Cement producer, PPC Zimbabwe is feeling the impacts of fuel increases that is not only affecting the company’s customers but its operations as well according to the Operational Update Nine Months to December 2018.
The Zimbabwean government, last month, increased fuel price with diesel now costing $3,11 per liter and petrol $3.31 per liter.
“Pricing (cement) has been aligned with local inflationary increases,” PPC says. “Nonetheless, recent policy announcements regarding fuel price increases has placed consumers in Zimbabwe under strain.”
“The impact of fuel increases and cost of living increases afforded to PPC Zimbabwe employees is expected to impact EBITDA margins by 1 – 2%,” the Operational Update says. EBITDA margins.
The EBITDA margin is a profitability ratio that measures how much earnings the company is generating. This is before interest, taxes, depreciation, and amortization, as a percentage of revenue according to the Corporate Finance Institute.
PPC Zimbabwe management is, however, implementing initiatives to mitigate the impact of inflation and liquidity constraint on the business.
The company also has liquidity management and cash preservation measures including focusing on local procurement, with 90% of input costs sourced locally.
The cement producer is increasing exports to neighboring countries as well as continuing clinker, one of the raw materials in cement production, imports from South Africa.
One other measure for liquidity management and cash preservation is share buyback of PPC shares listed on the Zimbabwe Stock Exchange (ZSE) through subsidiary PPC Zimbabwe.
“Despite the challenging trading environment, the Group remains positive about its operational strength and customer support for its brand,” PPC says.
“Volumes grew by low single digits compared to the prior year for the same period, due to operational challenges experienced in the third quarter of the financial year.”