PPC to streamline Zim unit

HARARE - South Africa-based cement maker PPC is mulling right sizing its Zimbabwean unit as part of strategies to contain costs.

Richard Tomes, joint managing director for South Africa, said their distribution costs relative to competitors were slightly higher because they are far away from the main market.

“That sort of justifies our Zimbabwe project,” he said. He said while “the management team in Zimbabwe had done a fantastic job of trimming costs”, going forward, the operation will be going through a streamlining exercise.

“Our conscience didn’t allow us to simply just go into Zimbabwe and retrench masses of people in the period of hyperinflation. We are now in a position where we can right size the operation,” he said.

“We have spent some money in modernising the (existing) plant a little bit and we have plans to expand into the area where we don’t have a big presence in the northern part of the country in Harare,” said Tome.

He noted that in the half year to March 2014 the cement maker experienced limited growth in Zimbabwe’s domestic volumes due to a slowdown in demand emanating from liquidity constraints.

However, depressed sales volumes were largely offset by an increase in exports to neighbouring countries, at favourable selling prices.

This comes as most Zimbabwean companies’ labour costs have dented profits, forcing them to retrench.

Meanwhile, PPC plans to invest $80 million on building a cement mill in Harare to be commissioned in 2016, an outlay that will increase the cement maker’s capital expenditure budget by about 30 percent from the original $200 million.

Last year, the company announced a capital expenditure budget of $200 million to construct a plant with a 1, 2 million clinker tonnes per annum capacity in Mount Darwin and a new Harare cement mill.

It is expected that the expansion of the local operations will boost efficiencies for the company, which is also planning to close “less efficient mills” at its Bulawayo factory.

Ketso Gordhan, PPC’s chief executive said the expansion plans will be achieved by backward integration in a phased approach.

The expansion project will complement the existing two manufacturing plants in Bulawayo and Collen Bawn, which are producing nearly one million tonnes of cement per year.

On completion, the group’s Zimbabwe cement output is expected to increase two-fold to more than two million tonnes per annum.

Early last year, Gordan said the Zimbabwean operation, together with PPC’s non-South African subsidiaries, would also increase its revenue contribution to the group to 40 percent from the current 21 percent by 2016.

In 2011, PPC acquired a 27 percent stake in Harbesha Cement in Ethiopia and a 51 percent stake in Cimerwa Cement in Rwanda.

The increased capacity will enable Zimbabwe to increase its exports in the region.

PPC also faces stiff competition from Lafarge and Sino Zimbabwe.

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