PPC raises Zimbabwe capex to $280m

Published: 26 May 2014

PRETORIA Portland Cement, Zimbabwe's largest cement firm, has raised its capital spending budget on expansion projects to about $280 million, a senior company official said.

Chief executive Mr Ketso Gordhan said PPC would spend $80 million on building a cement mill in Harare to be commissioned in 2016.

This additional spending will increase PPC's capital spending 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 clinker plant in Mt Darwin and a cement mill in Tete Province, Mozambique.

The new Harare cement mill is expected to boost operating efficiencies for the company, which is also planning to close "less efficient mills" at its Bulawayo factory.

"PPC expansion plans (will) be achieved by backward integration in a phased approach," said Mr Gordhan.

"First, (will be the) construction of 100 tonnes per hour cement mill (or 700 000 tonnes per annum) in Harare for $80 million . . . to be commissioned in 2016."

This will be followed by construction of a clinker plant and a mill at a cost of $200 million.

The Harare mill will be funded by a corporate loan to be secured against PPC Zimbabwe's balance sheet.

"The modern efficient mill in Harare gives a competitive advantage and phased capital expenditure approach reduces risk," said Mr Gordhan.

On operations, Mr Gordhan said the prevailing liquidity constraints in the economy had led to a slowdown in local demand.

Zimbabwe, which adopted the multiple currency system in 2009, is facing serious liquidity challenges due to a number of factors, including subdued exports.

PPC also faces stiff competition from Lafarge and Sino Zimbabwe.

"Tough economic conditions had occasioned low cement prices," said Mr Gordhan, adding that subdued local demand was being offset by exports to neighbouring countries.

The South African rand devaluation has favourably impacted on the company's revenues, while the benefits of investment in palletiser and right-sizing of operations are being realised.

He, however, noted that local demand for cement was likely to surge, supported by strong recovery of the construction industry.

There is also huge potential in revamping the country's infrastructure and address significant related bottlenecks.

Government, under Zimbabwe's medium-term economic blueprint the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, has come up with an Infrastructure Cluster focused on the rehabilitation of infrastructural assets.

According to the African Development Bank, Zimbabwe requires $14 billion for water and sanitation infrastructure, public amenities, ICTs, energy and power supply, and transport.
- The Herald

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