PPC turnaround accelerates as margins and cash flow surge, but FX losses weigh on earnings

Key topics:EBITDA up 23.5%, trading profit up 37% and PPC returns to net cash as turnaround strategy gains momentum.SA Cement margins rise to 17.5% and Zimbabwe volumes surge 25%, though margins temporarily contract due to clinker imports.R111m in FX losses on RK3 hedging contracts depress reported EPS and HEPS despite strong underlying performance.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..BizNews Reporter.PPC has reported a strong operational performance for the six months ended 30 September 2025 (H1 FY26), with its “Awaken the Giant” turnaround strategy delivering meaningful gains across profitability, margins, and cash generation. However, non-cash foreign exchange losses linked to hedging for its new Western Cape plant (RK3) significantly dampened reported earnings, obscuring what management says is the group’s strongest underlying first-half performance in years.Operational performance surges on disciplined executionGroup EBITDA increased 23.5% to R983 million, up from R796 million in the prior period, supported by tighter cost control and improved plant performance. The EBITDA margin expanded to 18.3%, from 15.7%, showing broad-based efficiency gains. Revenue grew by 6.2% to R5.38 billion, while trading profit jumped 37% to R688 million, as cost-of-sales growth (4.3%) remained below revenue growth and administration costs fell 5.6%.Return on invested capital (ROIC) more than doubled to 13.4%—well ahead of PPC’s guidance for FY26–FY27—reflecting stronger utilisation, better pricing discipline, and strategic capital allocation.Cash generation strengthened significantly. Net cash inflow before financing activities rose 32% to R661 million, while the balance sheet improved materially: PPC entered a net cash position of R310 million, a marked turnaround from R203 million net debt in H1 FY25. Finance costs fell to R37 million following the 2024 refinancing.SA Cement business leads the turnaroundThe South African and Botswana Cement division was the primary driver of the group’s performance. EBITDA increased 30.5% to R569 million, with margins rising to 17.5% from 13.7%. Sales volumes grew 2%, supported by a strong second quarter after weather-related disruptions in Q1.Cost-saving initiatives—especially in procurement, logistics and industrial optimisation—contributed to a 1.8% decline in cost of sales in South Africa and Botswana, enabling better operating leverage.Zimbabwe: Strong volumes but temporary margin pressurePPC Zimbabwe performed strongly on demand, with sales volumes up 25% and revenue increasing 23.5% in rand terms to R1.90 billion. The business declared US$20 million in dividends, compared with US$4 million a year earlier, and remains debt-free with nearly all cash held in hard currency.However, profitability temporarily weakened. EBITDA margins fell to 23.4% (from 26.1%) due to a 29% spike in cost of sales, attributable entirely to extended maintenance downtime at Colleen Bawn in Q1, which forced reliance on expensive imported clinker. Management reported a strong recovery in Q2, with both EBITDA and margins finishing ahead of the prior year’s Q2 run-rate.Post-period, PPC Zimbabwe agreed to sell the Arlington land asset for US$30 million.Materials business under pressureThe Aggregates, Readymix and Ash division faced declining volumes, particularly in ash. Revenue decreased by 7.1% to R494 million, and EBITDA fell to R14 million, from R28 million in the prior period.FX hedging losses distort earningsDespite operational strength, reported earnings were held back by non-cash foreign exchange losses tied to Foreign Exchange Contracts (FECs) used to hedge the US-dollar exposure of the RK3 project. A stronger rand during the reporting period resulted in R74 million in unrealised FX losses and an additional R34 million in realised losses, totalling R111 million.As a result, basic EPS and HEPS rose only 15% to 25 cents. Excluding these FX effects, however, EPS and HEPS would have increased 32% to 29 cents, which PPC argues is more representative of the underlying performance.OutlookPPC’s turnaround is gaining traction, with strong margins, improving plant utilisation, a return to net cash, and growing demand in both South Africa and Zimbabwe. With RK3 progressing, management aims to further improve competitiveness and capital efficiency, although FX volatility and cost pressures remain key risks..Read the results in full by downloading the PDF below

PPC turnaround accelerates as margins and cash flow surge, but FX losses weigh on earnings

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