PPC Ltd (PPC) Earnings Call Transcript & Summary

Good morning. Welcome to PPC's Annual Results Presentation for the 12 Months Ended 31 March 2022. My name is Kwame Antwi and I'll be your host or emcee for this morning, this presentation. As usual, we're hosted by Roland van Wijnen, who's the Group CEO. For those of you who are familiar with our presentation format, the team will present the results to all the audience and the listeners. And thereafter, we'll open the floor for question and answers. For those of you who are joining us on the webcast [Operator Instructions] The team will collate the questions and will direct it to the responsible individual after the presentation. For those of you who are joining us via the telephone conference call, we will open the floor for question and answers after the presentation. Without taking too much of your time, let me hand over to the team to start and take us through the presentation. Roland?

Thank you very much Kwame. Good morning, everyone. It is a pleasure to be with you this morning. I'm joined by our ExCo members here in Johannesburg, Njombo and Brenda, and all the way from Ethiopia, Mokate. Mokate is at the moment in Ethiopia for an Annual General Meeting preparation there. And I will touch on our business in Ethiopia just in a minute. I would like to start with this slide and take you back 2.5 years ago when I started at PPC. In December 2019, I had the pleasure to present to you the interim results for the very first time. And one of the questions that was asked at that time was, how will PPC position itself? What is the investment case of PPC? And the question was asked, will you need a rights issue to deal with the balance sheet? And at that stage, to be very honest with you, I said, I don't know, but we will do everything we can to avoid that we have to do a rights issue. And where I stand today, I can tell you with certainty that we don't need a rights issue to restore our financial position. And I can tell you today that all the points that you see on this very slide are actually in effect and are true. We are performance focused. We are returns focused. We are now leading in all the markets where we operate. We were not in leading positions in the DRC. And as part of the restructuring work, we have effectively deconsolidated DRC from our financial results as of April this year. It is still in our results from last year as discontinued operations, but all the Ts were crossed and the Is were dotted on -- I think it was the 24th or the 29th of April this year. In Ethiopia, we also didn't have a leading position, and we have a minority stake in a company called Habesha, a company that needed additional capital to position itself in that market. We have indicated that we would not spend more money in Ethiopia. And we have there, we've found a local investor that is willing to invest in Ethiopia. And we have signed an agreement with that local investor to sell our participation in Habesha. And we are currently underway to make that realization -- to make that transaction reality, and that is one of the reasons why Mokate is at the moment in Ethiopia. Mokate will still present the results of Zimbabwe and CIMERWA, but he has taken a new position in our company. And that brings me to the right bottom corner, an experienced, focused and motivated leadership team that is focused on the core of our business, which sits in CIMERWA, Zimbabwe and, of course, South Africa. Mokate has taken the role as MD for operational and innovation. He is driving our decarbonization strategy, and he is driving the operational efficiencies that are so needed in today's environment, especially where we are confronted with a high inflation, and I will touch upon that as well. With the financial position being stable, we can now also say that we have a good, if not optimal, capital structure to support our group strategy. And last but not least, as we shared with you earlier, last financial year in November, we have a plan how to decarbonize our business in a value-accretive way. So all the points that we have on this slide, we will talk through during this presentation, be it by myself, Brenda, Mokate or Njombo. In case Mokate's connection is unstable, I will step in and be his speaking master, so to speak. Against what background were we operating in the last financial year? First of all, after the lockdowns that hit the economy so hard, we had a moment of tailwind. We had good volumes, strong retail, and we were waiting for the infrastructure government projects to kick off in South Africa. At that time, we already said that, that retail demand is unlikely to last and we expected normalization of cement demand in South Africa. That has indeed happened. The cement demand that we saw last year has marginally grown from the year before. And I will show you in the next slide that cement demand compared to the period before COVID can now be considered normalized. We have expected and have seen a sustained growth both in Zimbabwe as well as in Rwanda. We keep on being concerned about the importation of cement across all the markets where we operate. Rwanda is a natural importer and will always remain to be naturally importer because it doesn't have the limestone to produce cement. Zimbabwe has been importing because the local industry couldn't catch up with demand, but that will change. And the Zimbabwean government is working closely with the cement industry in Zimbabwe to regulate imports to the level that is necessary. South Africa is still a bit of a different case. South Africa is importing almost 1.2 million, 1.3 million tonnes of cement, which is a full cement plant. That capacity, however, is available in the country. There are millions of dollars flowing out of the country unnecessarily, and we are not creating the employment that the country is so looking for and is so much needing. We'll talk about input cost and how we mitigate part of the input cost and how we have adapted our prices in order to protect our margins. Our focus areas stay where they are. They are focused on cash generation. They are focused on operational excellence. We continue to look at our capital structure. Our capital allocation will remain prudent for the years to come as well. We have indicated that we would like to resume dividends in the future. And Brenda will touch upon some of the points that are related to this and the agreements that we have with our lenders under which it will allow us to resume dividends. We'll continue our focus on reducing the environmental impact and the carbon intensity of our products. If we look at what it brought us in terms of outcomes in the last year, first of all, we are proud to say that we have reduced our net debt by ZAR 1.2 billion, coming out of cash flow from our normal continuing operations as well as the additional cash that we generated from the disposal of noncore assets, the disposal of our PPC Lime business and our small Botswana Aggregates business. We have implemented various measures both through capital allocation as well as through education and training of our employees that will drive our equipment efficiency. This in the cement industry is one of the key indicators to make sure that we produce cement at a lower cost than our competitors. I've touched upon the capital restructure, and we can now say this is the last time that we speak about capital restructure. We have completed all the necessary steps that are related to this. And I've alluded to the fact that we have started to implement our climate change strategy. In terms of numbers, I indicated to you the improved cash generation, but also our revenue has increased. Our revenue stands from our continuing operations at ZAR 9.9 billion in the last financial year. We will talk a lot about ex-Zimbabwe. Now we don't talk about ex-Zimbabwe because we don't like Zimbabwe. We do like Zimbabwe. But Zimbabwe's numbers are impacted by what is called hyperinflation accounting. And those have a big impact on earnings, and Brenda will unpack that in greater detail during her part of the presentation. If we look at our group EBITDA, it is what I call flattish, ZAR 1.5 billion last year against ZAR 1.6 billion the year before. Ex-Zimbabwe, it is completely flat, ZAR 1.1 billion versus ZAR 1.1 billion. The group free cash flow excluding proceeds from the disposals of PPC Lime and PPC Aggregates, has actually slightly increased from last year, ZAR 0.7 billion against ZAR 0.6 billion the year before. And EPS and the HEPS will be unpacked by Brenda when she talks about the impact of the noncash items and how the impairment reversal showed last year in our results, and of course, that hasn't repeated this year. So on the right hand of the slide, 2 items that I would like to pick because the rest I have talked about. The debt facilities overall in South Africa have been refinanced, signed and sealed. PPC Zimbabwe is debt-free. And last but not least, PPC Zimbabwe continues to be in a position to pay dividends to PPC Limited. In the last financial year, a total of $6.2 million was received, and post the reporting period in June, an additional $4.4 million was received. So the background of the group is strong, solid footing, and I will hand over to Brenda to unpack the financials in greater detail.

Good morning, everybody. So just to give you an outline of the presentation, I will start by taking you through the income statement, deal with the cash flows and the debt position. As Roland mentioned, all the numbers shown in the presentation are from continuing operations. In other words, the DRC is excluded. It's still held as a discontinued operation at March 2022. And again, just to re-emphasize Roland's words, I'll consistently deal with variances year-on-year, excluding Zimbabwe as this entity's results are already distorted by the hyperinflation. Right. Moving on to revenue first. Again, looking at revenue from continuing operations. The overall group revenue increased by 11% to ZAR 9.9 billion due to double-digit volume growth in Rwanda and Zimbabwe and normalized volume growth in South Africa and Botswana. South Africa and Botswana increased by 4% of a volume increase of 1%, supported by achieved price increases of 5%. CIMERWA's cement sales volumes showed a 20% increase year-on-year, with revenue up 7% to ZAR 1.2 billion owing to rand's strength against functional currency. In Zimbabwe, cement sales volumes increased by 28% year-on-year due to retail demand and support from government-funded projects. Selling prices were adjusted in local currency and U.S. dollars to reflect currency depreciation and input cost inflation, respectively, resulting in revenue increasing by 34% to ZAR 2.2 billion. Excluding Zimbabwe, the group's revenue increased by 5% year-on-year. Looking at cost of sales. Overall, the group cost of sales increased by 19%, very affected by the 85% increase in Zimbabwe's cost of sales due to hyperinflation. Excluding both Zimbabwe's cost of sales and all depreciation, cash cost of sales increased by 7% year-on-year. The increase of 7% should be seen in the context of both volume -- volume increases and PPI in the 2 main jurisdictions being South Africa, Botswana and Rwanda, which can be seen on the right-hand side of the slide. South Africa and Botswana's cost of sales and other administration expenditure increased by 7% compared to volume and PPI increases of 10%. Similarly, CIMERWA experienced collectively a 28% increase in volume and PPI and its cost of sales in Rwanda francs increased by 25%. Both South Africa, Botswana and CIMERWA therefore contained their costs below volume and input cost inflation. Given the revenue growth that I just mentioned of 5% for continuing operations and cost increases of 7%, well, excluding Zimbabwe, EBITDA, similarly, excluding Zimbabwe, decreased by 2% year-on-year. South Africa and Botswana cement decreased by 5% and Rwanda's EBITDA was flat in rand terms. Material's EBITDA improved to ZAR 41 million compared to an ZAR 8 million loss in the prior year. Zimbabwe's numbers are again distorted by hyperinflation and exchange rates, but it is worth noting that Zimbabwe has maintained generating some 60% of its revenues in hard currency being U.S. dollars. And this is important as this generation of hard currency enables the payments of dividends to PPC. This is an important slide, and Roland referred to it earlier. Our earnings are very murky. And the objective of this slide is to demonstrate that notwithstanding the decrease in earnings of 89% that you see on the face of the income statement, once Zimbabwe and certain noncash items are excluded from the group's earnings, the decrease in earnings is 1%, which is not out of line with a decrease in EBITDA of 2%. I'm dealing here with earnings before tax. So the significant noncash items are shown on the right-hand side of the slide and all exclude Zimbabwe. The most material item as can be seen is the impairment reversal last year of ZAR 1.3 billion compared to a small net impairment in the current year of ZAR 38 million. Once these have been adjusted for and Zimbabwe's losses and profits eliminated and also adjusting for depreciation and finding costs to get a comparable sort of EBITDA number, then continuing operations, earnings before tax decreased by 1% year-on-year. Now moving to taxation. The effective tax rate on the face of the income statement is 111%. I'd like to make 2 points on this slide. The first is that the actual percentages, which are percentages of profit before tax, appear large due to the size of the profit before tax being ZAR 186 million. In addition, there are material ones-off items that should not recur. Focusing on a few of the nonrecurring items, the first being nondeductible expenses. This mainly relates to the final restructuring costs incurred to complete the capital restructuring and they're not allowed for tax. The under provision item relates to tax paid on the reassessment by size of the 2017 and 2018 tax returns. The noncash items are largely due to losses incurred by PPC, 3Q and Pronto and Group Services, on which deferred tax assets are not raised as well as nonmonetary losses in Zimbabwe and hyper impacts, which are neither taxable nor deductible. Lastly, the group paid tax of ZAR 22 million in withholding taxes, which is largely due to dividends received from Zimbabwe and Botswana. This is not a nonrecurring event, nor a noncash item, but simply being highlighted as the price the group pays for repatriating funds to South Africa. I'm missing the cash -- CapEx, there we go. Here's the CapE slide, touching briefly on CapEx ahead of cash flow. This slide depicts the trend of CapEx over the years. We did underspend in 2021, and most of it was on maintenance. In 2022, capital expenditure normalized back to 2020 levels and the ZAR 553 million that you can see there includes some [ ZAR 40 million ] spent by Zimbabwe on the [ calcined clay ] project? In FY '23, we expect our maintenance and sustaining CapEx spend to be in line with that of 2022 between ZAR 500 million and ZAR 550 million. Any expansion CapEx must be value accretive and meet our WACC at a minimum. Right. This slide shows the waterfall of cash flows. What is noteworthy is that the cash generated from operations after movements in working capital increased by 6% to ZAR 1.454 billion and free cash flow after CapEx and other investing activities increased from ZAR 649 million to ZAR 675 million. The group received ZAR 503 million from the sale of Lime and Botswana Aggregates which funds were all used to reduce debt. The cash flow for financing activities being negative ZAR 959 million includes debt reduction of ZAR 970 million, which is depicted on the next slide. Here, we see the movement in gross debt from ZAR 2.6 billion at the beginning of the year to ZAR 1.6 billion at the end. As well as the de-gearing, cash also increased in the group leaving net debt at ZAR 1 billion from ZAR 2.2 billion in FY 2021. Zimbabwe is debt-free, and CIMERWA's debt of ZAR 377 million has all been converted to Rwandan francs. The South African gross debt-to-EBITDA ratio is depicted at the bottom of the slide and shows an improvement from 2.2x to 1.4x. This is important, and Roland referred to it earlier, we have agreed with our bankers that at a level of 1.3x PPC commence the declaring dividends. I'm not going to put any forecast out there, but we're very close. Looking at the cash position, I just want to show you we're the cash in the group is held. The left-hand side of the slide shows cash holdings by country, and the right-hand side of the slide shows by currency, which shows that 45% of the group's cash is held in dollars and 25% in rands. The U.S. cash holdings are both in Zimbabwe and Rwanda, with 85% of Zimbabwe's currency being rands or dollars. In addition to the ZAR 6.2 million dividends, Zimbabwe paid a further dividend after the year-end of $4.4 million. To close briefly before I hand back to Roland, the balance sheet has been satisfactorily degeared through cash generation and disposal of noncore assets. We have refinanced our debt facilities in South Africa with appropriate tenures and a much more effective interest rate. On internal controls, further good progress has been made during the year, but this will remain an area of focus for some time. In addition to internal controls, containing costs will be a key focus in 2023, coupled with tax planning initiatives to reduce the effective tax rate. Thank you for your time, and I'll hand you back to Roland.

Thank you, Brenda. Thank you, Brenda, for the insights in the financials. Before I hand over to Njombo to speak about the South African market, I would like to give you an overview of the operational review across our portfolio. And in order to do that, I'll take you back to the very beginning when I spoke about normalization of the cement demand. In this picture you see on the left side, South Africa and Botswana cement volumes comparing FY '20, pre-COVID; FY '21 the COVID year; and FY '22, which we can call post-COVID. And you will see that compared to FY '22, the South Africa and Botswana cement sales volumes are up by 6%, which is roughly 3%, a little bit less than 3% on a year-on-year basis. That very much corresponds with something that is a long-term correlated indicator for cement sales, which is the GDP of a country. And looking forward, in absence of major upswings coming out of temporary infrastructure projects, one can expect low single-digit growth environments in South Africa. On the right-hand side, you see the markets of Zimbabwe and CIMERWA. The red block is CIMERWA. It's Rwandan market demand. And on the right-hand side, you see Zimbabwe and our sales in Zimbabwe. You can see there a very strong growth. That reflects, for Rwanda, the growing environment coming from a very low base in terms of consumption of cement per capita; and in Zimbabwe, driven by the same plus infrastructure spend and retail as it is not abnormal in a hyperinflation environment for people to invest in durable goods, such as housing and other elements that require our products. So this is the background from a volume perspective. Then we've spoken a lot about inflationary pressures. And what we've shared with you here is the cost breakdown of South Africa cement. And if you look through this slide, you see that from distribution, electricity and coal, more than half of our cost base is affected by energy pricing. That has led in FY '22 to a general external price increase of 9%. A lot of our input materials have gone up double digit. For those of you from South Africa, I don't need to tell you about Eskom's price increases, but those things are impacting the cement industry. Thanks to the work done by the teams on operational efficiency, we could mitigate 3%, and we had an internal cost inflation in the South African cement business of 6%. 5% was the increase on average in our selling prices, taking into effect as well product mixes and that the fact that the Botswana pula depreciated against the rand. And that has left us back to the numbers that Brenda shared with you in terms of EBITDA and EBITDA margin. If I now show you the EBITDA position and the revenue position throughout the group, you will see this in the perspective that I just shared with you. You'll see that the contribution to group revenue is still largely coming from South Africa, and that will not change. South Africa is the engine of PPC, both in terms of revenue as well as in terms of EBITDA. We are pleased that materials is playing a significant role and has turned a negative EBITDA contribution into a positive one. And you can see how Zimbabwe at the face of the EBITDA has reduced from a 30% contribution to 26% contribution. On the right-hand side of this slide, you see the EBITDA margins across the segments over the years. And as pleased that I am with the fact that we -- had a strong cash generation and we're able to reduce our net debt by ZAR 1.2 billion, I'm unpleased by the fact that we are not reaching 20% EBITDA margin in South Africa cement. And as a matter of fact, we have gone back from 16.7% to 15.2%. And rest assured that we will not be either resting or being happy until that number is going towards 20%. And on that note, I'll hand over to Njombo, who will tell you how we're going to get there.

Thanks, Roland. Good morning. I think as it has been said already, we have actually seen some upside potential from industrial and construction segments. And this is driven mainly by private sector. And in terms of the coastal region, we actually are quite pleased with the fact that the escalating shipping cost has actually held back some of the imports in the beginning of this year. The cement sales volumes, that is in line with the prior year and with a decline in the retail, this is something that we actually do expect. We did mention last year that we were as much pleasantly surprised by the unexpected upswing in the -- in prior -- past the COVID period, but we actually recovered quite well. However, the demand condition that prevails has created quite a competitive environment in terms of where we operate. But that is also exacerbated by the unreliable power that we face in the country and more significantly, the inefficient rail service that we are facing, which has an impact on our cost, especially in the movement of raw material in between our operations. So that has got a very significant impact on the cost. And then in terms of our forecast, we are very much focused in terms of how we supply our products, the value proposition that we have always relied on in terms of being an industry leader in providing the products. And one of the areas that we have set out to focus on was optimizing our operation to mitigate those input costs, which are definitely higher than what we can get from pricing out there. And we have a special focus on the clinker factor reduction, which we have managed to achieve, and that has actually brought down at least some of those input costs that has impacted us negatively. We're also fast-tracking the use of alternative fuels, especially on our coastal factories where we try to mitigate the costs of energy. And there's a very special focus in terms of upskilling our people. I think people make the difference in operations like ours, and that's where we are focusing. And this year is the year of talent in terms of improving our situation. And this has resulted in us managing to reduce our clinker factor in line with our decarbonization strategy, which has also seen some improvements in the operational costs. I'm very pleased with the improvements that we have seen specifically on our Slurry Kiln 9 and the Hercules vertical roller mill. We have actually seen some record runs in those units. We've managed to maintain margins in the Western Cape. Despite the fact that it was very slow to pick up after the COVID, we at least managed to get some volumes going in that area. We have managed to maintain our market share. We did mention that we will not be chasing volumes at the expense of price, and we've just done exactly that. However, we need to maintain a balance between the price and the volumes because we are leading in terms of the pricing. So in some of those -- some of the areas, we do get limitations in terms of the price increases that we would like to get due to competitive environment that we are facing. In terms of the financial impact, I think it is pleasing that despite the challenging environment that we are operating in, if you look at our volumes being in line with last year and considering that we use 2020 or FY '20 as a benchmark, we were relatively 6% up, which is very pleasing post the COVID. And our revenue is up by 4%. And EBITDA reduced by 5% understandably so as a result of the costs and also the volume impact. As Roland mentioned, what is displeasing is our EBITDA margin that has gone backwards, which could have been less if all those operational activities and efficiencies were not put in place. Now we speak quite a lot about the imports and the impact that the import has got on our business. If you look on the graph on the left-hand side, that's the result end of last year where imports have gone up by 19%. Now to put it into context, this totals into about 1.2 million tonnes of clinker, which is an equivalent of a full cement factory that employs directly close to 400 people and indirectly a couple of thousands of people. And that's the impact of imports into our space and into this country. If you look on the right-hand side, we just gave a picture of what it looks like in the first 4 months of the year. And if -- whilst it is very welcome, and we've seen the impact of this on our coastal volumes starting in this year. However, a 14% reduction, that shows the unreliability of imports into a country. And when this happens at the time where demand is available, then it means we need to very quickly bring back capacity, which could have otherwise been put outside to accommodate these imports coming into the country. And we know that this is unsustainable unless the government does something about imports because as soon as all the challenges on the logistics are gone, then this may bounce back. In terms of our materials business, I must say I'm very pleased with the performance of the materials business in the past year. And this is at the background of the muted demand due to the infrastructure where the materials business would be actually getting their volumes. We are seeing growth in the informal housing segment, which has really boosted our aggregates demand. And obviously, our change in the route-to-market strategy has also benefited us in that way. And then the agricultural sector benefited from good range, but we've seen that the steel industry where we're actually putting up a lot of aggregates volumes has also remained muted. The ash sales volumes, if we recall, prior year, we had a big bump up with the retail space where ash was actually sold in the blended products. We've seen a decline in the volumes and also the availability of the slag has impacted the ash volumes. In terms of the focus on the materials, we're focusing on capturing the pockets of growth that exist in the market. And by pockets of growth, we see a lot of private sector warehousing, which are geared to support the online shopping. And we have actually developed specialized flooring mixes for those large panel constructions that are required in that space. And that has also helped us to optimize pricing in that segment, which has seen an improvement in our margins on the materials business. And we also increased the dolomite offering for the concrete sector. And this is some specialized efforts that are being put in by our materials team. We have also increased the sales of classified ash, and that also boosts the margin into the materials business. And we have seen some slight growth in the exports of ash, specifically to Mozambique. In terms of the ready-mix division, on the outcomes, we are known as a leading supplier in that space. And as I mentioned, we actually developed some specialized flooring mixes for those -- for that part of the segment. And what this has happened, especially on the Gauteng area, we have capitalized on that growth in the private sector. And this has resulted in our materials business, Pronto specifically, to be awarded the PMR Diamond award, which is an award for a top readymix supplier in South Africa. And we're quite pleased with that and very pleased with the team because of the efforts that they are putting in. In terms of the classified ash, as we intended, we have seen some growth in that space and specifically on the readymix on those specialized mixes. And we also increased our exports into Mozambique. The results in terms of our materials business is very pleasing where we've seen a growth in the -- both the ready-mix and the aggregates volumes by 7% and 10%, respectively. And as I mentioned before, the ash was quite high in the year past. So from a very high base, we decreased by 17% on the ash business. And in terms of the performance, we have seen that the aggregates and readymix volumes increased by 16% and 3%, respectively, whereas we saw a decline on the ash business. What is very pleasing is actually the performance in terms of the revenue generation and the EBITDA on this material business where we ended up with a very well improved EBITDA and a very good margin in terms of this business. I'll hand over back to Mokate. Mokate, are you on the line?

Yes, Njombo, I'm on the line. I don't know if I am audible and you can see me.

We cannot see you, but we have audio.

Okay. Good afternoon, everyone. I can't see the slides so I really don't know [indiscernible]. I'll first, start to give you a bit of a flavor of Zimbabwe numbers in the reporting period. As my colleagues have mentioned, we've seen significant growth in volumes in Zimbabwe despite challenging market environment, our volumes grew up by 38% year-on-year. And the biggest driver for this growth has been growing in the retail space as infrastructure projects. We've been able to maintain our market share in Zimbabwe above 5% with a slight increase year-on-year. However, our concerns have been the rising imports out of Zambia. We've seen the imports occupying between 20% and 25% of the market share. And this is mainly because of supply challenges [indiscernible] in Zimbabwe, [indiscernible] the northern market of Zimbabwe. With regards to pricing, in US dollar terms, we've maintained our pricing quite stable and I must give credit to the Zimbabwe team. ZWL terms, we did our best to check the inflationary cost increases because of ZWL pricing. What -- I also mentioned, we've successfully been able to get most of our sales, more than 50% of our sales in foreign currencies, which obviously generates what we call free funds that are needed for operational requirements as well as to pay dividends. In terms of industrial performance, the top achievements includes that in Zimbabwe, we've had several issues with power supply. But what is pleasing is that we've made progress with our 30 megawatt solar PPA agreement in Zimbabwe, construction as such has commenced, and we expect construction to start in the next 2 months. And the expectation is in the first quarter of FY '23, we should be connected to the new 30 megawatt solar power supply. Direct issue that we have at Zimbabwe because of the growing of the demand of cement with 28% growth in our volumes, we did 100,000 tonnes of clinker to support this growth in cement volumes. And we reported clinker from both South Africa as well as domestically to support this growth in volumes. In addition to the 100,000 that we require to support the 28% increase in volumes, we needed 60,000 tonnes of clinker to prepare for the 6 to 7 weeks shutdown that has been at Zimbabwe kiln. And I'm pleased to announce that we completed the [indiscernible] project end of -- beginning of June, and we've since set up the kiln. And going forward, we expect Zimbabwe to be self-sufficient with regards to clinker supply. In terms of financial performance, I would not really dwell much as both Brenda and Roland have commented. I think what is pleasing is the declaration of dividends after Zimbabwe using their free funds. And we are -- with this strong performance, we expect this to continue unless that situation changes in Zimbabwe. I can move to the next slide to cover CIMERWA. In that, if you all recall, in the first half, there was some concern about CIMERWA's volumes. In the second half, there's been a very strong recovery in CIMERWA. And this is driven by the infrastructure projects. As mentioned during the half year, we've won the tender to supply the new Bugesera Airport volumes, [indiscernible] our volumes in the second half. But also more importantly, we've been able to unlock export volumes into the neighboring DRC. We've seen our export volumes accounting to 18% to 24% of our total sales. And also the creditors are volunteering as the volumes grew 20% year-on-year while we fortunately have been able to break the record, we've been able to at this stage manufacture 110,000 tonnes of cement, which has been a record for our CIMERWA business. And also what we've seen with regard to our market share, we can gain our market share quite stable around 25% despite a new entrant coming into the market. Going forward, we expect the volumes due to the Bugesera Airport to continue as this project is still growing. And it is also pleasing to announce that we also won a tender to supply cement to the new stadium that is being built in Kigali. With investor pricing, our prices have remained relatively stable year-on-year. We had a slight price increases in Rwandan francs, but because of the strengthening of the rand in the Rwandan francs, we've seen our EBITDA slightly limited, but in dollar terms of EBITDA in Rwandan francs went up close to -- in dollar terms went up by almost 10%. Industrial performance, again, in CIMERWA, we had issues with our supply in the last quarter of the calendar year, but that has been resolved. Overall kiln in a year would produce the same quality of clinker and despite the increase in volumes slightly attributed to optimization of our clinker factor in our Rwanda business. On the cost side, as we've made commitment towards decarbonization, we continue to drive our own coal replacement in Rwanda. We've been able to achieve 12% coal replacement in Rwanda. And we are actually looking at additional sources of fuel in the nearing countries to continuously optimize our fuel usage in Rwanda. Fuel remains one of the big cost item for our Rwanda business. To drive clinker factor, we've also had additional cash to optimize the usage of [indiscernible]. We've been able to financially to convert some of our product offering into [indiscernible] with an aim to very continuously drive our clinker factor reduction program in Rwanda. On the financial performance, as I mentioned, EBITDA year-on-year is flat in rand terms. However, it's 14% up Rwandan francs. It's mainly because of the strengthening of the rand against the local currency. Njombo, we can go to the industrial slide. Okay, right. On the safety slide, if you look at the group performance in terms of LTIFR we've been able to reduce our LTIFR 0.26 to 0.19 with 0 fatality. And I think this confirms our efforts to provide a safe environment to our employees as they come to execute their functions. Next slide, Njombo, [indiscernible]. The next slide actually reconfirms our commitment that we shared to the market in November last year, already disclosed our TCFD commitment and our commitment to reducing our carbon footprint in the next -- June 2030 and our net-zero commitment in 2050. And on the next slide, I'll just give a flavor of some of the work that has been done in the next slide to reduce clinker factor. And one of the key levers for us to reduce our carbon footprint is the reduction of the clinker content in cement. And I'm pleased to announce today that we've been able to achieve a 5% year-over-year reduction in clinker factor, and this equates to approximately 160,000 tonnes of clinker per annum. And this very important, 1% of that clinker factor reduction equates to 7.5 to 10.5 [ kilograms ] of CO2 per tonne of cement. And this shows the importance of this lever in really achieving our commitment that we've made towards decarbonizing this industry. [indiscernible] the clinker factor across our business, we'll also continue to make sure that we run our kiln as optimum as possible. And on the next slide, it gives an indication of what we call NET OEE and as invested previously this NET OEE is computed by taking the available running hours of our kilns in a year. And we multiply it by production index, which is based on what we call best demonstrated practice. And [indiscernible] our OEE has remained flat, and this remains a very strong focus for us to mute the impact of inflationary cost increases and plan on our kilns as best as possible. We have faced challenges with power supply in both Rwanda and Zimbabwe. And with all the work that we're doing in Zimbabwe, we expect this to -- at least the impact to be reduced going forward. In South Africa, the biggest challenge has been the design challenges from SK9. After commissioning, we had issued on SK9 in terms of achieving design capacity, and that has been resolved and I'm pleased also to say in May, SK9 broke clinker production records to show the progress that we're making to us improving our NET OEE. And on the CapEx in this financial year [indiscernible] towards making sure that we improve our NET OEE on all operating units. And if you look at the next slide on thermal energy, you see our thermal energy year on year is also flat, which really connects quite strongly with our NET OEE trend. Because if you run kiln better, you should start deriving cost efficiencies coming out the thermal energy consumption as well as electrical energy consumption. And just to give a bit of monetary relationship between this thermal energy and rand instance, every 1% of thermal energy reduction equates to [ ZAR 135 to ZAR 150 ] per tonne of cement. And that shows the importance of this lever for us going forward. And one of the few things that you'll also look at as Njombo mentioned is obviously looking at alternative fuels. But some of our factories do include as well as Rwanda to see how we can optimize this lever in our efforts to decarbonize our business. Thank you.

Thank you very much, Mokate. Glad that the connection worked. And good luck with all you have to do in [ Ares ]. Ladies and gentlemen, I'll bring it to a summary and a close before we hand over to Kwame to lead us through the Q&A session. In summary, 4 bullet points. Cash generation is strong in the last year on the back of operational performance and disposal of noncore assets. With that cash generation, we have restored a solid financial position for PPC. We've implemented measures to improve our efficiencies and to increase our operating equipment efficiency, and we have completed our capital restructuring. Going forward, we will redouble our efforts to mitigate inflationary cost pressures that we have, and we will continue to focus on cash generation and are, of course, ready for any upswing in demand as it may come from the government-led infrastructure programs that are in the pipeline. Operational excellence is necessary for our business and will continue to be our focus, and we will continue to keep you updated on how we progress on some of the main indicators that we shared by Mokate earlier in the presentation. We can now say that we are building from a strong core and not just the strong core of the assets that we have or the people that we have. We can now also say that we're building from a strong financial position. We will continue to strengthen our market leadership in South Africa, Botswana, Zimbabwe and Rwanda. We will drive operating efficiencies hard. And there with optimized financial returns, accelerate decarbonization and continue to work on a culture that is always performance-driven. The enablers are our customers, and we are grateful for their continued loyalty. We deliver beyond strength of what sits in the back. It's our services, it's our people, it's everybody who makes it happen. We've introduced a culture of [ Jabali ]. [ Jabali ] stands for someone who is strong as a rock. And that is what our products stand for. That is what our people stand for. And I'm grateful to what everyone in team PPC has done over the last month and will do in the months that come. Our resilient financial position positions us well for the future. And therewith, I can now present you this slide once again with much more conviction as 2.5 years ago. With that, I close, I thank my colleagues, and I'll hand back to Kwame to lead us through the Q&A, please.

Okay. Thank you, Roland. We have a few questions on the webcast, Louise. The first one is from Anthony Clark.

Thank you, Kwame. you have actively engaged with the market, yet the recent FY '22 trading update shocked the market and the share price slammed over 20%. Today, it's back to ZAR 3.09. The upticks to the trading update and the PPC management and VCP sales earlier in the year now as an additional eyebrow. Please make a comment on these events. The upticks clearly do not come over well to the market in light of these moves.

I'll take the question. Thanks, Anthony. Look, the trading that was done in January, I'll need to look that way. The trading that was done in January by myself and not by broader PPC management, by myself and my partner, as well as my VCP has been explained at the time with the information that was available at the time. The trading statement that we released last week is an obligatory trading statement that we need to release the moment the Board feels comfortable with the numbers. And there is a 20% deviation in EPS and HEPS, which was the case. In that trading statement, we have also explained our EBITDA movement and we have spoken about cash generation. Everything you heard today is supporting that trading statement, and everything we release to the market in terms of the operational update at the end of March has been confirmed by the numbers today. As to the share market, the share price on the market and how it reacted that raised my eyebrow, not so much the other things that you've asked in the question, Anthony.

Thank you, Roland. We have a couple of questions from David Fraser at Peregrine Capital. The first one, was the 160 kilotonnes of clinker brought into Zimbabwe all produced by the SA operations?

No, David, thanks. No, it was not. And I'm taking this for you, Mokate. It was in your speaker's notes if your connection would fall away. 70,000 of that was coming out of PPC South Africa, David, and 90,000 was coming elsewhere. There are multiple reasons for that. As you know, we are operating in the South as well as in the North of Zimbabwe with our rare clinker factor. So it is much more efficient for us to purchase clinker from the northern part of Zimbabwe from our competitors. We've also paid that, by the way, in Zimbabwean dollars. And we have even brought in something out of Zambia. What we needed for the South, the 70,000 came from our operations in Slurry. You want to add something Mokate?

Yes, Roland. I'm saying one of the most -- one of the challenges is actually the capacity [indiscernible] that's why we actually had to resort to [indiscernible] domestic supply.

Fair enough.

The next question from David. What are the remaining debt levels in Rwanda split into local and hard currency, please?

I'll hand it to you, Brenda. It wasn't -- It is in the presentation actually.

Sure. Dave, no problem. One has got ZAR 377 million equivalent of debt at 31 March, and it's all in Rwandan francs. It was all -- so the facilities were already negotiated 100% local currency now.

Thank you, Brenda. Here's third question. The Rwanda volume growth appears to be on the back of low margin exports. Please explain the strategy behind this?

The Rwandan volumes that are exported are very high margin, actually. So there's no low-margin exports in Rwanda. It's actually -- sorry, if I may build just on the answer. As you know, the plant in Rwanda is very closely located to the DRC. So it's actually part of the natural market. I wouldn't call this export in the same sense as Vietnam is bringing exports into South Africa, very different.

I think he is referring to the margin...

But margin of our exports out of Rwanda is actually better than the margin we have on some of the product that stays in Rwanda.

We have 2 questions from Mark Narramore at Excelsia Capital. The first one, how much cash still needs to flow from the [indiscernible] sale?

Sure, Mark. So at the end of March, we had received everything bar sort of a net [ ZAR 13 million ]. So we owed [ ZAR 12 million ] due to a tax adjustment that we paid out early April, and they owed us the deferred consideration of [ZAR 25 million ] which was duly paid at the end of April. So as we sit today, everything has been received.

The second question from Mark. What is the current replacement value of cement asset? And what does that translate to on an EV per tonne metric?

It's a bit of a tricky one, Mark. If you build a new cement factory, you're probably talking depending a bit on how you build it, where you build it, USD 250 million to replace something that we have in one line in Slurry, so on SK9, looking to Njombo. So if you would multiply that -- for South Africa, we would build one -- if you have to replace everything, right? So let's say, you spend [ 200 million, 500 million, 700 million, 800 million, 900 million ] just replace to your assets in South Africa, I would say. I see Mokate nodding as well. I see Njombo nodding. So that's about the right number, Mark.

The next question from Roy Cokayne at Moneyweb. PPC had a strategy of expanding into Africa to take advantage of growth opportunities on the continent and diversify the company's income streams. That's what has happened to PPC's operations in the DRC and planned in Ethiopia imply a reversal and consolidation of PPC's future operations or are there still growth opportunities in Africa that PPC will pursue?

Thanks, Roy. We have agreed with the Board that our focus is on Southern Africa and not on Africa as a continent alone. The reason for that is twofold. We need to focus our resources, both financial resources as well as human capital resources. But of course, we have seen by some of the investments made in, for example, Ethiopia and DRC. Yes, there is high growth, but there is also high risk. And we have a duty to manage risk as much as enable growth. Our strategy in Southern Africa and our decarbonization strategy is what will lead the growth path, not so much further investments across any country in the continent.

And the last question for now is from Steven Hurwitz from 36ONE Asset Management. How is PPC able to extract cash from Zimbabwe when other South African companies operating in the country are struggling to do so?

Steven, I don't know about the other companies, of course, or I can't speak on their behalf. On our behalf, as mentioned by Mokate, more than half of our revenues is coming in other currencies. So it's coming in South African francs, U.S. dollars, et cetera. And under the South African exchange regulations, you can use those so-called free funds for dividend payments, amongst others.

We have a follow-up question from David Fraser of Peregrine. He has asked, with 20% volume growth, surely, we should have anticipated significantly better EBITDA margins in Rwanda. Why did this not come through? Were you unable to pass on input cost push into selling prices?

So you're not wrong there, David. The reason is that, indeed, the input cost inflation was very high. We have put a double-digit price increase through in this financial year to maintain our margins. Also bear in mind that the margins are roughly around 30%. If you go much more beyond that, you will start to attract even more imports that already are in the market. So this 30% is a bit of a natural barrier in the cement industry. There might be years that you go slightly above it. You remember, David, when PPC Zim at 38%, I said this is not sustainable. And that is the main reasons. We're also operating in an environment where, of course, the government will start to look at profiteering if we just milk the market completely.

[Operator Instructions] We have a question from Lonwabo Maqubela at Perpetua. Given the inflationary environment, why do you think pricing in SA remains weak relative?

I will hand it over to Njombo in a second, Lonwabo. A very simple reason for it is that there is an overcapacity, and we have competitors that are more focused on volumes than price. You have more.

I think that is it in a nutshell. What we said is we're going to focus on pricing in terms of PPC. And we have picked up price. But like I said earlier, it's a balance between the volume. We're quite happy with our market share at this stage. We are not chasing volume. However, when we start having an impact on the volume, we will actually be looking at our pricing. But I agree with you, I think cement in South Africa is actually underpriced.

And if I just build on that on what Njombo said, Lonwabo. You remember that when Njombo's team increased prices double digits 2 years ago, we did lose volumes. And when Njombo said he's happy with his market share, that means we are not willing to lose more volume on the back of price. We have also to look after our operating efficiencies.

Thank you, Roland. I think we can give a few more minutes just to see if any further questions come through. There don't appear to be any further questions.

If there are no further questions, we'll hand over to Kwame for the closing.

Okay. Once again, thank you, everyone, for joining us. If you have any additional questions, please don't hesitate to contact us. We've got our details at the back of the presentation and on the website, and we'll endeavor to try and get back to you within 24 hours. For those of you who are joining us after for the management meetings, we'll see you later on and enjoy the rest of your day. Bye.