PPC (PPC) Status Update summary

Strategic investment and project overview

• Announced a R3 billion investment in a new state-of-the-art integrated cement plant in the Western Cape, following six months of internal analysis and a strategic partnership with Sinoma Overseas.

• The new plant will replace two aging plants (40 and 60 years old) and increase capacity to 1.5–1.7 million tons per year, with advanced technology for energy efficiency and lower emissions.

• Environmental approvals and mining rights for the Riebeek site are secured, with limestone reserves supporting over 80 years of production.

• Construction is expected to begin in Q2 2024 and commissioning by end of 2026, with a milestone-based payment structure and no equity stake for Sinoma.

• The project is designed to meet all capital allocation criteria, with expected returns above WACC and a payback period supported by robust feasibility studies.

Financial and operational impact

• Variable costs are projected to decrease by 20–25%, fixed costs by 35%, and carbon emissions by 30%, making it the lowest carbon cement in South Africa.

• The investment will be funded through debt, maintaining a net debt to EBITDA covenant of 2x, with no intention to issue equity.

• Dividend policy is expected to be maintained, with possible internal adjustments to debt targets to ensure continued dividend flow during construction.

• The new plant will enable a competitive cost structure, allowing for market share recovery and improved profitability, especially against imports and local competitors.

• Steady-state production is expected within six months of commissioning, leveraging experienced staff and a proven start-up track record.

Market and industry context

• The South African cement industry is rapidly changing, with new low-cost, efficient Chinese plants entering the region and shifting competitive dynamics.

• Overcapacity concerns are addressed by replacing inefficient old plants with modern assets, providing a significant cost and environmental advantage.

• The Western Cape has been less competitive than inland regions, but the new plant will offer an unbeatable value proposition and counter imports, especially from Vietnam.

• The partnership with Sinoma has halved the estimated project cost and is expected to yield further synergies and efficiencies.

• The project is both an offensive and defensive move to expand footprint, regain market share, and prepare for a more competitive environment.