PPC Ltd (PPC) Earnings Call Transcript & Summary

Good morning and a very warm welcome to PPC's Capital Markets Day. My name is [ Debbie Miller ], and recently joined the PPC team to head up the Investor Relations function. So we're very excited to be with you today. It's been a busy week with conferences and the like. So we really appreciate you taking the time out, and thank you for joining us, where we hope to be able to bring to life a little bit the words and the numbers that you read all the time. We'll be covering financial, operational and some strategic issues. So it should be a good day. The management team presenting also showcases, I think, the breadth and depth of the team. We've got quite a few team members who've traveled from far, Chrissie, Albert, thank you for joining us today. We also have a few nonexecutive directors with us in audience, [ Dan ] thank you traveling down. Nice to have you. There are also quite a few people who are not presenting that have joined and supported the team here. I'm sure you'll get a chance to chat to them during the tea and the lunch break. Please do take the opportunity. I think you'll find it insightful. SENS was issued this morning, so we have freedom to discuss the current quarter in a bit of detail. As you know, this is our pre-close for the 31st March year-end period. We have a full program and lots to cover. But we've left quite a bit of space for questions and answers after each session. So we're going to try and keep it tight so that we both cover the topics, give the people a chance to talk, but also a chance to hear from you, make sure that we're covering off the important pieces. So once again, thanks very much for joining you -- for joining us and ask Roland, the Group CEO, to give us an overview. Thank you.

It's a pleasure for me to stand in front of you to update you on the financial year 2023 that we're about to close in a couple of weeks from now. Allow me a few words on the agenda and on the various speakers because you will see in team PPC, a number of faces that you might not have seen. You'll see a number of faces that you have seen. And you do not see one face that you might have been willing to see here. Our MD of South Africa and Botswana, Njombo, is on study leave. He's doing an intensive course in Harvard. And speaking from experience, I was privileged to be there as well. This is intensive. So we have released him from his day-to-day job for a couple of months. That means that I have taken on a little bit extra in the form of HR. Brenda has taken on a little bit of extra in the form of finance. The big man Mokate has taken on quite a lot extra as he's now looking after South African Botswana for this space in time. So with me today speaking will be Mokate on South Africa and Botswana, supported by his colleague, Dave Miles, who is looking after our materials business. Then we have Chrissie. Chrissie is working with Brenda, but she's also a Non-Executive Director on the Board of PPC Zimbabwe for a couple of years, has good insights in the Zimbabwe business. She will provide the update on PPC Zimbabwe. And then we are lucky that we have Albert with us as well. Albert Sigei. He is now working with me on a number of topics. He was the CEO of CIMERWA until January of this year. He handed over, but is still, of course, well entrenched in what is happening in Rwanda. We'll give the update of CIMERWA. Then we also have Delon with us. Delon has spoken to you in the last Capital Markets Day on our various operational initiatives. Today, he will specifically talk about decarbonization. And I would like to take the mixaway that decarbonisation is a costly exercise without returns. So the main part of his presentation is to give you insights into why we are saying that these projects are all value accretive. And we'll give you some insight in what the paybacks are and what the type of projects and why they are value accretive. The good thing of decarbonisation in our business in South Africa is that we're not yet having to make the trade-off versus environmental and financial returns. For the next 5, 6, 7, 8 years, they go hand-in-hand in the South African context as well as in the Rwanda and in Zimbabwe by the way. Then in the broader team, allow me to introduce as well in the back, Johan Vorster and Becky. Both of them were at the prior Capital Markets day. They're looking after our South African cement market in Inland and in coastal, very different dynamics, and we'll touch upon those markets. And then we have as well Simphiwe with us. Simphiwe is the man to ask your questions about hyperinflation. He's the head of our group reporting, and he knows all the Evraz in and out and keeps us on the straight line when we sometimes want the challenging things from an Evraz perspective. Next to Simphiwe is [indiscernible] works with me has worked a lot with Debbie as well in the preparation of today. Thank you for that. [ Eileen ] was here as well already at the previous Capital Markets Day, she's looking after our environmental and health and safety aspects across the group. And Anashrin is known to many of you. He is back with us. He sort of did a little [indiscernible] outside. We're very happy to have him back heading up marketing and specifically looking at business intelligence. So with that, I have introduced the team as well as the agenda. I'll give you a brief overview of the main points, and then we go into what we sometimes a little bit locally refer to as the 3 buckets. The South Africa Botswana bucket, this Zimbabwe bucket and the Rwanda bucket. That overview is always against this backdrop. You saw it in the video. We exist to empower people to experience a better quality of life. And we look at our business through the elements that you see on this slide. We are cognizant of the fact that capital has been provided to us, both by yourselves as shareholders as well as by banks and that we need to have a financial performance, so there is a return on that capital provided. The way how we do that is to look at providing the market with a product and a service that customers are willing to pay for and willing to pay for it in the extent that it covers our cost of capital. Once we have that product and that market, we obviously need a group of people who are willing to go the extra mile in order to serve those customers and do that safely and at the lowest possible cost. In my philosophy, once you have those 2 in place, process excellence becomes a lot easier, but it is an important element. We are a capital-intensive business and managing our costs and making sure that we have a cost leadership position is crucial in order to go through the cycles, and we will talk about the cycles today. We do that with a purpose as well as with a sense for corporate social responsibility. The company has been in existence for more than 130 years. And we have always been mindful of the impact that we have on society, be it the communities where we operate, be it the trucks that we put on the road, et cetera, et cetera. And of course, underpinning that is proper governance and compliance. Now this is not just whether you call it a nice slide or not, I leave to your judgment. This is not just a slide. Actually, behind all of these are measurable indicators that we look at on, for example, within the Exco a month-to-month basis, reporting back to the board on a quarterly basis in each of these areas. So when we talk about delighting our customers, what is our number of customer complaints, what is our retention rate in customers. When we talk about people, we recently completed an annual engagement survey out of which come actions, are those actions being completed. Financial -- sorry, process excellence, the obvious things that we talked about here before. What is the equipment efficiency, what is the mean time between failures. All of those are measurable indicators. Financial performance throughout the P&L and the balance sheet, where we always look at the bottom line, the 2 most important ones for us is the free cash flow generation as well as the margin -- EBITDA margin. Those are the 2 main drivers, and we'll talk about those today as well. So that is the context of our overall group. Some key considerations to frame the discussion that we have today. If you look at the graph, you've all been familiar with the journey that we've worked on over the last years. And we've always been saying we need to deleverage. We need to deleverage, we need to deleverage. And the cash that we generated has been all used for degearing our balance sheet, degearing our balance sheet. You will hear from Brenda today why we believe that we are reaching our optimal state in the balance sheet. That will then enable us to allocate capital to distribution back to shareholders. So that graph, you will see changing now over time. This is something we spoke about last year, and it is a moment that despite the difficult trading environment across South Africa, we will reach at the end of this month. On the other part of the slide, I just want to make it very clear because there are still questions that I'm getting about legacy issues. Those legacy issues are behind us. We have deleveraged our balance sheet. We have decided that we focus on Southern Africa to the markets that we consider core, where we want to apply our resources or South Africa, Botswana and Zimbabwe. Obvious question then, what are you still doing in CIMERWA. Some of you have picked up some Bloomberg rumors about that yesterday, the day before. CIMERWA is not part of that. So we do believe that at some point in time, CIMERWA is better off in the hands of someone who is in that region and can draw the synergies of that region. When that moment is, that all depends on whether somebody sees the same value in the business as we see. At this stage in time, that's why we haven't communicated anything. There is nothing of substance that the Board has decided upon that we have to communicate to you. So that is how our portfolio works. Whilst I touch upon rumors also, there were rumors on PPC Zimbabwe, PPC Zimbabwe forms part of our core. We have received on the back of the Lafarge transaction unsolicited offers as well for us in Zimbabwe business. In the beginning, they were not very serious. They have become more serious over time. And then the Board has a duty to assess them on their value. At the moment, same as for CIMERWA, there is nothing that the Board has in hand that it can actually say yay or nay to. So that is our Southern African focus. I'm going to talk about the DRC once today that is now. So if you are interested to pay attention, the legacy issues in the DRC are done. So the DRC is deconsolidated from our balance sheet. We have an agreement to support PPC Barnet with management and technical services. We get paid for that, and that's where it stops. Governance overall has improved significantly, and I'm very comfortable to stand in front of you now, much more comfortable than the first time I stood in front of you that we actually know what we're doing when it comes to numbers, compliance to laws, et cetera, et cetera. And that helps us as well in dividing in putting management time and management attention on a deeper understanding of those numbers and making sure that we drive those numbers all in the right direction. If we look at the environment in which we trade, South Africa, volume and price is an issue, and we will unpack that more when we talk about the South African business environment. In our view, it is there to stay for a while. How long that while is, how long is a piece of string? But some of the fundamental issues in South Africa around transport, around electricity, around the lack of infrastructure spend will not change. So in our projections, we are not counting on a big uptick in volumes anytime soon. We are ready to provide those volumes. And when they come, we will serve them to the market. When we talk about the South African cement market, we have stated before and I'll repeat it, that we are happy with our market share. So we are not looking at growing our cement market share. When Mokate talks about South Africa, he will explain to you that we have a different market dynamic in what we call the coastal region, which is basically with this part of the country and our Inland region, which for us predominantly is Gauteng North West, Mpumalanga, Limpopo. High competition. And we have seen that on the back of price increases we implemented in June last year that our market share has come under pressure, and that prohibits us in increasing the price premium. Also the fact that there's less disposable income available. You've seen all the retailers going down. People are trying to look for ZAR 1, ZAR 2. So we cannot sustain a ZAR 5, ZAR 6, ZAR 7, price differential on the bags. We'll talk about, of course, inflationary pressures that we've seen. I would like to congratulate the team, especially on the way how they contain distribution costs. This was an area of focus that we -- that I said in one of my first meetings here. This is an area where we have space, and we're seeing now the benefits from that. We'll show you a slide later on how our distribution costs have evolved versus external inflation. Variable production costs well contained, but still growing in low double digits. This is against the backdrop of the coal price increases that we have witnessed as well as continuous electricity cost increases. We are energy-intensive. So we will need to do further work to make sure that our electricity and energy consumption goes down, and Mokate will unpack that and to some extent, Delon as well in the decarbonisation part. Fixed costs, they have increased circa 4%, slightly below inflation. We do see opportunities in our overall fixed cost base, and we will address those in the months ahead because we believe that in order for us to improve our results, we have price to some extent controllable, cost we have controllable. The volume, when it comes, it comes. Capital allocation and returns is something that Brenda will unpack. And I'll show you that we have not yet achieved our cost of capital in South Africa. We are achieving a return on invested capital above our weighted cost of capital in Rwanda. Zimbabwe is difficult to calculate because of the hyperinflation accounting. As a team, I think we stand. We have depth across the jurisdictions. We are comfortable. I do think that it's fair to say that we know what we're talking about. We know what we're doing, and we have a plan in hand to go forward. These are the buckets, and I think it's important just to spend a little bit of time on that. So Zimbabwe and CIMERWA, where we have the ownership indicated on the slide, are there in their own independents. Their capital plans do not require any assistance out of South Africa, it's self-funded. There is some further gearing potential in these countries as well. So we are aiming and setting the targets for them to continue the dividend distribution and to grow those dividend distributions over time. That flows back into the SA Obligor Group that fundamentally exists in a cement business, Inland coastal in Botswana and the materials business, ready-mix, aggregates and ASH. And we will unpack the details of each of those in a moment. It is important to think about those 3 separately because we often get confused about the group. What is your group situation. Ultimately, the distribution of cash back to capital providers like yourself, is coming out of the SA, what we call the SA Obligor Group. And that SA Obligor Group is fed by the EBITDA it generates as well as by the dividends it receives from PPC Zimbabwe and CIMERWA. Overall risks, macro. So we are a macro dependent business. I've always said, and I've said it to the Board, luckily, I did it just after I arrived. All CEOs of cement companies look like heroes when the market is good and they all look like idiots when the market is poor. I currently look a bit like an idiot. The fundamental question is, are we doing better than our competitors? Are we able to implement cost reduction measures faster than our competitors? Are we the cost leader in this capital-intensive business? Do we have a sound balance sheet so that we can ride the waves of the economy. Our market leadership helps with it. The fact that we have scalable capacity, of course, helps with that. As I mentioned before, we are ready to produce the volumes needed to build the infrastructure and the fact that we have the product and geographic location. Part of the country goes different than another part of the country. South Africa oversupply, import competition. The imports stay. You might have seen in the sense that we have again made a point in a call to work with government to stop those imports and to do the job of controlling cement that is below quality. Especially in the Inland market, highly competitive. We see, again, people taking shortcuts. The President called upon business at the mining in Durban to get out of our armchair. I haven't been in my armchair for quite a while. Let me just leave it with that. Energy intensity is important for us. Clinker factor is a main driver and you will hear Delon talking about how clinker factor reduction leads to cost saving and how it also leads to decarbonisation. The same goes for alternative fuels and raw materials. Can we replace coal especially if you look here in the Western Cape, we bring the call over long distances. Can we replace it by tires? Can we replace it by what we call refuse-derived fuels, waste streams. Human capital, we have a strong team in place, but we also know that for introducing some of the newer technologies, we need to constantly upskill. We also know that we are an attractive target to the mining industry when it comes to our engineers. So we need to make sure that we provide an exciting work environment that people stay with us and continue skill development and succession planning is a part of that. This is a slide that I showed you at the last Capital Markets Day, focus areas that we have between FY '22 and FY '25. I was told if I press the button, things start to move, and there they go. So things have moved. Of course, when I stood in front of you a year ago, we didn't yet know what the exact impact of the Russian-Ukrainian conflict was. It has given us a setback, and you've seen it in our numbers. Our cost inflation is much higher than what we had anticipated. And there with exceeding cost of capital for the SA Obligor Group is going to take us longer than what I thought in February or January last year. But we have a path how to get there. Driving the OEE, we're not having it in red anymore. It doesn't mean that we're done, but we're on a good trajectory. And I think we're getting there. Asset and cost optimization remains our key focus. Those are the elements that we have in our control. As we speak about returns to shareholders, we continue, of course, with very prudent capital allocation besides cost and being a cost leader thinking through how you apply capital to the various parts of the business is critical. And Dave will speak about it when we talk about our materials business and how we look at each of the business lines that we have in there. With that, I hope I've given you an overview. I will hand over to Mokate to talk us through South Africa and Botswana.

I'm running a slightly different head today. So I'll give you a little bit of an overview of South Africa and Botswana Cement. And I'll touch a little bit on the market dynamics and I look at what we've done with the costs over time. And from the costs, I'll look at what other strategic levers, South Africa Cement in Botswana. And what are the key takeaways. I hope I will press the right button, let's do it. Okay. So if you look at the macroeconomic indicators for South Africa, it's a mixed bag. If you look at the GDP growth outlook, relatively muted. What is promising is if you look at gross fixed capital formation or some recovery in the medium term. There's been on the news quite a few of these projects that have been announced quite a few of them are on roads, infrastructure, water, renewables. I think in coastal, we've seen recent news publication of the Clanwilliam Dam. And these are the things that at least they bring a little bit of optimism about in the short term. However, I give what Roland said is if you look at retail, household consumptions under pressure. In fact, if you look at stats SA's publication on households or hardware, paint and last retail sector. Quarter 4 of calendar year '21 to quarter 4 of calendar year '22 ratio is 6%. We've seen some of the -- some of the retailers that announced the rough year results by the end of December 2022, they're showing a revenue decline of about 4%. And when we speak to some of our customers, they actually confirm that they're seeing a slowdown in the retail market. So these projects, clearly bring a little bit of optimism. There's -- Lesotho Dam that has been also been announced '21 as to when is going to start, but obviously, Lesotho is a key market for South African producers. So it brings a little bit of optimism in the near future. And Roland spoke about the dynamics of South Africa Cement landscape. If you look at Inland highly concentrated. And I think this is where we have a little bit of an advantage from a portfolio effect. In coastal last year, the performance was not the great, Inland carried coastal. This year, we're seeing -- we're seeing a swing where coastal volumes are picking up quite nicely. Well, Inland is under a little bit of pressure, particularly from the decline in the retail space. And also with these projects that are coming up, they are throughout the country with our footprint as PPC impedes us an advantage to actually supply most of these projects that are spread throughout the country. If you look at the other side, with the market size that we estimate including Botswana, roughly 13.9 million tonnes, fairly distributed throughout the country with Gauteng still the biggest market. But -- and followed by the likes of Limpopo, which is really a significant market for us. And with our presence in Limpopo with [indiscernible] facility, it actually gives us access to that market. And I'll explain a little bit more around what we call active capacity and mothballed capacity. So this graph actually before you start scratching your head, I'll try to contextualize it. So what we've done with this graph, we've taken active clinker capacities, and we assumed 80% net OEE. And in simple terms, 80% net OEE, you can say these skills are running 292 days in a year out of 365 at design capacity, producing clinker at design capacity. And then we convert that to cement using standard clinker factor of 70%. This takes the noise in your assumptions. And if you look at -- and then we compare that against demand. So if you look at this graph, and at the top there, we're showing different shocks that the industry went through over time. You see entrants, number 1, 2 and 3. I can comment about number 3 because number 3 is when we introduced SK9. And when we introduced SK9, we had to take inefficient capacities out of the market. In the top graph, the black one that continues, it shows if we run active capacity plus mothballed capacity as an industry, there's enough capacity to supply the market. But over the time, the clinker producers have soft mothballed inefficient capacities. And you say why are we now experiencing still a gap between demand and supply? And this is because we've got other people in our system. We've got imports. And I'll cover the imports slide later, but you also have blenders that absorb that excess capacity. So as clinker produces, we are the ones who have given up, to a large extent, volumes to these 700 producers, if I may put it that way, on imports which is unfortunate, and we are the ones paying carbon tax. And this 700 producers are not actually incurring a tax. And this is really the argument that we're actually posing with authorities. And this actually paints a picture of what has been happening with import. And you'll see this slide is slightly different to what you've seen before because we've never really shown you clinker imported converted to cement. And what you see that pink bar chart -- bar on the graph actually shows clinker imported converted to cement using clinker factor of about 60%. And as a rationale for 60% is because of our intel, we understand that with the slag importation in clinker, that clinker is converted roughly close to that number. So if you look at that, there's been a steady growth over the period, and there's a slight decline in 2022. Should we celebrate, I say no because it's not sustainable. The deadline is based on increasing fixed costs as well as the depreciation of the Rands. Should we really rely on that? It's not sustainable. What we're asking for is a fair level playing field for us as an industry and for us that have actually put a lot of money setting up these billions of Rands to build kilns and also creating employment with all our social investments that we put in this country. And that's the position that we've -- we're actually putting across with authorities. And we see what the tariff on Pakistani cement has done to the deadline in the volumes out of Pakistan. You see in 2022, a tariff is well distributed depending on the source of cement from Pakistan. And you can see the impact that has done. And this is really what we are saying to the authorities please level the playing field for us. We are continuing, with lobing it is under review. Looking at now. We can also look at other cement of other region. And there's already a study underway to prove that cement from other regions can constitute dumping as well. Okay. And based on the dynamics that you've seen from a volume and supply point of view, you can clearly see here, we're demonstrating our price increases over time relative to inflation. And as PPC, we've always said we have 2 price increases in the year. And we've actually kept our commitments to have 2 price a year and adjust our pricing in line with inflation. But you'll see towards the tail end that the gap is opening up. I think the Russia-Ukraine conflict has put energy prices in spiral. We've seen relatively in terms of our cost bucket, slightly higher inflation in the last 2 years. And unfortunately, the price premium that we already had in the market becomes very difficult to fully pass on that cost to the consumer. And that's why you're seeing that slight gap. In this -- in FY '23, we've seen a price increase of 5% to 7%, and we remain committed to really plow back on some of those cost pressures that we've seen in the next financial year. And as I said, with a very tough retail market with consumers, we're seeing a shift in our market. We're seeing a slight drop in retail and an increase in industrial. And the increase is not volume for volume. It's just a proportional shift that we're seeing from retail to industrial. And I think one of the things that stands strong for PPC is a brand, the quality and the consistency that we've been able to offer the sophisticated market. And if you look at our volumes, and there's been steady growth over time, in the industrial sector because of the value add that we provide to customers. Retail. We squeeze consumers is all about parts. 2 Rands makes a big difference to the consumer. And we've seen a limit of squeeze in the retail sector. And we remain resolute with our price increases there. The Greenshoots that are coming up on the project side, that can also provide a relief for us with regards to volumes. And this slide shows our cost of production, our cost of sales, distribution. As Roland mentioned, distribution cost remains a big cost factor for us. But what we've seen in the last 18 months, 12 months with Russia-Ukraine conflict, energy costs have gone up from fuel, diesel and also in South African context, our electricity prices have gone up quite high. If you look at stat SA, PPI published in January, roughly 12.7%. Our bucket of PPI 12% to 14% because the weighting on energy is slightly higher. But we've been able to mute that a little bit. We -- our internal inflation was roughly 11%. and is still purely because of some of the initiatives that we've implemented in the last 12 months. And some of them is we've focused on efficient units. We ran both SK9 and DK2 efficiently this year. It's one of the best lines that we've achieved. We've got OEEs. Roland spoke about between 78% and 83% throughout South Africa which obviously brings in industrial excellence benefit from energy consumption. Our energy mix is slightly lower from the thermal energy consumption. So we've seen a little bit of that effect muting the impact of inflation. And we've done some work around coal replacement, where we replaced expensive coal with cheaper coal at this -- some of the 2 Inland key operations. We're doing some work to get the tires up in coastal because, as Roland says, bringing coal to coastal is an expensive exercise. So on a distribution cost, I will cover a slide in the next slide, you'll see using FY '21 as a base, a lot of work has been done on our distribution cost. We've negotiated contracts. We've really optimize our routes. And we really squeezed quite a lot if you compare it to inflation on our distribution network. And we're continuously looking at optimizing our network as well as our operations to actually have a favorable delivered cost advantage to some of these key notes. Okay. So Roland covered some of them. I mean as I said, excess capacity is an issue with squeezed consumer spend, decline little in retail, we need that to be offset by infrastructure rollout to really lift up the volumes. What can we do about it? I think -- we've looked at cost optimization, cost optimization, cost optimization. I think that's the one lever that we have. We're engaged with the authorities, as I mentioned, around the issues of import. They're taking almost 1 million tonnes, which is really a big portion of the domestic volumes. And as part of the department that we set up on innovation is to really gradually drive implementation or delivery of innovative solutions to the market. We cannot continue just doing the same thing over time. We need to start looking at how do we differentiate ourselves from a product offering point of view to the end user. And I think that's one of the reasons that has helped us to steadily grow our volumes into the industrial sector because of the value add and the differentiation that we've been able to implement. Operational efficiency is really something that it has to be part of what we do on a daily basis. And I think there's been great progress in FY '23. Still a lot more to do. And we try to squeeze more work out of the rock to make sure that we get the best out of our assets. Electricity. Roland spoke about blend optimization in his slides. We know that the biggest cost when it comes to electricity is on grinding. So if we grind pure cement and blend, it brings a cost advantage, especially also now with the whole issues of load curtailment and load shedding, blending cost less power compared to pure grinding. So if you complement it to -- you also get a cost advantage because you can also refine your controls with regards to clinker factor control. As Roland says, clinker is our biggest cost. So we're looking at various -- some of those models to see how we optimize it and execution of renewables. At this stage, we've signed our first PPA. Obviously, needs to get to financial close before we can confirm the timelines is for 20 megawatts in Inland, and we are working on other PPA because we're seeing this as the way to go. And it's not only to secure power. It brings cost advantage from electricity pricing point of view. So that's some of the things that we're working on. Coal costs, clinker is your biggest cost market. And if we can really reduce the clinker and maximize extension while not compromising the quality of the product, it's really the way to go. And we're doing a lot of R&D work around how to activate clinker, how to activate extension to try and get that cost advantage -- alternative as I mentioned. And then on the human capital, there's a lot that we're doing. We've relaunched our cement technology training. We really get time to get our engineers best level with regards to understanding what are the key levers to optimizing our assets. So that's really a focus area. Okay. So key takeaways, very tough retail market going forward, greenshoots coming from infrastructure rollout and some of the other projects that have been announced. The weakness in the Rand and the increase in freight cost, they help a little bit with the imports, but we need that permanent solution and a permanent solution to level the playing field. We've got issues with rail network, we've got issues with electricity increases. At this stage, we do quite a lot on road because our rail is not in a great state. And how do we manage that with a sort, we're also looking at from a network optimization point of view to make sure that we don't get exposed to with regards to rail. Energy costs are increasing. We need to look at ways to bring energy costs down, a lot of R&D actually work ongoing to look at how we lower the energy cost internally. Again, set your asset, run it as efficient as possible and fast track the deployment of alternative [ rails ] to move away from coal. And be ready, be ready for an upstream because it shall happen. On the financial side, we've just given some sort of guidelines in terms of where we expect the volumes to end and selling price we spoken about it and also on the input costs. And then I will take this and hand over to my colleague, Mr. Dave Miles, who will actually give you a little bit of a view of where we are with our materials business and what are the things that we're going to implement in the short term to turn around the material business. Thank you.

Good morning, and thank you for joining us. PPC is seen as a solid company and because they put a prior history of 130 years, but over the last few years, we have developed materials business. And in many cases, a lot of people don't understand the materials business. And when you look at materials, we are actually 3 separate businesses serving 3 separate industries. The readymix. We are serving the construction industry, be it the small builder. So if you were building a garage, PPC, readymix would serve you, right up to major construction projects. The ASH, obviously, we're supplying an extender into the cement industry, the mining industry as well as the construction industry. And then we've got aggregates, which is purely -- mainly focused in on construction. And this financial year has been a tough year for the industry. And if we look at the 3 businesses separately, we'll start with ASH. Now ASH is a good, solid business. And it's critical to PPC, especially with the decarbonisation program. ASH, as Mokate explained earlier, is blended in with a cement to reduce the clinker factors. But ASH is running into an issue and it's called load shedding. If we got load shedding, the coal power stations are not running, which means there's no availability of ASH. So it's critical for PPC to have a secure ASH supply. And we are fortunate we have our operations at kiln which of all the power stations at the moment has the highest uptime. And Mokate was speaking of 80% uptime. [indiscernible] the highest uptime is actually around 62%. And we won't talk about the new ones, which are down at likely [indiscernible] which is next to nothing. So we do have a good source of ASH. It's a good quality ASH. It is going into the cement industry. The issue we have, if retail is thinking as it has been over the past financial year, the ASH business does suffer because that's where it predominantly goes is into the blending of the cement. It's a very lean business. It's actually scary how a few people we have operating the business. And the bulk of our cost is actually on distribution, which is sitting at 82% of our cost is on the transport because the power stations are out in the Mpumalanga, your biggest market is in the Gauteng area. We are looking at new applications for ASH. There's a lot of very exciting research being done by Eskom into soil stabilization, road stabilization, et cetera, which will expand the usage of ASH. We have had a decline this year of roughly 20% on the ASH sales. But going forward, it's actually looking more promising is that there's the -- we have secured projects for the new Lesotho Dam. We will be exporting up into Lesotho as well as the new expansion for blending plants on the PPC side. So going forward, ASH will look a lot more promising going forward, but it is a very cost-effective and profitable business. The readymix side is where we are supplying the concrete. We're taking the cement with our aggregates, ASH and giving you a finished product. It's integral to PPC. To a large degree, it is protecting the cement offtake. So our return on our assets and our margins are actually measured in combination with the cement consumption. Readymix at the moment is the largest bulk user of cement from PPC and it's always regularly in the top 5 offtakers. So that's a critical part to secure that cement offtake for the 2 factories up in the Inland region. One of the things with readymix is very susceptible to rate and a downswing in the construction. With the construction markets being in the total downstream at the moment, you have to try and move that business as far as possible to a variable cost business, which we are currently going to be doing and as SENS has announced. Material costs, believe or not that concrete is 65% of our selling price is just purely in materials. So if we can reduce those costs as much as possible, it has a positive impact on the bottom line. And doing that with the likes of ASH is also reducing the cost and also reducing the total carbon footprint. One of the areas that we have in readymix is we can take a plant, put it up for a project, so for a wind farm or a solar plant or a road project out in the middle of nowhere, do the project, take it down and move to the next one. And that's one of our strategies is to actually increase our footprint with projects. But at this stage, volumes are looking flat going forward. So cost containment and fixed cost reduction is the strategy going forward. On the aggregate side, and this is the business that has hit the hardest this financial year. We're sitting with 2 quarries located in the North West of Gauteng. And aggregates unlike cement or ASH actually doesn't travel much further than 30 or 40 kilometers. Further than that, it's just not viable and people will go to other suppliers. And with the area we're in with no infrastructure being developments being done, the business has been hit hard, and we have lost significant volumes. So we will be structuring that business in line with what our current market is asking for. So that we can get back to a positive cash contribution. One of the big advantages of one quarry Mooiplaas, which supplies a dollarmite. It's not limited to the construction industry. That material is also very suitable for use in the agricultural industry where they use the line to stabilize the soils. Now this year, with all the floods up in Gauteng, farmers actually haven't been plowing that much. So that was where we were negatively impacted. Also the metallurgical material where it's used in the processing of steel and then chemical, which goes to [ Sasol ] and they may actually make fertilizer for it. And that's going to be a big focus is to generate those markets going forward. And year-on-year volumes, as I said, similar to ASH, are down roughly 20%, between 20% and 25%. So in summary, the materials business is a vital part of PPC, especially on the ASH for the decarbonisation. And ASH will continue to carry on as it is, and there will be slight growth, and we're expecting slight growth in this new financial year. The readymix is a valuable member, and it's critical to the cement guys because it is utilizing a lot of their cements and it's protecting the margins as well. But we need to remember, we look at -- we measure the readymix in combination with the cement. Aggregates, yes, there is going to be -- we are going to restructure that business. It has to turn around. Otherwise, if it doesn't turn around, we will probably look at disinvesting aggregates, which is not something we want to do, but it has to remain cost positive as it needs to be a stand-alone business. It's not critical to the cement side. Hopefully, and I'm sure 2024 will be a better year for the Materials division, and it will return back to where it should be. Thank you.

Thanks, Dave. I'm just making sure [indiscernible] has got, we've got one question online. So we've got about 10, 15 minutes for questions. I'm just going to coordinate everything here. So I've got one question from Rowan Goeller from Chronux online. On cost increases, the industry was talking about aggressive price increases to recover cost inflation. This has not happened. Can you talk through the competitive dynamic in the market right now?

Thanks, Debbie. I've got Becky and Johan. I wanted to put them on the spot, but I'll tie and answer that question. And Rowan, Yes, there were announcements of double-digit price increases by various players in the market. We've seen one that is really stuck to go increase but off slightly overtime because everyone else -- some of them, they postpone their price increases. But in our case, double digit was going to imply that we increased our price premium in the market even much higher. In some markets, I mean, we had price premium in excess double-digit price premium before the price increase. So we -- especially in retail. So we actually had to -- our price increase was not double digit, but we wanted to make sure that we don't overprice ourselves in the market. But yes, some of them they postpone their price increases.

From the audience. Any questions? I've got no more questions online. There no more questions in the audience.

I'll put a question that relates to your competitors. I mean, if you operating at -- you're operating at sort of [ 20% ] EBITDA margin, where that leaves in [indiscernible] operating? And how do you guys stay in the market? I mean you think the cash positive at this point or not even there?

Well, I don't have that intel, but I can tell you I didn't take one to be like a scientist. We are shielded by portfolio effect, maybe exposed in different regions. And you can imagine somebody who just operates in an Inland market, probably a bit of [indiscernible].

If I may add to that, if I may, thoughtful, if you look at our Inland business stand-alone, right, either AfriSam and Lafarge and Sephaku and Mamba are doing absolutely something magic that we don't know about or your conclusion is correct. Follow-up question is, how long will it last? That I don't know.

The second follow-up, yes. Just in terms of the imports, I mean, you successfully got the Pakistan cement out. Vietnam seems quite large. And I guess the other component which I get worry about is that China is quite small. And with the sort of property issues they have with all the capacity, wasn't Chinese cement come into SA? And is it naive to you think that the government would ever do anything to change it? I mean, British American Tobacco having similar issues across the board, across all industries, it just seems like -- no one's getting any help or with stocking imports.

Sorry, let me just get my mic. If you look at China, they've got huge pollution issues, sorry. They have a huge pollution issue. And that's why I turn over time that actually discontinued running some of the inefficient operations. That's why you don't see a lot of imported cement out of China, because they are running efficient capacities to meet domestic demand. Yes, the risk remains Vietnam, and that's why there's a study at the moment to look at justifying our agreement that there's a possibility of dumping.

Just briefly, your one slide that doing blending. Is that when you're going to go into blending as the one question? And then similar to Paul's question, I mean if the guys are suffering, how is the blending market coping in this space? Is that an opportunity for you to, I guess, like you showed, you're producing all the clinker, you're not getting the volume. Can you gain net volumes? And if so, what's changed since back then versus now in your strategy?

So we're doing blending. We've been doing blending all the time. And remember, we bought Safika a while back. So we do blend. We are just expanding our footprint at the moment. Getting closer to the end consumer. We're setting up an extra blending facility closer to the consumer. That we should commission.

But then are you seeing those guys -- are you seeing the number fall down? I mean everyone is suffering from load shedding. Surely, they should also be hitting -- I mean, they don't have the kind of balance sheet that you guys have. So you're seeing some consolidation in the market, I guess.

So what you see is, I think the biggest thing is who is providing this blender with cement. Are we pricing our cement to the blender properly to encourage right behavior. If you give a blended bulk cement at a discounted price, they will just grow. And that's really the issue. So we need -- the only way that you can see a decline blended cement from independent producers is if the bulk cement is priced properly.

In terms of our strategy, it hasn't changed, we just build on what Mokate said. We are building a new blending station to serve the market in Limpopo. So where is the blender's competitive advantage coming from? It's number one if somebody supplying cement at a discount. It's also does he have access to cash or slack. So if there are strategically positioned close to a power plant, and it cost us more to distribute then might have a competitive advantage. So what we constantly do between Mokate, Becky and myself is to look at the market and say, what's the cost to deliver into that market. And could we put up a blending station there, right? The other question is, can we supply directly to a blender. So far, our pricing is not attractive enough to them.

If I can just ask a question around on the consolidation side. I mean if you look at talks about disposals in the future and where your balance sheet is and after those disposals, you'll be -- I mean, you've been quite a net cash position. I mean how do you think about -- is consolidation is not getting a lot cheaper and cheaper where peers are. And I mean, would that be a logical thing? Has that changed? Because I mean there's always been pushback on that and what's logical. So just anything on that front, what's changed? Is it making more sense? And are those prices around consolidation getting a lot easier to do? Thanks.

Look, I've always said that consolidation is not the answer to our problem on volumes. And that, of course, stays, right? Consolidation doesn't change any of that. Consolidation wasn't a theme in our management discussions, let alone board discussions because we were just busy with restructuring the whole thing and putting 2 bad things together doesn't like one to join that. Where we stand today, consolidation is something that we are more actively thinking about. Okay? Because we do know Lafarge was actively looking for a buyer, NPC was actively looking for a buyer. AfriSam we understand is in the hands of banks which are normally not long-term owners. We've done a study on what fits best to us. Benefits that we dare take into consideration our distribution and our admin overheads because one of the challenges that you're well aware of is the moment you go through the Competition Commission. One of the first conditions is you cannot use this to close down facilities. So there is no benefit in that any time on the short front. And then the next step is, is that a willing buyer? Is there a willing seller? And then you come to valuation discussions, and we're going through a cycle. So if you are currently sitting on a site that you want to sell something, you might want to say, look, maybe we need to wait a little bit. So it is more actively thought through than anything that I've ever been at PPC with, but it's also not something that is easy fix. You have competition issues, you have valuation and discussions.

I wanted to just ask on your Inland retail bagged market share. It looks like from cash build's results, there was a significant drop off in PPC's share. Can you maybe just comment a bit on -- was that something you -- was it pricing? Was it strategic? Just some comments on that.

So what you see with the cash build sorry, we're not done. The disposable income coming down. So price premium where 5 might have been acceptable. Now it's not anymore. So we also have seen though that in some of our independent customers and we're looking at Becky to coming through the details. We have been able to pick it up. But our Inland especially retail bag market. Market share, if you go to that level of detail has declined. We've picked it up partially in our industrial. That's why our overall market share in Inland is under pressure, as we say, but it hasn't fallen off the cliff. So we see that shift.

It is to do with the imports. You've been speaking about it for years now in terms of submissions and it's like. We've put in a submission. And I think Roland and Njombo is [indiscernible] away from the minister, not to speak him directly about it. What's the Level 2 plan or the plan B to put you that way? Because it just seems to -- there seems to be no resolution, not just in cement industry as somebody earlier said in other industries also where you have these dumping things like that.

The Level 2 is to live with it. And the only way to live with it is that you create a cement market ultimately in certain zones of the country that are particularly exposed, like you've seen in other parts of Eastern Africa. So you get prices that swing depending on the freight rate and your dollar exchange rate. And you get ourselves, for example, saying, well, we don't need to produce any more clinker. We'll bring in the clinker ourselves, and we start a grinding station. So you either play the same game and you become an importer. And you heard the video. We are very proudly South African, and we put it on our silo in PE. I'm not sure if you've seen it. And you would lose 400 jobs directly in the cement factory and a big number of them indirectly.

And your pricing would be on shall be all about show depending on...

Availability as well.

Availability.

So what's the roadblocks from.

I wish I had a blueprint for that, too. It's just an internal process. It's just taking too long.

It's taking a long time. And we do get -- and this was in the media, so I'll speak about it. You do get almost a tit for tat. So I'll give you a little bit of import protection, but you have to promise me prices don't go up. And we go like, well, we can't do that. Look -- we do that if you promise me that electricity doesn't go up for starters. It hasn't. Those are ridiculous discussions, and we're not entertaining -- we can't go down that. But hey, I have to be a bit careful what I say because we are in discussions. And we have to work, as the President said it, out of our armchair, shoulder to shoulder. But one thing, let the private sector do their stuff. And just give us a level playing field. That's all we're asking for. We're not asking for protection so we become a lazy industry. All we're asking for is look at the price of clinker in the boat, in the vessel in Vietnam, and you know that it is variable cost plus. And you've seen in Pakistan. Yes, it's appalling. It's -- okay.

We got 3 minutes left of questions. I've got a couple more online. I don't know if we've got more in the audience. I just want to give priority. Thanks.

Perfect. I just had a question just really on demand. You speak about this infrastructure green shoots. So I just wanted to understand, is the bulk market more or less favorable for the blenders? So given the kind of the nature of the market or actually it's...

Retail market.

Okay. So mostly retail.

Yes. Yes.

And then are you -- I mean it sounded like in the same statement that you're still quite cautious about the environment, very cautious and yet again, speak about this green shoot. So it's really a function of that you expect an acceleration in the decline in the retail market?

Yes. And we've also been cautious and we remain to be cautious because we want to focus on the things that we have in our control. And we don't want to fall into the track that we say, look at all the tenders being awarded. You guys don't worry. Everything is going to be rosy because we haven't seen it.

I understand. And then maybe just lastly, just on the competitive dynamics in the bulk market. Like is it a market that you naturally have higher market shares, et cetera, or it depends by region? I just wanted to understand how you think about the competitive dynamics in...

So the bulk market is a market that usually -- and Dave knows this very well, that likes a consistent quality of cement and prefer to be a good quality of cement. But it's in that order. Consistency is even more important than quality. The current producers, there are probably 3 in the inland market that can properly serve that market, amongst one of them is ourselves, of course. Blenders don't serve the market because they don't reach that consistent quality, and some of the integrated producers don't serve the market either.

The other thing is look at the one kiln operator, what makes sense to maximize our volumes to serve the bad market because you can extend your cement as high as possible. So what we've seen over time with this working operators, they focus more on retail because that's why they can maximize their volumes. Unfortunately, as retail gets under pressure, they start to start scraping off of bulk orders.

Also, sorry, sorry.

Go ahead.

What is important that the bulk markets are more sophisticated customers.

Yes.

So it is not that, that is a market where you immediately command huge premiums because you're dealing with people like Dave. They're big, they take big volumes. So they first talk about price, then they talk about price and then they talk about price. They have professional procurement departments in some instances. So it's a completely different segment where you don't necessarily, because you have less competition, would extract a lot more value.

Okay. We've run out of time, but I've got one more question then. I'm going to pose to you from the online. Please give an example of mothball capacity that you have in PPC. Also, do you have the mothball capacity in the market given your market share?

I'll comment on PPC's mothball capacity. I think in the slide, we talk about 4 kilns in length. So SK8, slightly soft mothball as well as kiln 1 soft mothball. Another [ 2 ] it's somewhere left the bank.

Great. Thanks. I think we've done in South Africa and butane. Thanks, Mokate, Dave. Well, thank you. Chrissie Moloseni is going to chat to us now about Zimbabwe. Thanks, Chrissie.

Thank you. Good morning, everyone. I think Roland did justice to introduce me to the -- to everyone. So I'm working with Brenda, and I also sit on the Board of PPC Zimbabwe. So starting with the market dynamics, I want just to recap in terms of the market in Zimbabwe. I'm sure you're familiar with the map of Zimbabwe. So Zimbabwe's market is divided into 2. They know the market and the southern market. The southern market is where we have got our strong presence. Though we have got a strong presence across, but our clinker facility is in the South, and also we've got a mine plant in the south and a milling trend in the north. So in terms of how our market is structured, you'll see that we have a very strong position across the country. We serve our customers using the facilities that we have in the south and, of course, in the north with a very robust optimization in terms of supply. The one thing that I wanted just to highlight on this map is what has actually happened during the past year, particularly related to inputs. So if you see in the north, we have actually seen a bit of an increase of imports coming from Zambia. So you see below the pie chart that shows you the regional market. So we're surrounded with lots of excess capacities in the region, starting with, of course, South Africa and, of course, Zambia. So we see some impacts of imports coming through, particularly in the northern market from Zambia, but also some bigger players coming from South Africa. And the other development that has happened in this market is one of our competitors in FY '22 increased their capacity from around 500 to about 900. That's competitor A that you see on the right-hand. But despite all this, PPC Zimbabwe continues to command a very strong position. And on the issue of the impact of the imports, the major driver has been -- and you'll hear me speak about it most of the time as we go through the slides, is related to our H1 major maintenance that took place in PPC Zimbabwe, and that's why we have had a bit of increases in the imports. In terms of the industry capacity, I think this slide is very important for us to understand in terms of how we have actually evolved as an industry. So the major players in the industry in the past 2 years have had some operational challenges. But with the improvement now in the overall equipment efficiency, we see growth. So that's the red bar that you see. And again, we see that because of that, there was quite a big gap in terms of the capacity and the demand. So the line that you're seeing in red is the demand overall for the national demand and then the red bars are the industrial capacity. Obviously, you can see the gap that is being filled by clinker imports and cement. So the clinker is PPC Zimbabwe, importing from the various sources either in South Africa or within the market or even in Zambia. And then also we see the imports that I talked about earlier. So clearly, there's been that gap that we have actually seen from FY '21. But the good news is the initiatives that we are in Baking and related to the projects that we'll be implementing starting from FY '24. So in addition to the initiatives to improve the OEE, our fly ash project that we're expecting to come to be commissioned in FY '24, we expect to release some capacity to the market and also the Calcined Clay project, which my colleagues will talk about it later in detail, that also we expect to release some capacity to the market. So this project initiated by PPC will -- in addition to decarbonizing or decarbonizing the industry, you see that there will be some capacity to clinker and, of course, cement. So the gap that has been created and has been filled by imports either of cement or clinker will be filled up by this capacity improvement to be done by PPC. Just to take you through our distribution channels. So the business Zimbabwe, we continue to see retail being the largest contributor to our total sales. It's our biggest channel today despite the challenges that we faced in the first half of the year. And we saw a bit of a decline in retail. We saw some massive increase in the construction segment and also mining. CPM and retail suffered a bit because of the product supply driven by the issues of the -- plant issues that we had, the major shutdown that we had at the beginning of the year. Having said that, we are still working on strengthening our presence through the retail space. That applies also to the contractors and the end users and also focusing on our CPMs. Clearly, it's a very important segment for us. And how we do that is to continue to have very close partnerships with our customers. And also, we have engaged actually technical sales representatives that support that take and also the construction. So construction is a major one as well followed -- following retail segment. As you can actually see, it's contributing 20% to 25% of our total volumes. And with the projects that we are seeing in Zimbabwe -- actually, I'll talk about it later. You notice that our growth in terms of the demand is being driven by the retail and the infrastructure development. And that actually comes under our construction segment space. So we are focusing on this space as well as it saves our civil space, super contractors, residential, nonresidential so that we can actually grow that segment. Another important point to note here regarding our distribution channels is also how we deliver our cement. Yes, we are currently at about 72 -- 77 to 23, split bagged and bulk. We're still putting together initiatives to grow that bulk market. And that's why we're focusing so much on the construction so that we can actually deliver bagged cement. And why bagged? This is where we have got higher margins in the bagged deliveries. And I'll come back to the issue, of course, that I talked about earlier. So PPC Zimbabwe, cost for us is very critical. And the -- not only because of the cost inflation that we talk about all the time, but it's just the general environment in Zim -- I mean the policy changes and everything else is quite difficult, sometimes very uncertain. So in terms of the contribution to Zimbabwe cost of sales, that pie chart, that's what it is actually telling you. Yes, our major challenge or major contributor is transport, but it's because of how we are set up. As I've explained earlier, Colleen Bawn, clinker is manufactured in Colleen Bawn and transported to our milling plants, which are miles away from the clinker production facility. So yes, transport is the biggest issue. But before I even speak about this transport, the challenge that we have had, particularly in this year, has been the performance of the plant. So that has got quite a big impact on the cost. In cement, as you know, if we don't run our kilns regularly, if we don't run them consistently, the challenge is always the cost because this means that your heat consumption, your electrical energy becomes very high. So the key focus area for us to address the cost in Zim is to focus on the industry improvement so we can optimize on our kiln overall equipment efficiency because that will bring us quite a lot of cost benefits -- cost-savings benefit. So now that we've completed and commissioned the big projects that took us quite a bit of time at the beginning of the year, the bag filter and the bucket elevator, the focus now is to optimize on the improvement of the industrial performance. That will bring a lot of benefits. Heat consumption will come down, electrical energy consumption will come down and various other efficiencies. Because if you operating the plant consistently, you avoid plant stoppages. There are so many improvements that you can actually benefit from the cost perspective. The other challenge that we have actually had in Zimbabwe is the stability of power. So we have had a lot of stoppages that relates to power. So we have done an analysis of this, and we find that most of our stoppages, when we really look at the Pareto analysis of what causes our stoppages in our operations, we see that over 20% of the stoppages because of power. So this is the ability of power is causing quite a lot of challenges, not only for volumes because we're losing volumes anyway we can produce, but also our costs are going up again because it takes quite a lot of energy for us to start when we stop to start the equipment. In addition to that, the equipment gets damaged. And as a result, our maintenance costs go up. So it is very critical for us to focus on stability of power, the quality of power. So what we're doing at the moment, you see it in the risks and the strategy levers that I've actually outlined in the coming slide, we are discussing with the power authorities. But most importantly, the projects that we are putting together for the solar for both the Blue factory and Colleen Bawn. Another factor that -- or key focus area that we will focus on to address the cost structure in Zim, this clinker factor-reduction initiatives. I think you heard what South Africa is doing is across actually the group. And I think later on, you'll hear from Delon in terms of the specific initiatives that we are trying to do. So that also applies to Zim. We want to secure extenders fly ash. The more we extend the clinker, the cheaper it becomes to produce clinker. And also in the medium to long term, we need to accelerate the execution of this lens on Calcined clay. And again, I'll leave it to my colleague later to explain more on this. Fixed cost is another area that we continuously look at. And going forward, we will also focus on this so that we can just manage our fixed cost structure. Logistics, as I've already mentioned before, the way we are set up, we are always looking at opportunities on how we can optimize with [indiscernible], negotiating the rates, trying really to understand how else we can actually bring the cost down because the challenge that we have with the transporters and in the environment like Zim, sometimes we push to pay in U.S. dollars that pushes the prices up. And just talking about the U.S. dollars, I think let me just preempt here in terms of the cost structure for Zimbabwe. So all these costs that you're looking at here, I will talk about the ForEx sales later, most of these inputs, 30% of these raw materials, packaging and part of maintenance we import and pay in foreign currency. But because of the situation in Zim where we are using multiple currencies, this cost roughly about 70% being paid in U.S. dollars and about 30% in the local currencies. I think -- I thought that is a very important point to just highlight so that we understand the cost structure in Zim. In terms of the risks, some of them I've already addressed, but production has been our biggest risk. But we believe that with a major maintenance that we had earlier in the year, in the first half of the year, extended KSD, not only did we do the bag filter, but we addressed other issues that were causing the stoppages. We are believing that our OEE -- net OEE will improve. Our industrial performance will improve, and therefore, be making our -- making available product to the market and restore our market share. And stable and consistent power supply, I've talked about it. The main strategic lever there for us is to accelerate the implementation of the solar solutions for both Colleen Bawn and Bulawayo factory. And I'm pleased to say here that progress has been made. We have signed an IPP with one of -- IPP supplier, and we are in the process of finalizing. We are hoping that finance close -- financial close will be reached March -- end of this month or early next month. And then we are really looking forward to commission somewhere in FY '24 -- calendar year '24. And then on a daily basis, actually, and this is really on a daily basis engagement to the supplier -- electricity supplier. A team continues to engage them to just see if they can actually help us to give us the power so that we don't have these inconsistent supply. So that is very, very key for us. Rising input costs, yes. So this, again, is a big issue with all what has happened with the commodity prices, particularly on the fuel. But our strategic levers have actually said, renewables, solar, clinker factor reduction, plant optimization, they are very key. We'll also face a logistics capacity issue. And our logistics capacity issue, we are believing that the use of the road negotiation with the transporters will help us to address that. We move our clinker from Colleen Bawn using the rail. So rail is a very critical logistics that is provided for us. Imports, I did highlight at the beginning, big issue for us, particularly during the year that we had some issues with the production. But now that, that is behind us, we'll be focusing on producing more and having also consistent quality products across the market and lobbying the ministry. Because we also saw some elements of important clinical imported clinker -- imported cement which has got issues with the quality. So again, we'll be lobbying with various authorities to ensure that we have got a fair -- level playing field as far as the quality of the products are concerned. Local regulation, this is a continuous, continuous engagement with the stakeholders and Ministry Reserve Bank. And again, repatriation, we'll continue to sell in local currency. In terms of ForEx sales, again, this slide just shows that we are tracking still well. Our ForEx sales continue to grow. We are tracking at about 8% year-to-date as of January, and these sales are coming from our domestic foreign currency sales. FDI continue to contribute to that. Diaspora platform also working. So this will help us to continue to repatriate dividends to PPC Ltd. The capital investments or CapEx for fly ash and everything else, our expectation is that we are going to gate date but with no cost to be PPC Ltd. And in terms of the key takeaways, 3 or 4 things for me. Despite the challenges of Zimbabwe, the demand continues to be strong. The market is there. What we need just to do is to work on production, focus on industrial performance, make sure that we secure the production to serve our markets and then we secure significant infrastructure projects where these are driving the growth in terms of the demand, restore our market share and maintain our ForEx sales or our sales in ForEx over 70% so that we can generate the funds to be able to patriate dividends. And financial expectations. So we are expecting that our volumes will decline between the ranges of 14% to 18%. And this is because of the gradual recovery of the market share following the maintenance work in the first half of the year. But we expect the dividend to continue to be paid biannually. And our margins are expected to recover in FY '22. Let me point out here that we do manage our performance in Zimbabwe using the USD parallel because we want to take out the hyper noise in our numbers. So all these numbers I'm talking about are based on USD parallel. So this is our expectation for Zim. I would end there for now. Thank you.

Thanks, Chrissie. Are there any specific -- I've got a question online, but is there anyone in the room that has a question for Chrissie. Charles?

Maybe if you can just help us a bit just with an update on the market dynamics in terms of general pricing per ton in the market. I mean, I think looking back in my notes, I think it was like $200 a ton in the 2015 period, but it kind of dropped down to $125, $130, I think, of late. I suppose where I'm going with it, this hyper inflation accounting is obviously a lot of nonsense really, and we're just trying to look at what is the reality on the ground, your capacity times by market pricing and trying work backwards from that point of view. So maybe if you can talk to that and then also just an update on the work back from kind of current market pricing to what you as PPC get in your pocket as well? And then the follow-on -- maybe a follow-on question is, obviously, you've had some expressions of interest in this asset. You can either look at it 2 ways of dividend model and you value adjust the dividend stream of USD 8 million to USD 10 million a year or you obviously have a stab at looking at it at the actual underlying financial performance of the asset. And if you're going to sell the asset, you're obviously going through that process yourself. And maybe if you can just talk to us as to how you think about valuing PPC at the moment.

Take the market questions.

All right. Okay. So I think in terms of the market, what I can actually say is that I think what we've actually noted over the past year or 2, we were able to put up as PPC quite a reasonable price increase, if I can put it that way, to recover our cost increases. And the pricing has -- I mean the market has been able to take the price increases. In fact, if I really compare '23 -- this year and last year, we have actually managed to pay double digit in U.S. dollars price increase, which the market has been able to take. Yes, of course, with the impact of the imports, there's a bit of pressure, particularly in the north, in terms of the pricing. But still, we see that the market has been able to sustain. And this virtually, highlighted in my key takeaways, that we have actually seen solid pricing over the period. And we don't expect that to change significantly, that the market will still be able to sustain these price increases.

We kind of are $150 to $140 per ton at the moment on market on average?

Mokate will the market.

I can take that, Char. So if -- and what Chrissie says is -- sorry, let me come to the front. The double-digit price increase that -- price increases that we've had in the last 12 months, we've seen prices returning very close to what we said earlier, close to $200 in retail.

In terms of the M&A activity, Charles, so we are fully aware that a lot of people look at our investment in PPC Zimbabwe on this dividend model. From our perspective, it has to be looked at, at the DCF model using the U.S. dollar, and of course, you get quite a significant gap, right? In my opening remarks, I did say that we got a number of unsolicited offers and that especially in the early days, they were too low for us to even consider them and bring them to the Board. And that was because they were most likely based on a dividend discounting model using all dividends on top of it, right? So those kind of things are not interesting for us. So if we are to be looking seriously at an offer, there are 3 considerations that we apply: number one is whether the value properly reflects the value of the business in terms of the DCF; number two, whether the counterparty that gives the offer is creditworthy and can actually write out the check and is not in a sanction list preferably -- not preferably; and number three, can the deal be done swiftly because we don't want a protracted, long sort of process.

The solar IPP, is that going to be signed in USD, the off-take agreement? And then how does that affect your dividend going forward? I mean because now your costs are going up. So maybe just what your costs -- you gave a split earlier, but how does that affect it going forward?

Our electricity has been going back and forth between USD and local currency.

Local currency.

We just switched back to USD and we hope in exchange to get a power guarantee. But if you want to pick it up further, the IPP is below...

Yes. So if you look at -- as Roland said before, the introduction of electricity is always in USD and purely because we signed an exclusive agreement with ZESA that they will ring-fence our supply and guarantee consistent supply of power. So we paid in USD for that. But when there was a shortage of currency, obviously, we raised our hands and say, so help me god. We don't -- we cannot really give you U.S. dollars. Let's go back to ZWL. So we went back to ZWL. And in recent times, discussions has been we secure you power, you pay a mixture of ZWL and U.S. dollars, and that's where we landed. And now they're actually moving more to U.S. dollars. In fact, we are in a lot of the pages around the payment of power. But the solar comes with a significant reduction in tariff. It's close to 65% of what we pay for the credit in U.S. dollar terms. So what the IP -- so the debt financier wants the money to be externalized. And we said, look, it's not for us to tell you that it's possible. You have to go to the reserve bank. So ours in Zim not so long ago and we -- they got a letter -- a confirmation letter from the money can be externalized because the situation in Zim is [ slicker ]. If there's no foreign currency, it's not a problem.

And maybe one more just on your plan. You obviously have planned CapEx rollouts. That looks like it's expansionary in nature. So how do you then affect -- how does that affect the dividend going forward as well?

You want to take it?

So in terms of the dividend, we don't expect any impact on the dividend because I think [ Vesola ] since it's an APB is actually basically off our balance sheet. So we've got a very small CapEx that will be investing in the solar just on the connections. Calcined clay is in the outer-years, but that has been already functioning to our cash flows and dividends will not be affected.

So the idea is that we debt finance.

Correct.

Yes.

Sorry, in the back here, [ Randy ]?

So can you just remind us with Zim -- I was just trying to work through sort of dividends versus free cash flow. But what is the payout ratio? And just remind us what is the payout ratio. And -- yes. And maybe give us an idea -- I was trying to work through numbers. I mean ZAR 8 million dividend, I don't know, 8% yield. You kind of get to ZAR 1.5 billion to ZAR 2 billion value. And whether that's somewhere in the ballpark or am I getting something wrong there?

So the business, under normal circumstances, should turn out about USD 30 million, USD 35 million in EBITDA. And it depends a bit on the CapEx profile. We don't have a -- we have a policy. But basically, how we're managing the dividend flows out of Zim is we look at the cash forecast and we take as much out as we possibly can twice a year. So that ZAR 10 million or ZAR 8.8 million as it was now will grow to ZAR 10 million. Once we do the Calcined clay project, this is a bigger project, we will refinance it -- we'll finance it through debt profile. On the valuation of the business, I'll leave it in the capable hands of [ Exco ]. It's plugging numbers. At the end of the day, look at the business, $30 million, $35 million on EBITDA, apply a multiple. The business is debt-free at the moment. You have numbers.

And although we've gone through a high-CapEx cycle the last 2 years, I mean, with all these big projects. So that should start to taper down, doing more maintenance CapEx out of our own cash.

Are we done? Great. Well, time for a break. So we'll see you back in here. I think we just make it 5 past 11. So we got a good 20 minutes. Thanks. [Break]

Welcome back, everyone. I hope you had a good body break if you're online and coffee and tea and refreshments if you were here with us. So we've been through South Africa and Botswana, we've been through Zimbabwe. And Albert Sigei is going to come and tell us all about Rwanda or CIMERWA. Thanks.

Good morning, everybody. Yes. So we move from Southern Africa to the Green Flex region, Rwanda, which is fondly called the land of a thousand hills. So like my colleagues, I'm going to take a very similar -- the same flow basically: market dynamics, and then we tackle the costs, and we move on to risks and strategic levers and then key takeaways. So starting with the markets. I think you've probably seen this map before. So Rwanda is [indiscernible] about more than 1,000 kilometers from the Indian Ocean in the Great Lakes region, and we are located here in the Southwest Cana close to Burundi and also bordering the eastern DRC, which is part of a natural market. So a natural market basically is Rwanda itself, Burundi and Eastern DRC. And we do -- in terms of flows into the country, we have imports coming in from Uganda, Kenya, from also Tanzania and exports gain -- going into the southern DRC, the South Kivu, which is this spot, and then the North Kivu. They not with very famous for the volcanic eruptions, that is where Goma is located. And most of the imports are coming from Tanzania. But our market share, we have managed to keep it within our target range, which is 40% to 45%. We've got one competitor or grinding station, and we are the only integrated player in the country. Our competitor has a market share in the range of 15% to 20%. You may want -- you may ask why, considering that we have around about the same level, 700,000, in terms of grinding capacity. Why do they have a lower market share? But it's simply because of the difference in business model. They are a grinding station, and we are an integrated plant. And also a big part of the capacities within the country actually purpose or posted to the export market, particularly the Eastern DRC, which is a very resilient market. Pretty soon, we hope to see another green arrow going to Burundi from our plant. This is a market where the borders have been closed for political reasons over the last several years. But the good news is that recently, those borders have opened up. And we -- trade of commodities is now possible. But they are facing some tipping problems to do with ForEx availability in Burundi and so on. So that's the market -- around the market. In terms of the evolution of the market, I think the good news is that this has been a market that has gone very steadily with a CAGR of about more than 10% over the last 5 years. And in fact, we forecast that the 2023 size will cross the 1 million metric ton mark for the first half. So it's a very steadily growing market. And this growth is backed up by good GDP growth and also a healthy pipeline of infrastructure projects or construction projects. Moving on from the market evolution. Now in terms of the supply-demand, you will see -- of course, we spoke about the market, which is around about 1 million tons by the end of '23. But in terms of the supply side, we are the only integrated player, meaning we are the only ones who produce clinker. And therefore, the rest of it is satisfied by either imports or grinding station players within the country. So the total active grinding capacity, in fact, does exceed the domestic market. But like I mentioned earlier on, they -- a lot of that is, in fact, purpose for exports. So a lot of that -- the red bars in servicing the export markets, particularly Eastern DRC. And maybe the one thing I can emphasize here is -- in this chart is the fact that we, therefore, continue to remain a clinker-deficit country. The amount of clinker in the country is not enough to support the cement requirement. And in fact, a lot of our competitors are importing clinker to serve their market share. One of the things that we have really worked on very intentionally is to increase or enhance the proportion of the exports in the market. And it's around about 1/4 of our total sales. And most of this is going to Eastern DRC. Actually, almost all of it. But like I said in the earlier slide, there is a green shoot in terms of a potential new market, which is Burundi, and we should be seeing that also contributing to our export sales going forward. And we're very excited at Burundi because we have the best delivered cost. The Bujumbura, which is the capital city of Burundi is only 100 kilometers from our plant. So as soon as those -- they are keeping issues and the route to market at least has -- the borders have opened up. But then as soon as we really have a foothold there and they're able to raise the dollars to purchase from us, then we should start -- we should see this bar going up a little bit on account of Burundi, which is good because it helps us to diversify. As the competition intensifies in the domestic market, we will be creating a new outlet in which we are very much more competitive as well. And then in terms of route-to-market channels, we have quite a diversified route-to-market channels made up of -- on the retail side, we decided to -- we like to split it a bit more rather than just saying retail into -- because they are really different animals at the end of the day. You've got the distributor that the whole tells what the bigger guys. Then you've got the smaller retailers and what we call micro retailers. And we also have construction, concrete product manufacturers and exports as discussed. So we are quite focused on growing this pie and strengthening our presence there in terms of the smaller retailers and the micro retailers because we feel that it's more solid when -- with intensifying competition. And we are doing this by various initiatives, including digital solutions for the last mile, things like e-commerce. We are doing this by doing things like partnering, standing in for them, those small retailers, in discussions with their banking counterparts so they can get a click up to financing and the like. So this is really important for us in terms of to grow it and to consolidate it and to solidify it going forward because it's more reliable in a highly competitive environment. So those are the -- that's the focus area. On construction, we are quite strong there as well. And in fact, a lot of the big projects, including the new Bugesera Airport, which maybe some of you may have heard about. It is an airport which when complete will accommodate about 14 million passengers per annum. It's being done in 4 phases. The fast phase is just under 2 million passengers. And the total cost when it's all complete will be more than $1 billion. So this is one of those where we're locked in. We are the key supplier at the moment. We -- in Phase 1 -- is in Phase 1. And that with the volume there alone over just slightly less than a 2-year period is close to $100,000 just from a single customer. So there is -- that is one of the areas where we are really focused on. And we are doing -- we are strengthening our offering there, including technical discussions and giving them solutions on various aspects, including the product itself but also mode of delivery, be it [ jumbo ] bags or bulk and so on. Most of our bulk is actually within the construction. And bulk today is around about 7% but growing as the market becomes more and more sophisticated and there's more and more of these major projects come through. So that's the route-to-market channels that we are focused on, quite diversified, as I said earlier on. Then coming to costs, the picture is similar to what you've seen from the other countries in terms of general splits with the big buckets being heat, heat cost, electricity called and alternative fuels. That's a very big chunk of our cost. Distribution, as you can see there, is about 17%. So -- and -- so we're taking a number of interventions to tackle this area and make sure that we are as efficient as possible. And this include optimizing the kiln performance through execution of critical projects. One -- and these projects are important because they will be able to run the plant at an optimal capacity. When you run it at a higher capacity, then it means your unit metrics, your heat cost per ton, your electricity cost per ton and so on and so forth are going to come down. So we have completed some, but there is a number. There's 3 specific ones: the raw mill -- the limestone dryer; the raw mill fan; and the cooler retrofit, which are then the next areas that we need to extract value from in order to not only increase our capacity, but also at the same time, bring down our costs. And plant automation because when you automate the plant, it means your controls are much better and you are able to run much more efficiently. And then clinker factor-reduction initiatives. We've done a very good job here so far, and you'll see it in one of the charts coming up. But there's still some efforts we are making to see how much further can we go. And some of these include R&D initiatives, just really looking at some new materials that we can utilize, including, I think, like in South Africa and Zimbabwe also, the whole topic the aside so on and so forth. But we are doing R&D on both extenders and also on grinding aid, which are good for cost and also good for carbon footprint, i.e. decarbonization. Alternative fuels, we are around about 10%, 15%, but we have a road map to invest a little bit there and grow the substitution rates much higher. So this one is also very critical. We use coal at the moment as the base fuel for heat. But we also -- we're using alternative fuels, rice husks. We started using coffee husks, and we use palm kernels, all coming from the region within Rwanda but also Eastern DRC and some of it coming from Western Tanzania. And then on logistics cost optimization, this is a factor of 2 things: one is the truck turnaround and the other one is the price of the transport itself. So to optimize the truck turnaround, we are looking at various things, including just improving fleet management, digital solutions. We have a good transport management system that is linked to our ERP, but we are looking at how to introduce digital solutions so that we can track the trucks that much better. And we've also rolled out our road safety program because -- a structured road safety program because we believe that there is a direct link between safety performance on the road and costs. So this is really quite an interesting area for us. So overall, we have what we are calling a cost-savings program because we believe that if you want to succeed, you must take a prudent approach whatever the topic is. So we are taking that approach on this topic as well so that we can identify the various areas and really drive them systematically. So in terms of risks and strategic levers, production challenges and capacity shortage, here is execute the response. Strategic lever is to execute our preventive maintenance program effectively. And I also spoke about the 3 key projects that we're going to be undertaking going forward. On rising input costs, I think we have touched on all of this. Cost savings, clinker factor and plant performance on repatriation, the response here is enhancing export sales. And as you saw earlier on, it's -- we are at about 25% today. And in fact, with that, we are able to build foreign currency cash because we have converted our debt to local currency. And therefore, the requirements on us on foreign currency are much lower than the inflows that we get from the sales through exports. And then in terms of dividends, we also expect a lot of the investments that we will be making going forward. We can -- we've got a very good balance sheet. So we can leverage it and be able to execute those projects. So that shouldn't also impact our dividend repatriation back to the group. In terms of regulations, we have a very strong and close engagement with various stakeholders. In fact, as you may know, the government of Rwanda through several bodies, 49% shareholder. So we've got a very close collaboration, and they are helping us in terms of engaging with the different bodies. So we engage the community. As we engage the local leadership, we engage the national leadership, environmental management authority and so on and so forth. These risks -- this risk of regulation changes is also helped by the fact that Rwanda generally has a very stable governance and a very predictable environment. And you've probably seen various rankings to do with the ease of doing business. Rwanda tends to come among the top in Africa. So this is one of those things that is really useful in terms of the growth environment. On skills, we are working very closely to -- on skills development and the focused succession planning. Then now on the capacity evolution, which I'm sure is a topic that all of you would be keen on because in Rwanda, we are generally -- to get -- we generally -- with the results that you will see, we have done this by remaining sold-out. And this has been our strategy to make sure that we sell everything we can produce by putting it on export or putting it on the domestic market. So last -- in 2022, we have moved from 64% to 71% in terms of production-level buses, what we consider to be benchmark capacity. So we've -- we added 7%. By 2025, we are hoping to reach 100%. And I'm happy to just share that the raw mill fan upgrade, which is this additional 4%, and the cooler retrofit, which is this additional 5%, we should tick those ones off this year during the next shutdown coming in November. And the next -- the remaining step change, therefore, will be on the raw meal drying solution, which is a project that needs 2-or-so years. And on this, we've done a lot of -- we've done everything in terms of preparatory work, the process of tendering. So there's 1 or 2 steps that is pending, and I'm sure we'll get on with it very soon as well, yes. So this is the progress on the cement equivalent, capacity improvement. Then on -- in terms of debt, we have transitioned from a net debt position to a net cash position in 2023. So again, speaks to the much strengthened balance sheet and a very healthy cash position in the company. And of course, all the debt is without recourse to South Africa. We anticipate to extinguish the debt by financial year '24. The good news, fast dividends were declared and payable at some point in -- before the end of this month or maybe early April '23, yes. And I think Brenda shouldn't stick into that one later on. In terms of key takeaways here, the -- externally, again, just to summarize, a very good recovery from after COVID. We forecast our growth in '23 of around about 6%. And as I said, CAGR growth of about more than 10%. Demand is supported by manufacturer build to recover, healthy project pipeline, good export market and all these initiatives that I don't want to repeat. We just spoke about them on costs, route to market, on footprint reduction and plant improvement. Now going forward, in terms of financial impact, the volumes in FY '23 will be expected to be flat because of a clear shutdown that happened in second half. However, we made very good progress in terms of price increase, and we expect our price increase compared to the previous year to be in the region of 14% to 17%. And that should show in the results. EBITDA margin, which should be within target, 28% to 32%. And they -- of course, I did mention the dividend declared, out of which the group should be getting around about ZAR 80 million after taxes. And that is Rwanda.

Thanks, Albert.

We are potentially looking to exit Rwanda. That seems to be interesting. I mean Rwanda seems to be struck the most appealing market. And you've got opportunities in export growth, dividends beginning to flow, stable government and a large contributor to the group EBITDA. Why would you want to move away from this market? And why is the specific focus on the lower end of Southern Africa as opposed to a very appealing Rwandan market?

Yes. I'll take it. Don't be confused with the now and what is coming. So Rwanda matter has 12 years life of mine. That's number one. So first of all, that plan to secure its long-term viability needs to find new limestone reserves. Those are not in Rwanda. Those are in the Eastern DRC. A lot of tension, certainly at the moment, between both countries. And from experience, to have a limestone reserve disconnected, distance-wise especially politically wise, which you [indiscernible], is a key risk going forward. That's number one. Number two, there's quite a lot of movement within the region. So quite recently, there was a new clinker facility opened in the, call it, the southeastern part of the DRC by a Chinese investor. They are building a grinding station in the Rwandan market. So there will be more capacity built in a growing space. We know that Kenya still has ideas of building new clinker capacity. So if you want to be a player in that region, you need to open your checkbook and you need to start investing so that you have a strong regional East Central African presence, right? Now when we went on our international expansion, that was originally the idea, that ultimately, you end up with a very strong regional network. What we've seen now is both due to the financial restraints that we have as well as human capital restraints that we have and the experiences that we've gained from projects in Botswana, Zimbabwe, Ethiopia, DRC and Rwanda that we are derisking our cash flows by focusing on Southern Africa. Now that means that [Semera], that's why I said in my opening statement, sooner or later, will fit better with someone who operates strongly in that area. And that's why we are open for computations right now. If we wait -- this is a typical thing, if you wait too long, you might become marginalized because people will start to make their plans without you. And for [Semera] I mean I'm speaking [Semera], where Albert was the CEO. That company needs to think about its future. They have a vision to be, a, how do you call it a significant player or leading player in the Great Lakes region. That's the [Semera] matter of our vision. That means partners that are willing to finance that. And we, at this moment, are not willing to write out the check for a couple of hundred million dollars to build a new cement plant. Does that answer it?

Any other questions from the room? Okay, a little bit. I've got 1 or 2 questions online. Please talk through the electricity supply and stability of this. And I think we've chatted a little bit about the limestone life supply. So we probably don't need to cover that again. So the electricity, yes.

Yes. Thank you very much. So on electric supply, there is -- it's been fairly stable, and the government actually has a number of projects. some of them based on a lot of renewables projects, but there's quite a number of projects that are coming on to the grid. So in terms of supply over the coming years, we don't see a major issue. If these projects are executed well, some of them are based on their gas -- on the Burundi, as you may know, on Burundi there is methane gas. So there is a very big project on power coming from there and a number of others that are either coming on stream are going to come on board very soon.

Thanks. Alberto, got one other one coming from online. How big is the Burundi market opportunity what has changed to open this market?

So what has changed in the Burundi market is basically, let's call it, showing of political relations -- as you know, there were challenges between the 2 countries, but we are very happy to note that progress has been made. And Talks of engagements have been made and the borders have been opened just the same way that the Ugandan border has also opened up. So it's basically improved relationships between the 2 countries. In terms of market size, Burundi, and I have to say, maybe has been constrained by supply. So perhaps the market size is understated, but it's in the region of perhaps half of the Rwanda market, 500,000 tonnes or so. But it's -- when their supply improves, that's when you will see the real market size.

I have no more online questions. if there's nothing else in the room. Thank you very much, Albert. There's one more, sorry.

Can you talk about the cost of your power in the cost per megawatt? And I don't know if you can have a slide later on in regions compare in terms of unit costs, especially when you talk about the ESG, whether it's power costs or water costs on that your distribution cost? Will you be talking about that later and then leave it for then.

We don't have a specific slide with electricity per tonne and what are the tariff costs and stuff like that. But Delon, I'm counting on you that you actually know more or less the different -- the differentiation. If you could cover it when you touched upon your decar projects, please.

Good. Anyone else? No. Well, thank you very much. Thank you, and we'll move on to Delon now, and he's going to chat to us about very topical things at the moment, decarbonization. Thanks, Delon.

Thank you. Okay. So good morning, so good morning, everybody. So let me get into our decarbonization update, which we came out last year and gave some feedback on. I think I'll start with this slide, and it comes off the bat of our November 2021 TCFD report where we put out in terms of what are the enablers for our decarbonization strategy. And I think what's important also to highlight at this point is over the past 12 to 18 months, there have been various forums, the World Cement Association, NBI more closely to South Africa that I've been talking about decarbonization. The NBI initiatives specifically looked at decarbonization from a South African context. And what has been very clear come out of that, and it's probably still going to be published as well. These enablers are not unique to us. Where the difference lies is where the different levers are more important than other and it's very region-specific and close to the market dynamics. But the enablers remain the same, be it within our industry or within the country as a whole. So throughout the day, you've been hearing about clinker factor reduction has been a very key lever for us within the South African contact. Just to provide some color on what is clinker factor reduction. So obviously, we make our product, which is clinker and it has a certain CO2 profile. Now the best way to absorb that CO2 is to add what is called supplementary cementitious material. Now why are they so important? One, they usually have a lower CO2 footprint. Two, they display very similar Cementation property. So it's an ideal constituent for us to drive clinker factor. Hence, such an important lever for us. And in this space, we've spoken about the use of fly ash, which remains a key lever. In Rwanda, we use Pozzolan, which we have access to very unique to Rwanda, a big plus point. And you'll see a lot of the initiative has been very much focused in Rwanda around that. One of the newer focus areas that has gained momentum is what is called calcined clay. And essentially, it's taking a raw clay, putting it through a thermal processor and producing a highly reactive product, which has very similar cement properties but a lower CO2 footprint and can be produced at a lower thermal energy input talking to the cost line. So clinker factor is a key lever. If we move on to electrical energy, we've spoken about it. Renewables has to be part of the mix. And my colleagues have highlighted the various initiatives. But over and above that, we're also looking at in terms of our normal asset management strategy. How do we go about replacing older inefficient equipment with more better energy efficient rate of equipment. So this forms part of our usual maintenance plan, and we'll continue to be a focus. You see the backup storage. And just to take it back to the Zimbabwe scenario where we spoke about the fact that we need to put a solar PPA, that PPA also has backup storage included in it, which makes the potential tariff that we've got even more enticing the fact that we would be in a position to actually run our plants for about 4 hours to ride out power outages, very unique and probably one of the first ones regionally, if I can say that. On thermal efficiency, alternative fuels, again, touched on earlier. It's about making sure our kiln life, which is the heart of our engine runs optimally. So the amount of energy we put in, we absorb it as best as we can. The better we do that, the lower will be our impact let's say, on a rand per gigajoule basis. More over on that is how do we move away from our dependency on coal. Now again, within the Southern African context, doing that in a responsible manner. The term that's being used the just transition approach. It's not only unique to South Africa, it applies to us [indiscernible]. So here, the focus I would say twofold, refuse-derived fuel, which is a fuel process from a waste dump into a very high catalytic value fuel and also tires, which is abundantly available in the South African region. So big focus areas. More over than that in terms of thermal efficiency is to embrace the fourth industrial revolution, the whole use of AI. Now at a very basic level, we do have what is called high-level control systems. It's been part of some implants to [cloth] on 20, 30 years, it's taking it to the next level. So it's not something unique to us, but it's something that we can build on. Training and development absolute must. It's been a big focus area for us over the past 12 months, and we'll continue to do so. OEE, again, a hot topic for us. It is something that we've been very deliberate on over the past 2 years, and we've seen gradual improvement. And all this means is running our plants at its design output and at a benchmark availability. That's easier said than done. But usually the issue of power supply. So we've been affected in various ways, some more so some less. Zimbabwe, for sure, has been the greatest impact twofold on power supply, so power quality, power dips and also power outages. And that's significantly affected Zimbabwe in the South African context. Yes, we have, but power quality as well has also started to form part of the play. But this also then talks to the performance levels that my colleagues have been talking about. In fact, with all the interventions we've been able to mitigate more substantial downside performance. even though we've had the power issue. So again, talks to the initiatives and what it means for us. So those are the enablers. Let's go through our ambition. So this has been defined. And like I said, back in 2021, when we launched TCFD, they remain unchanged. Our target up to 2025 is to get to the 680, which would be a 10% reduction. And to get to the 550 by 2030. So we've already started that process, but where are we tracking? So at the bottom there, you can see the year-on-year performance. And it's very clear to see from the 756, we ended off FY '22 at the 723 mark. And this year, we're probably going to be slightly better. Now again, given the background of all the issues we've had operationally, power supply. That's actually a very good performance. Factor in what Mokate highlighted earlier, the portfolio effect, the shift away from retail because clinker factor is a big lever in this. The fact that we can still show sustained levels of performance talks to the initiatives that we've been doing. The targets remain unchanged, and we are on part for that. So let's unpack a bit of the CapEx plan. And again, mentioned previously. So I'll start within the South African context, right? Because that represents roughly about 60% of this CapEx plan that we talked to, of which a big portion refers to the calcine clay work that's required specifically for the Western Cape. Now we've initiated that project, but we've been very circumspect and prudent in terms of how we move forward. And we've been focusing on ensuring that the resource that we have is adequately validated and also to look at options of how we can improve and get access to other resources. So we will focus on that and probably bring it to some sort of conclusion within the next 3 months and then move into the next step for calcine clay. In terms of coal substitution, again, very specific to the Western Cape. We've already initiated our project that will be commissioned end of FY '24. That will enable us to move from tire substitution, current levels of between 5% to 7% to maximize that 15% and that will drive directly down to our ramp of gigajoule did at the cost line. Rwanda, Albert just touched on it. there's, let's say, 2 of the bigger projects that make up the Rwanda CapEx. The one involves the clinker cooler retrofit, which is already a part of the mix and in the play and will be commissioned let's say, latest Q4 FY '24. And all that is going to bring us better efficiency of the cooling line with some better availability, which will translate to some better output. But to take that plant up to its nominal capacity. So full capacity up to design. We do need to initiate the bigger project around the limestone dryer. But our approach is first bet in all these smaller projects, probably move out the limestone dryer to around FY '25 give or take, but still a very important part of the mix. We've also already invested up to, let's say, FY '22, FY '23 in terms of clinker factor focus the use of fly ash, the use of Pozzolana specifically in Rwanda. So that's already in the play. We are ready to transcend our performance on clinker factor there. We are able to handle more fly ash. It's just a question of the availability in the market. In a similar vein, Chrissie mentioned fly ash in Zimbabwe. So we've done a Phase I that will probably look at about 5% use of fly ash within our cement mix. But the next phase is to move and transcend our product portfolio as we move from what we call the same tools, the same coal, and that will really drive benefit. And as you saw, the capacity impact on the slide Chrissie showed earlier. And then in general, across all our regions, we spoke about electrical energy the normal programs in play to move towards more energy-efficient equipment. So that in all, probably encompasses what our plan was, we put out and we are still tracking with most of it is just shifting and adapting to the environment in terms of time lines. So one of the things that a role in start off is about value accretion. As much as we are focused on decarbonization. These projects are able to stand on their own 2 feet. And I'll highlight a few things here. So firstly, it does talk to reducing our variable cost. And simply, that is supported by a lower terminal energy cost continue a cheaper, let's call it, alternative coal, cheaper coals or you use a cheaper waste fuel. And that drives directly to the variable cost line. Moreover, the lower you push your clinker factor. So for the same clinker, you can produce more cement, again, impacting the cost line. OEE, the better we run, the more efficient it would be, et cetera, et cetera. So what this table at the bottom was trying to illustrate and taking some of the projects is what are the impacts across those 4 levers. So I'll just use one example being calcined clay. So for calcined clay specifically, for the specific operation in western cape at it has the potential to improve clinker factor by 15%. More over than that, it will reduce our thermal impact or thermal efficiency by 10%. And again, like I highlighted, it's all about being able to use calcined clay that requires less energy input, so a positive contribution to our thermal energy costs. And also it adds to capacity. So you see a similar vein across all these projects. The key thing to highlight the payback years. All of these projects range between the payback of 3 to 4 years. The other key thing to highlight is all of these projects, I can say, remain value accretive without factoring carbon tax. We all know the carbon tax trajectory we virtually sit on. If you add this to the project, it makes it even more attractive. So then lastly, we have this plan. But like I said, we have to adapt. And 2 key things that have come up, let's say, in the past 12 months, we spoke about expanding our blending capacity. We see an opportunity. We've initiated it. A lot of that CapEx spend has already taken place in FY '23. We will commission, let's say, mid this year. But again, this is adapting to a changing environment. Calcined clay, in that original plan was pushed out towards the outer years, closer to 2030. But based on what we've evaluated for Zimbabwe, we've seen the need to bring it forward. And that's what we've now initiated. All in all, on track to achieve the 10% reduction within the CapEx plan, if not better, hopefully. That's it.

Thanks, Delon. I have no online questions. So great job.

We had a...

Is there anyone in the room?

Okay. I'll try and address electricity prices. So if I look at Rwanda, roughly in U.S. cents now per kilowatt hour is around $0.11, $0.12. Zimbabwe somehow fluctuates. It's very difficult to put a number to it. But back in the day when it was on a U.S. basis, it was close to $0.10, give or take. And then South Africa is very region-specific because we've got different municipalities. So it's very difficult to give you one number. But yes, that's where we're looking at energy cost. So I would say the big plants,I'm going [indiscernible] South African now. And remember, it's a blended because we have maximum demand charge as well. but let's say, around $0.80, $0.90, give or take. And if you go closer to the metro, then you start going into the upper wonder ends, give or take, close to -- Yes, ZAR 0.8, ZAR 0.9 a kilowatt hour. So South Africa is still on a lower start in comparison to what we see outside our borders, but catching up very fast for sure.

Maybe just a question on whether you have any insight on what your competitors in South Africa are doing from a decarbonization point of view? And maybe how do you think the competitive landscape changes in the next 3, 4 years because of it?

So competitor very difficult to say. But back to my earlier point of the studies that we've been involved in from a South African perspective, I think we see very similar trends, very similar focus areas. Internationally, very much aligned to what we are focusing on. Sorry, the second question?

[indiscernible] competitive landscape.

For sure. I mean, you've seen the input cost pressures are not unique to us. And they will be forced to up their game, move towards the space that we're focusing on decarbonization. And I'm sure there are aspects that they are focusing on as well.

Can I have my mic? Yes, good. Thanks. So if you look at what you hear you pick up, I recently picked up a hard to call from one of our competitors feeding tires in their clinker plant, very similar to what we're doing in the hook. I know that one of our other competitors is putting out in the market that they have a local clinker factor. So they're working on the same levers. We had one competitor saying that they had the greenest cement in the market but hey, that was based on imported clinker. So we sort of intervened and said that's foul play. What I want to say with it is that all these things are not rocket science. Everybody knows that. What is important is that the industry through the industry body has a dialogue with the government when it comes to utilization of waste. And that is what is specifically happening now in the, call it, the inland area, where you have most of the players, where we're trying to come to an agreement with the government who's having a problem with tires and we say, look, we can help you with that problem, but you need to help us with the CapEx investments that are coming with it. So there are dialogues ongoing. And I would say the landscape will change. If you look at for example, Europe, and it's a matter of time, probably that we get to this, maybe it's a bit further away. But your lowest clinker factor and your lowest carbon footprint becomes your competitive advantage, also in -- also cost point, but also towards the customers. U.K. areas around Central Francisco, even New York, they're change in building codes around this. But that's still a long way out here.

You touched deeply on carbon tax. In light of what you're doing terms of your decarbonization strategy, what is the impact of the current carbon tax trajectory on the business, PPC as all -- are you thinking about sensitivity analysis or the like? Maybe give us some numbers?

If only the carbon tax was wisely used, we wouldn't have this. Okay. currently still the impact is relatively mild. The trajectory is scary. If you just take the trajectory of the South African government but that will not come in. I cannot imagine a scenario under which that will come in play because then we would be pricing ourselves completely out of the market. So I do think that as the years progress, you will get the announcements from the treasury that it will tune it down. But the overall trajectory is up, and that's why we believe that ultimately, we need to be a leader in our lowest clinker factor or lowest carbon footprint as that will pick up going forward. This will become a competitive element.

So let's put it in terms of variable cost percentage. At the current trajectory, we're sitting, let's say, between 1.5%, 2%, right, at current rates. With the proposed rates that 1.5%, 2% goes up to 3% up to 6%. If the proposals that's been currently made take into effect in terms of allowances, that 6% jump to 20% of the variable cost. So massive impact, but it cannot happen. The industry wouldn't be able to sustain itself. So as expense within the current model for carbon tax, we're looking at moving from the 1.5%, 2%, up to a maximum of 6% by 2030. And we are going to engage to make sure the current model is sustained.

I was supposed to come back on but there are no more questions. Thank you, Delon. Appreciate it. And Brenda, you start. So we come to the really fun stuff and they put us in the dark. The hard text, the number.

Just good afternoon, everyone. Let me just maybe show you the format is obviously different to the various other presentations you've been through. So I'll first take you through how we manage the business, the leverage and the cash flow update capital allocation and capital structure, which is important. I'll end up on costs and then just take some key takeaways. But you saw this right at front with Roland, but I'd like to maybe just emphasize a couple of points because it's really important to understand. So we refer to this SA obligor group.And just to be clear, this is the entity, this entire entity on the left here that basically borrows from the South African banks. And each and every entity in that group stand surety for the obligations of at group and hence, the name SA Obligor Group. And what it does is it gets the dividends in from internationals and it uses those dividends historically to assist in the de-gearing over and above the EBITDA generated from its own operations. Going forward, it will support dividends to PPC or other distributions to PPC shareholders. Again, it's the Obligor group that determines the size of the dividend to -- or the distribution to the shareholders based on its leverage. And that's why we consistently talk about our target leverage while optimal leverage of 1.3x to 1.5x gross debt to EBITDA. That allows dividends to go to shareholders. The dividend flow that comes in this way also boost the return on invested capital, which will come to just now in terms of how we measure ourselves. Just looking at some [indiscernible] quickly, a few important takeaways we've consistently told you how bad or difficult the hype inflation numbers are and they haven't changed. And so we manage this business in U.S. dollars, parallel rates. And our key focus areas are cash flow and EBITDA. That's what we focus on and obviously extracting that cash flow out of them as consistently and regularly as we can. In terms of managing its performance, it's again, we manage cash because the return on invested capital is completely distorted by the hype-related balance sheet. In Rwanda, it's more normal, if you like, in terms of how we manage the business, very much like we manage the obligor group. We managed in rands. And we manage on its ROIC and its ROIC really exceeds it quite nicely. It makes very, very good returns on invested capital. I'll say it one more time. It's been said before, but both here and it's mentioned that all funding needs will be funded in country and have no recourse to PPC's balance sheet. So I'm not going to -- I think that all the points made on the top of the slide here, we have talked about -- just moving forward then to the gearing. So here, the slide indicates quite nicely how we've degeared over the years, and we expect to end the year at sort of between $725 million and $775 million. And you'll notice this is net debt. And the reason we talk about net debt now is we're starting to accumulate cash in the business. And we or the Obligor group, okay? So this is an obligor group slide one more time. And we're accumulating cash because we don't want to degear anymore. We've got a fixed debt repayment profile. We don't actually want to early repay. We're quite happy with our gross debt as where it is. And that's why we talk about net debt here. So strong cash flow support this reduction of debt historically, as I've said. It's still being the SA Obligor Group is still contributing despite the weaker margins. And we do see ourselves hitting their target of 1.3x to 1.5x gross debt number by the end of the year, which will allow distributions to shareholders. Right. We've spent some time on the CapEx and each entity has talked about their own CapEx. And this perhaps just summarizes some numbers associated with that. So in terms of -- and on the next slide, I'll explain the definitions of these -- how we -- what we talk about sustain, optimize, compliance CapEx and expansion CapEx. But in terms of the 3 buckets, just in that sustained optimizing and compliance. South Africa, we see leveling out at 282 to 310. That's slightly below the 324 that we stated in FY '22. Zimbabwe gradually reduces to about between $4 million and $6 million. And Rwanda normally in this spends between ZAR 40 million and ZAR 50 million. There we go. Can you hear me now. I hope you heard all of that before. But in 2024 and 2025, and I think Albert touched on it, Delon touched on it. That number is going to increase by about ZAR 170 million for that cooler and moan that you heard about. On the expansion CapEx, most of that 40 million, 50 million is the high-fold blending plant. And most of that, if not all of that, is the calcined clay project in this part of the world. Rwanda. You've heard about the warmer drying solution, and that's mainly that bucket over there. Zimbabwe, Calcine Clay and the fire storage. So just again, this is -- this slide really focuses on what we call below the line, EBITDA cash flow items. So just to, that's the CapEx. The other big 1 is obviously net working capital. We do see our net working capital do a little increase at the end of this year, somewhere between ZAR 60 million and ZAR 80 million, and that's really just to stock buildup. We really want to optimize our kiln shutdown periods, and we're just building up some stock at the end of the year. Tax was a difficult one. We have that really alarming effective tax rate. We really are planning to get that down to a sort of a steady 31%. The way we structured, just to remind you is, I mean, there's a good and a bad side of that higher rate. The bad -- the good side is we pay withholding taxes and all these dividends, and that pops that rate up. And we also have some expenses in PPC Limited that they get deducted largely a dividend-receiving entity. And as I mentioned before, we are not going to reduce our debt further from where it is at the moment in terms of its normal repayment profile. Right. Here, I think you've all seen this before, but just to remind you of our definitions for capital. So we have what we call compliance CapEx, and that is relatively easy to understand. we have to -- definitely have to actually spend in order to comply with regulations and our own fixed asset policy. Maintenance is really just maintaining our output. So without which we would either not would increase our cost or decrease our output. Optimization improves operating efficiency and it has a positive EBITDA impact. whereas expansion capital has the -- actually increases the output. Now clearly, given the position we're in, it's this area that is going to require a very strict capital allocation rules and debates is the balance of that capital that's available in this bucket to distribute between expansion CapEx and returns to shareholders. And clearly, that is something that we will look at very carefully in the sense that we've said to you before, Aspirationally, we want to get returns to shareholders going. So any expansion CapEx has to compete very competitively against that and really have returns that we believe are in excess of what shareholders expect to receive. Right. Just moving on to a concept that you probably see maybe not for the first time, but for the first time since I've been here. You will -- I think we've used before, the concept of a PPC. PPC economic value add. And I think we just -- and it's really not that different. We just believe that ROIC is probably a more used and potentially better understood term in the market, and that's what we're moving towards in terms of how we measure our holes. Just to summarize its that there's some nuances in the [indiscernible] key put, we take our EBITDA, we add back on depreciation because we believe depreciation is a normal operating expense. It reflects the on your operations and you need to add it into your expenses. We then deduct tax at the normal tax run rate. And then in PPC, the SA Obligor's case, we had dividends to that. Obviously, that's not applicable to Rwanda. But we add dividends received. And the reason for that is that in our invested capital, we include the carrying value of those investments into Zimbabwe and Rwanda. And that gives us our NOPATs or net operating profit after tax for the engineers. And then we divide that by invested capital. And that number must exceed our WACC. And suffice to say, we are not there. And that's ONE of our key focus areas. We are not achieving our WACC. We do think we will achieve it in 2 to 3 years' time, and that's our target anyway. We're currently just largely below 10%, and our target is over 15%. We only have 3 levers we can pull. We can price. As Roland said earlier, we can a little bit, but it's not really something we control. Volumes volume takes sits back to cost. Cost is the key focus area for this business to get back to a ROIC that exceeds our WACC. And I mentioned before, we apply the same methodology, excluding the dividends for Rwanda -- but we don't do it for Zimbabwe. It's let's just say, say garbage in garbage out is what's happening there to balance sheet. All right. Just to sum up before I move to the next thing is the resumption of distributions is now possible, we believe. We always have to caveat nicely. And what we'll obviously consider that it's probably stating the offers, but we will consider market conditions. I mean just the market is volatile at the moment. We need to consider our forward-looking compliance, maintenance and optimization CapEx. We can't stop spending in those buckets and run our assets the ground. I'm not too worried about the covenants, but because we well care there. I don't care about them, it's just that we sort of concern. But what we will focus on is that on a forward-looking basis, we maintain that optimal level of gearing. And you will note we have moved from using the word dividends to distributions. And that's just to make sure that everyone understands that there's flexibility in how we distribute that cash to shareholders. Right. Moving on to costs then -- so what we've tried to do here is just unpack the costs into its categories? Just so you have a nice understanding of what the size of each bucket is and whether it's variable or fixed. So at the top is variable production cost. So this is the total cost for SA Obligor in actually producing the cement and the variable cost base of that. And you can see the size of the number there, that ZAR 2.6 billion. And as you would have heard from -- it was Mokate, we've contained that to 11% year-on-year increase, circa 11% FY 2023, which is below the input cost of those things. That's the one that is driven by primarily electricity and coal and so forth. We then get our variable logistics and distribution costs. And that's the major cost driver and that one that's obviously variable depending on how many tonnes you actually deliver to your customers. That has had a very high cost inflation this year circa 20%, and we've contained it to that circa 12%. And then last but not least, is fixed costs and support costs. And these are really the costs that are the sticky cost in the business that either sits at the site or in sort of admin strike support. And that has worn a sort of a 3 to 5 circa 4% inflation. Roland mentioned it, and it's absolutely right. Our focus remains on cost for this coming year. We haven't been focused on it last year. We're not going to stop -- as I said on the previous slide, it's the key lever that we can control to get our ROIC to where it needs to be. The 4 areas that we've identified that will get particular retention in this upcoming year are those that you see there, IT, procurement, strategic marketing and support. So individual initiatives will be undertaken in each of those areas to further contain costs in this business in the coming year and hopefully, it obviously flowing through into the future. And then on key takeaways. I think I've said all these points, but just to summarize, cost, cost, cost and cost. Decarbonization, you've heard from Delon is also a cost delivery or a cost reduction delivered. And that makes us environmental accountable. Focused on continuing that constant dividend flow out of Zimbabwe and Rwanda. One more term, finance their capital on their balance sheets, maintain our optimal level of gearing. And we -- and I think those takeaways there then take us to where we need to be on the right-hand side of the thing where we expect our debt to be at 1.3x to 1.5x. We got to keep it there for the foreseeable future. And hopefully, those cost initiatives that I've now ruffled on about quite a bit. We'll get that road to where this to be.

I think that is me. Let's move on to questions.

Just thinking about distributions going forward. from Rwanda and Zimbabwe, it's kind of like a 6% dividend yield on your current market cap. Should we -- is there more in the SA unit as well that can be added to that? Or how should we think about that? I mean, I know you use distributions, I assume something about a buyback of some sort. So maybe just your thinking around that quantums as well be interesting?

The quantum will be -- and I don't want to give you a specific number because there's been a lot of debate that's supposed to go around there. But the quantum is definitely a combination of what we generate in cash in SA Obligor, plus dividends received relative to our gross debt subject to those good things. So it's that combination.

Just maybe if you can reiterate that flow from Rwanda that you're right, that's ZAR 80 million is that annual dividend that was mentioned earlier in the earlier presentation and it has that meant expected to change. I see there's obviously a bit of a pickup in their CapEx on a go-forward basis for those other reasons that you've just kind of gone through. Maybe if you can just talk to how you see that playing out going forward?

Sure. So maybe just if I could touch on the first dividend. So they did declare their first dividend and about CHF 10.5 billion, but it wasn't because they hadn't been able to the past was were very constrained in the past by the assess loss. So they would have lost the assessed loss if they had to cloud dividends. So that was completely utilized by 30 September, and that's why they're now into their first dividend payment cycle. That ZAR 80 million that we referred to is 51% of that after withholding tax. We are very fixed and firm and maybe Roland, you can -- that, that dividend profile, it's not a once off. And that's why we keep reiterating that their CapEx needs to be financed on their balance sheet. They've got very low gearing and there's debt capacity in country. So we don't -- that's not -- we don't see in our forecasting period. We don't see that being stopping or decreasing significantly at all.

If you go back to that ROIC slide, I'm trying to understand, you've got this EBITDA earnings before depreciation tax and amortization. Why are you adding back depreciation?

I can go back to [indiscernible] a because we are penalizing ourselves, it's penal to do so, and we think it's right. So EBITDA is before you've taken a depreciation hit. Yes, because we say it's a real cost. So I hear what you mean. So we reduced our EBITDA by the depreciation. Okay, fair enough.

I've got an online more broader competitive question here. Overall strategic question, should any of the competitors that are for sale go into Chinese hands? Is there a risk that might increase the level of Chinese imports? Overall strategic question, should any of the competitors that are for sale go into Chinese hands? Is there a risk that marked increase that might increase the level of Chinese imports.

So I'm making sure assumptions assumption on we're speaking about South Africa. So if any of the players become into Chinese hands, will that increase the Chinese imports? At the moment, we don't have many Chinese imports. There's a little bit coming out of the new Mozambique plant. So I don't think that a new Chinese player will change the import landscape drastically. We already have a Chinese player in the market. So one of our competitors is largely Chinese-owned. Will there be more appetite of any foreign direct investor currently in the cement market in South Africa? That's a question that I cannot answer, but the level of foreign direct investment, unfortunately, in the country is very low.

I just want to calibrate the size of the cost opportunity you still speak to. So you say ambitions to get to the 15% ROIC. I mean, what assumptions are you making regarding sales growth? You say if volumes are very difficult to volume growth is difficult to achieve price growth, it is difficult to achieve. But I mean, what are you actually taking into account on those factors, I suppose?

Coming up with that as a target?

Seems unachievable just from cost containment?

No, it's not. I mean, so let's start off the 15% you see there is our initial target because it just is over our WACC, okay? So that's the way that number comes from. To get the adjustment on cost is in that time frame is very, very tough. Over and above -- it's a high single-digit number cost cut over and above what we've done to give you a flavor of the sensitivity. So it's with difficulty as you've heard.

So the way we -- I'm not going to give you the exact budget for obvious reasons. But it is 3 levers: small one on volume, slightly bigger on the price and the biggest one on the cost. If you run your own sensitivity, which you should be able to do when you have the full Fs or do it on last year. And I stand corrected, Brenda, but if you just pull 1 of the 3 levers on price, you need about 10% up above and above what we expect for next year. We have increased prices a little bit in February, sorry, in January now. So that will have a role on effect anyhow over and above. On volume, it's 7.5% cost, it was 12.5%. So that answers your question. You cannot just do it on cost. That is for sure. So you need the 3 levers. That's why I said, costs, we have the most control over, then price and volume is what it is.

All 3 levers, even just little bit -- not little, but a bit from each lever can get us there. And that's what I estimate say as well. So it's not a target that we don't see ourselves achieving in that time frame.

Another important one is going back to what Dave said before, that we're becoming very laser sharp on a business like, for example, aggregates. We say, look, we cannot afford ourselves to have cash leakage out of a business that is actually not contributing to the core.

Yes, just a question just on the whether you'll be articulating a kind of a dividend policy now that you're in a position? I know it's still early, but something to the effect of a full pass-through of the subsidiary dividends and then plus x percent payout of South Africa and to the extent that there's no additional CapEx required. I just want to get a sense of how far you are and your thinking with respect to that?

I think our thinking has developed quite far and we definitely will be articulating the policy we see you at the year-end. But maybe just to give you linking as to what's in that thinking is we're certainly not going to -- well, all of this is still subject to the Board. So this is management's view. We certainly don't want to have a dividend policy that deals with different cash flow streams. We will look at the SA Obligor balance sheet. And what that looks like relative to all the cash flow that is being generated both from operations and dividends and for a policy around that relative to optional leverage.

And definitely as well around the cash, not around earnings given our hyperinflation.

I think a related question here. What happens to Rwandan cash flow when the debt is repaid?

Cash flow that I'm assuming the PPC -- the Obligor receives from Rwanda Cash?

Not sure, Brenda. It's I think at the moment, obviously, you're saying that you're going to go net positive on your debt profile. So now you're going to -- if you don't pay it all out, it's going to sit on the balance sheet. I presume that's the question that's sitting behind us. What happens to Rwandan cash flow when the debt is repaid.

I'm a little confused on the question. So in terms of -- it's referring to the Rwandan cash, that Rwandan cash will be used to fund some of their CapEx and the rest will come back as dividends to Obligor group.

And when you're talking about debt in South Africa, then you've made the point already that you intend to maintain an optimal leverage level.

Can you maybe just talk to the opportunity for buybacks if the share price is still kind of where it is at the moment relative to dividend return to shareholders, assuming that the status quo remains in balance sheet is where it is today at year-end?

So let me start by saying the policy is going to determine the pot of cash. Okay. That's available as I have just said now. Whether we apply that positive cash then to a dividend or share buyback is going to be a debate. It will be informed by where we view the value of our share in some instances relative to how we see the value of the share. If we think it's undervalued, that would be our strong preference. But definitely, either -- that is going to be the debate, but it is definitely on the table and that's why we consistently use the ware distributions. And the amount should be the same as what we would have declared out alternatively as a dividend.

I have no more questions, and has nothing else. Yes. So Roland, I hand over to you to close us down.

Thank you very much, Debbie. Closing us down? Something impressive. As I have one or 2 more slides, and then we can do another Q&A and then chat outside and take questions online whilst we're still with our online audience. Before I do that, let me first thank you for coming out, especially those here in the room but also those of you online that have taken the time, I'm listening to the presentations and I'm passionate about this stuff, and I should be. And I was thinking about -- we're talking a lot of details on our business on making cement on OEEs and decarbonizing. And I do hope that you find it useful to understand and contextualize the numbers. We do also invite you to give feedback. I was chatting outside during one of the breaks our intention is now to have 4 interactions per year, call it. 1 in March, 1 in September, just before we go into close periods, either on the back of a conference or something like this. and then 1 more focused on the financials when we do our year-end and when we do our interims. And we welcome your input on what the format should be, what works for you, what doesn't work for you too much detail, too little detail and so on and so forth. This slide you've seen before, and I stand to this slide. If you look at the investment case for PPC, it remains a company that is performance and returns focused. With leadership positions in the markets where we have a presence, Botswana, Zimbabwe, South Africa and Rwanda, especially valid for South Africa well positioned to take advantage of structural growth and infrastructure demand. Decarbonization, I hope we have been able to demystify a little bit and unpack the fact that, that is just a cost. No, it is having a benefit as well. So all these projects are value accretive and they lay the foundation for a sustainable business going forward. I'm glad that I can now say that we have achieved an optimal balance sheet structure so that we're not only having to announce that we have generated cash in order to pay down our debt profile. We can now swift to distribution models, as it was outlined by Brenda. And I hope that if you look at this part of the room, and if you have a chance, you look deeper into our organization that you see an experience focused and motivated team that despite external challenges and Brenda talking you through the numbers in the dark, is focused on performance and generating the returns. This summarizes in the last 5 bullet points. I'm not even going to repeat all 5 anymore. I think you've heard them as they always say, tell your audience what you're going to tell them, tell them and tell them what you've told them. I'm going to ask you, read what we've told you. And with that, ladies and gentlemen, let me open once more for Q&A if there are. And if not, it's over to Debbie to close us down, close us out or whatever she wants.

Okay. I'm just taking online, do you seem to be one or 2.

I mean, Roland, just maybe talk us through your plans, the commitment to the business more medium term where your head space is at the moment?

So I have a 4-year contract that ends in 2023. As we said at the interims, we will tell you in June where the Board has landed in terms of the future leadership for the company. Firstly, I have certain ideas in my mind. I'm not going to tell you because I'm focused on the now in here. And so is the team. In the moment, I'll tell them, I will stay, some of them might go the moment I say, I go. Some of them don't listen to me anymore. So if you don't mind to wait, Charles, I appreciate it.

Okay. I've got 2 other questions or Roland from Rowan here on lung. The big cement retailers have not been very brand loyal, particularly as demand weakened after the COVID [DIY] boom? Is this still the current situation?

Rowan, as we indicated, the customers of the retail business are ultimately the ones that drive the traffic. So we have seen the disposable income coming down, so people becoming more price sensitive. And if, let's call it, the major retail brands, even if they're loyal, if they start to see their customers go to other shops and spas and whatever you have to buy other brands. It's logical that they need to make reactions as well. So I wouldn't personally see it as we expect the major retailers to be loyal to us or to any of the other major brands. We need to make sure that we deliver cost at -- deliver a product at the lowest possible cost and manage that premium properly. What is important to me is that especially the large retail players are quality conscious. So what we have seen, and I know this is not the job of our customers, it's a job of the regulators, but we have seen cement bags that are underweight that are not performing. And I would find it a shame that some of the good brands that we have in South Africa and the retail space are selling crap.

Is government enforcing local procurement rules, particularly with large road projects? Does imported clinker count as local after local grinding?

So unfortunately, the government projects are not massively present. You did hear when [indiscernible] awarded to the Chinese whole uproar. -- they committed to local content. If you look at the player in the Port Elizabeth area that imports clinker, they have an exemption, so it doesn't count the rule. So all with all, this rule is helpful, but we need to see it in practice. You're not allowed to drive through a red traffic light either.

We don't see any of those, do we? Exactly. I'm not sure this is a question that's more and I can probably take offline just on the current production and production at full capacity. Obviously, just some detail we can iron out there.

Yes, maybe lean a little bit on Mokate there as well. As Mokate mentioned, we have 2 of our kilns SK8 and DK1 that are not operating. We can bring both of them back. If we bring both of them back, we add how many million tons of clinker? So and divided that by 0.7 there or thereabout, and you have the cement capacity that we can bring back online. The 2 lines that we are running in the inland, SK9 and DK2, they're running roughly at 80% OEE. So we still have a bit of space there I can move that to the 85%. And this is just the inland area.

Nothing more online. I've done one final check, and I won't shut you down.

I appreciate it.

Nothing else. Well, then thank you, everyone, for your time and the management team for a very informative session this morning. There is some [indiscernible] lunch outside, and a lot of the team still here so you very welcome to join us. Thank you again and to the people online. Have a good lunch. Bye.