Listed cement producer, Pretoria Portland Cement (PPC), says it anticipates a sharp decline in business by up to 20 percent for the six months ending September 30, 2019, compared to R1,039 billion realised in the similar period in 2018.
According to the company that will release its half year results later this November, a myriad of reasons are plaguing the Zimbabwean business environment.
Notable ones, the firm said, included the slowdown in business stemming from the hyper inflationary environment that has characterised the local economy since mid-2019.
In addition, PPC’s Earnings before Income Tax Depreciation and Amortisation (EBITDA) is also projected to dip by close to half the last year’s record.
“The main drivers for the decline in EBITDA include Zimbabwe’s hyper-inflationary environment and PPC Zimbabwe business is expected to decrease by between 15 percent and 20 percent compared to R1,039 billion for the period ended September 30, 2018, while EBITDA is expected to decline between 40 percent and 45 percent compared with the R352m achieved in the prior comparable period,” PPC said.
The cement maker lamented the fast-paced value erosion of the local currency and inefficient interbank market operations in terms of accessing funds for settling their foreign obligations.
“PPC has been closely monitoring the economic situation in Zimbabwe and whilst the business is self-sufficient, the Zimbabwe Public Accountants and Auditors Board (PAAB) announced that Zimbabwe is a hyperinflationary economy.
“This conclusion was supported by a rapid increase in the inflation rate, which at the end of September 2019 was in excess of 150 percent, the significant deterioration in the traded interbank Zimbabwean dollar exchange rate over the period and the lack of access to foreign currency to discharge foreign liabilities,” said PPC.
PPC Group says the results were also impacted by application of IFRS9: Financial Instruments to the funds held in Zimbabwe and the Zimbabwe Financial Asset that arose as a result of the US$ denominated Zimbabwe loan that qualified as legacy debt.
Besides the said drop in business, earlier this year Pretoria Portland Cement (PPC) Zimbabwe, indicated that it was now losing business due to cement imports thereby calling upon Government to promulgate protectionist laws to promote competitiveness of local producers.
Government lifted a two-year import ban on some basic commodities, including cement, last October as a measure to deal with rampant shortages that drove the public into panic buying.