Releasing its annual results, Pretoria Portland Cement (PPC) said it believes 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," the company said.
It added that 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 North West province of by late 2010.
"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," PPC said.
PPC's 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 dependant on how quickly the ramp-up is achieved, it added.
In the meantime, PPC will continue to supplement any cement shortfall with an 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 a R604m 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," it said.
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.
"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 confident about achieving another improved performance next year," CEO John Gomersall said. - Jacqueline Mackenzie, I-Net Bridge
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