Pretoria Portland Cement Ltd. (PPC), South Africa’s largest cement maker, may increase production in the country by as much as 4 percent this year, Chief Executive Officer Ketso Gordhan said.
Volume will probably climb by 3 percent to 4 percent, Gordhan said in a mobile-phone interview. He took office yesterday after replacing Paul Stuiver, who resigned as part of a succession plan announced in October.
“South Africa is in a very tough environment at the moment,” Gordhan, 51, said. An oversupply of cement partly caused by new entrants will have an impact on the market in the first quarter of 2014, he said.
South African cement sales fell 3.8 percent in the third quarter as widespread strike action and slower economic growth sapped demand. PPC sales rose 8 percent in the year through September. Africa’s largest economy probably expanded 2.3 percent in 2012, below a previous estimate of 2.5 percent and the slowest rate since the 2009 recession, Standard Bank said yesterday. Africa’s biggest economy is expected to grow 2.9 percent in 2013, according to the South African Reserve Bank.
“Without a more buoyant residential and non-residential building sector, it will be difficult to see volumes bounding ahead,” said Peter Steyn, an analyst at Macquarie First South Securities Ltd. “Hopefully government infrastructure delivery gains pace to bring a new growth driver to the market, as this tepid growth rate will do little to bring balance.”
Shares in PPC rose 0.7 percent to 32.90 rand by 1:18 p.m. in Johannesburg, while the FTSE/JSE Africa All-Share Index was unchanged.
Sephaku Holdings Ltd. (SEP) is expected to begin construction of a new production facility in 2013, and PPC is “unlikely to be unscathed” by the arrival of new supply, said Peter Steyn, an analyst at Macquarie First South Securities Ltd.
PPC is expanding outside South Africa via acquisitions including a 51 percent stake in Rwanda’s Cimerwa Ltd. for $69.4 million. It also agreed to buy about half of Ethiopia’s Habesha Cement Share Co. alongside South Africa’s Industrial Development Corp. in July. The Johannesburg-based company plans to announce two more projects in Africa this year as it looks to boost profit, Gordhan said.
Gordhan, who has worked in South African President Jacob Zuma’s office, was previously the head of private equity at FirstRand Financial Services Group.
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