(PPC) chairman BL Sibiya told the group's AGM on Monday.
The November and December industry inland sales were constrained due to competitors' production problems, resulting in a cement shortage, he said.
The company benefited from additional sales but as a result experienced stock-outs at times, he added.
"Unfortunately there continues to be too much emphasis placed on statistics in respect of building plans passed, which firstly only include data for major metropoles' and secondly have become less pertinent, as data for major civil projects and the sustained rural demand are not included in building statistics.
"South Africa will inevitably feel some of the effects of the international economic slow down and it is therefore difficult to give a definitive outlook for the year. The company however, continues to believe that the demand for cement regionally will remain reasonably resilient as a result of current and future infrastructure projects.
"This view is in line with recent statements made by most large South African construction companies whose order books have an increasing weighting of infrastructure projects. Additionally, some economists are predicting an increase in the percentage of GFCF to GDP as this year progresses," Sibiya said.
He added that the industry has virtually stopped unprofitable imports which represented 5% of the 2008 regional demand. Volumes in the Western Cape remain disappointing, but strong demand in Botswana, up 14%, and Mpumalanga, up 8%, has helped support the company's sales, he said.
"Our established geographic footprint and our new production capacity positions PPC well to take advantage of any tight supply situation. Cement operating margins have remained under pressure during the first financial quarter. Until January the diesel price reduction has lagged the fall in the rand price of crude oil and the rate of petrol price decreases but is at last reducing appropriately. We expect some relief on coal prices in the second half of the financial year as some contracts are re-negotiated.
"The new Dwaalboom kiln production is progressing well and we are pleased to report that 90,000t of cement was produced in December which enabled us to rebuild stocks in the latter half of the month. The Hercules mill project is progressing according to schedule, while the environmental impact assessment process for the Riebeeck plant continues.
"The Lime and Aggregates divisions have experienced a decline in sales volumes due to decreasing demand from the steel producers and concrete product manufacturers. This decline in demand combined with cost pressures has impacted on margins. We have however, seen some recent signs of an improvement in demand from the steel industry," Sibiya said.
He added that all the requirements of the Broad Based Black Economic Empowerment transaction and associated Scheme of Arrangement were completed on 15 December 2008. The company intends appointing two additional black non-executive directors to the board from nominees put forward by the BEE Strategic Partner Consortium. The board currently has a majority of independent non-executive directors and has an increased number of black
directors.
"South Africa will inevitably feel some of the effects of the international economic slowdown and it is therefore difficult to give a definitive outlook for the year. The company however, continues to believe that the demand for cement regionally will remain reasonably resilient as a result of current and future infrastructure projects," Sibiya said.
"This view is in line with recent statements made by most large South African construction companies whose order books have an increasing weighting of infrastructure projects. Additionally, some economists are predicting an increase in the percentage of GFCF to GDP as this year progresses.
"The company will continue to review potential scenarios within South Africa and to explore export opportunities while optimising our production and supply networks. As stated in the 2008 Annual Report, cash earnings should remain strong and all major project capital expenditure will continue to be funded through borrowings," Sibiya concluded. – I-Net Bridge
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