RELEASE OF THE GAZETTED MINING CHARTER ON THE 27 SEPTEMBER 2018 29
5.1 OPERATIONAL REVIEW
5.2 SOUTHERN AFRICA
Tons 5.2.1 SA CEMENT HAS EXPERIENCED HEADWINDS IN 1H19 32 Cement Market Volumes Pricing Costs Demand under pressure due to Weak consumer demand (Independent House Builders) Construction industry in distress Western Cape lower demand due to drought and imports Improving inland demand PPC exposed more to private sector investment Estimate that the domestic industry declined by 5.0% - 6.0% PPC Southern Africa (including Botswana) down 3.0% Launch of new SURERANGE in August 2018 well received by the market Southern Africa up 2.0% Inland pricing up 3.0% Further price increases implemented in October 2018 Variable cost of sales up 4.0% Fixed cost of sales higher due to: SK9 depreciation, Safika integration costs, timing of maintenance activities Higher outbound logistics costs due to fuel increases 500 000 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 0 CEMENT IMPORTED BY PORT OF ENTRY (CALENDAR YEAR) Durban Cape Town Port Elizabeth East London Richards Bay Other Sour Total imports have increased by ~191kt YoY Cape imports increased ~26kt YoY The bulk of the imports have come from China, Vietnam and Pakistan The major ports of entry have been Durban and PE and to a lesser extent Cape Town MUTED DEMAND IN THE WESTERN CAPE COUPLED WITH RISING INPUT COSTS HAS IMPACTED SA CEMENT PROFITABILITY 32
5.2.2 PPC STRATEGIC RESPONSES TO MARKET FACTORS 33 SOUTH AFRICA CEMENT DEMAND AND CAPACITY (2018e)* 1. MARKET FACTORS 18Mt 1,0Mt 1,6Mt ~36% excess capacity gap Cement imports Growth of third party blenders leading to Erosion of quality Detraction from market related pricing Value destruction for stakeholders 2. PPC RESPONSE 14Mt Lobbying government to impose tariffs on cement imports Driving efficiencies through cost leadership and optimal sourcing Continued innovation in alternative building technologies Enhanced product portfolio and route to market strategy implementation INDUSTRY CAPACITY LOCALLY PRODUCED IMPORTS BLENDERS INDUSTRY DEMAND E N G A G I N G G O V E R N M E N T A N D R E G U L AT O R Y B O D I E S *Estimated data from market and industry sources 33
5.2.3 NEW SURE RANGE OF PRODUCTS LAUNCHED 34 Masonry cement designed for plaster & mortar Early strength cement designed for concrete, mortar, plaster & bricks Premium multipurpose cement for general building & civil High early strength cement designed for precast products Superior high strength specialist cement Cement for Road stabilisation F I T FO R P U R P O S E R A N G E O F C E M E N T P R O D U C T S TO C AT E R TO A L L C U S TO M E R N E E D S 34
5.2.4 KEY COST DRIVERS l DISTRIBUTION IS THE LARGEST COST DRIVER 35 27% 25% 23% 21% 19% 17% 15% 24.8% 23.6% 18.9% 23.3% Higher fuel costs 13% 11% 9% 7% 5% 3% 10.3% 10.2% 11.2% 11.1% 9.0% 7.8% 7.2% 7.3% Distribution Other* Salaries Electricity Depreciation Material consumables 8.4% 7.6% 6.3% 5.3% 3.9% 3.6% Maintenance Coal Packagaing 1H19 1H18 *Other includes explosives, spares, drill bits, lubricants, vehicle hire and pallet costs 35
5.2.5 SA CEMENT l WE ACHIEVED R22/TONNE IN SAVINGS IN YEAR 1 36 Metrics Target saving based on R50/tonne We achieved R22/tonne in cost savings Increased profitabilty target to R70/tonne in the next 12 18 months Strategic cost reduction 40% - 60% R12/tonne Completed integration of Safika Cement Organisational restructure of Head Office and Operations ongoing Drive plant efficiencies to reflect operations requirements Integration of material businesses into SA Cement to ensure optimal structure Extract value from strategic partnerships and combine offering from integrated businesses Cost efficiencies 20% - 40% R10/tonne Embedded tyre burning initiative in the Western Cape second kiln commissioned on tyres Optimisation of logistics new TMS technology introduced SK9 performing at expected efficiency 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 Baseline: October 2017 Identify areas of savings Progress monitoring and feedback Achieve optimum margin (2-3 years) F U R T H E R 1 % - 2 % 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 36
5.2.6 SA CEMENT OUTLOOK l NAVIGATING THROUGH A CHALLENGING OPERATING CLIMATE 37 The South African landscape remains economically challenging Focus on executing and realising R70/tonne savings benefits The business will continue to defend and maintain its leading position and competitive advantage Muted GDP growth projected over the next 12 months Real pricing growth to achieve returns in excess of cost of capital, growing EBITDA margin, and driving operational efficiencies 37
5.3 MATERIALS
5.3.1 MATERIALS LIME, AGGREGATES, READYMIX & FLYASH 39 Materials 1. Revenue 7% higher, benefiting from growth in lime and ash 2. EBITDA lower due to lime and readymix, aggregates and ash made improved contributions Lime Aggregates Readymix and Ash 1. The product suite showed a decline in volumes burnt lime, burnt dolomite and stone 2. Revenue was up 5.0% - benefited from improved pricing 3. Significant exposure to the domestic steel industry and solid progress in other environmental applications e.g. flue gas desulphurisation 4. EBITDA impacted by increased variable costs, coal and maintenance 1. Revenue marginally lower than the previous year 2. Reduced volumes, due to lower sales to readymix and CPM segments 3. Pricing was marginally higher for the period 4. Both variable and fixed costs were well controlled 1. Readymix market remained competitive, pricing and volumes remained under pressure Input costs impacted by higher fuel costs 2. Flyash business continues to produce pleasing results Achieved an EBITDA margin of more than 20% M AT E R I A L S P R O T E C T E D ~ R 5 0 m I N S A C E M E N T E B I T D A T H R O U G H C H A N N E L M A N A G E M E N T 39
5.4 REST OF AFRICA
5.4.1 OPERATIONAL OVERVIEW REST OF AFRICA 41 Zimbabwe Rwanda DRC Ethiopia Volumes 28% higher than last year Disposable income boosted by good crop harvests Major construction projects e.g. Gwayi Shangani Dam and housing has also supported demand Pricing marginally higher than last year in US$ due to product mix Market share has increased Volumes 7% below last year due to planned upgrade Pricing at similar levels to last year Market share has been maintained Subsequent to the 1st phase of debottlenecking, record sales achieved in September 2018 Business has been rightsized Other cost saving initiatives are progressing well Continuing to deliver on the route to market initiatives Market share between 25% - 30% Market remains extremely competitive in terms of pricing The market demand remains positive Optimisation of the route to market initiatives progressing well Ramp-up slower versus the plan due to: Political instability in 1Q18 Excessive rainfall in 1Q18 Exports have also increased compared with the prior year C O N T I N U E T O G A I N M A R K E T S H A R E I N R E G I O N S W H E R E W E O P E R AT E 41
5.4.2 DRC DE-RISKING INITATIVES TO MAXIMISE ASSET VALUE 42 WHAT HAS BEEN ACHIEVED DRC IMPACT ON THE GROUP Negotiation with funders with regard to debt restructuring completed Negotiation with EPC contractor progressing well 18-24 month extension of US$24m EPC contract retention fee Exploring various options with regard to de-risking the DRC asset Reduced DRC fixed costs to align with ramp-up volumes The business is producing positive EBITDA Interest partially being serviced by PPC Group Total long term debt outstanding US$152m P P C C O N T I N U E S TO LO O K FO R O P P O R T U N T I E S TO D E - R I S K T H E D R C A S S E T 42
5.4.3 ZIMBABWE LIQUIDITY INITATIVES TO MINIMISE BUSINESS IMPACT 43 WHAT HAS BEEN ACHIEVED PROGRESS REGARDING LIQUIDITY MITIGATION Managing input costs > 90% of input costs localised 100% Localised work force Grew exports volumes Balance of input costs supported by government Capital allocation Secured strategic raw materials Accelerated capex funded from local cash resources Investment into distribution channels Investigating investment opportunities in local downstream businesses Ability to repatriate funds Continuous engagement with the relevant government authorities All export proceeds are accessible in country Repayment of debt obligations All interest payments funded in country P P C Z I M B A B W E I S W E L L P O S I T I O N E D D E S P I T E L I Q U I D I T Y C H A L L E N G E S 43
5.4.4 REST OF AFRICA CEMENT OUTLOOK 44 Zimbabwe Rwanda DRC Ethiopia The political landscape has improved in Zimbabwe post elections, GDP growth forecast at > 4.0% Government is seeking external funding to assist with liquidity constraints PPC Zimbabwe is well positioned to benefit from improved growth prospects The Cimerwa plant has been upgraded to achieve ~80% capacity utilisation Finalising phase 2 of debottlenecking to achieve full capacity utilisation Rwandan GDP revised upwards to 7.1% for 2018, supported by the agriculture sector In DRC, elections are scheduled for December 2018. We continue to ramp up in that country, despite being constrained by overcapacity and muted demand GDP growth is forecast to grow from 3.7% in 2017 to 4.1%, supported by mining demand 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 R E M A I N W E L L P O S I T I O N E D TO 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 44
6. OUTLOOK
6.1 PROGRESS ON FOH-FOUR STRATEGIC PILLARS 46 Financial Operational Human Capital Customers Restructured RSA debt and smoothed liquidity profile Restructured funding agreements in Rwanda Implemented capital allocation priorities framework Maintained positive free cashflow Realised R22/tonne profit contribution in SA cement Completed 1st phase of Cimerwa debottlenecking Entrenched route to market strategies in DRC leading to increased market share Captured organic growth in Zimbabwe Completed 1st phase of head office restructuring Strengthened key leadership with focused executive committee Implemented employee value proposition Rolled out internal branding in SA businesses Rebranded SURERANGE and launched new products in SA Focused on our brand image continuously Strength Beyond Focused our value added technical support in particular SMME s Implemented new technology in transport management system 46
6.2 OUTLOOK WHERE TO FROM HERE 47 SA Cement Industry Slower than expected recovery in economic growth The industry is not achieving its cost of capital To sustain the industry through the cycle real selling price increases is imperative Lobby government to impose tariffs on cement imports SA RoA Drive all components of the profitability equation Increased profitability initiative target from R50/tonne to R70/tonne Embed the integration of the SA business portfolio Embed simplified and focused management structure Strong market demand Solid demand in Zimbabwe, Rwanda and Ethiopia Continue to optimise Rwanda and Ethiopia plants to full potential Challenging environment in DRC expected to continue W E C O N T I N U E T O E X E C U T E O N O U R F O H - FO U R S T R AT E G I C P R I O R T I T E S T O R E A L I S E V A L U E GROUP Continue to focus on optimised capital structure and free cashflow Continue to focus on capital allocation priorities Evaluate options to re-patriate funds in Zimbabwe Realise maximum value from the RoA portfolio 47
7. Governance and Leadership
7.1 GOVERNANCE AND LEADERSHIP 49 Governance and board Board changes Board composition Subcommittees and composition Strategy review Leadership Revised executive committee structure CEO and other succession planning 49
QUESTIONS
APPENDIX l BEE III COMPLIANCE WITH THE NEW MINING CHARTER 51 Transaction size and entity Prescribed Participants Tenure Funding Vesting Dividends 30% BEE shareholding 2018 Mining Charter BEE shareholding may be concluded at holding company level, mining right level, on units of production, shares or asset Qualifying Employees: minimum 5% free carry Host Communities: minimum 5% free carry Black entrepreneurs: minimum 20% For the duration of a mining right Minimum period equivalent to a third of the duration of the mining right for BEE Entrepreneurs (new mining rights) Not clear for communities and employees Free carried interests of 5% communities and 5% employees Funding from dividends/cash flows Prescribed vesting periods for BEE Entrepreneurs only Interests held by communities and employees appear to be non-vesting No specifications 51
INVESTOR CONTACTS 52 Anashrin Pillay Investor Relations anashrin.pillay@ppc.co.za +27 11 386 9000 www.ppc.co.za 52
DISCLAIMER 53 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. 53