The cement industry has been reassured by South Africa’s National Roads Agency (Sanral) that the Chinese companies, which have recently won important contracts from the Roads Authority, will use local materials in these projects.
Njombo Lekula, managing director of PPC South Africa and Botswana, said on Monday that Cement & Concrete SA (CCSA) wrote to Sanral to confirm that the Chinese companies would use local products “and they gave us that assurance”.
However, Njombo said enforcement of the use of local products for these projects depends on the SA Bureau of Standards (SABS).
“She [SABS] becomes apparent through the NRCS [National Regulator for Compulsory Specifications]be the one to impress or make sure it’s a local product being used.”
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He added that although the procurement law – the Preferential Procurement Policy Framework Act – has been challenged, he believes “we can rely on the assurances we have received from Sanral that they will use local products”.
Njombo’s comments were made in response to questions from analysts during a presentation Monday on PPC’s financial results for the six months ended September 2022.
This follows sanraEarlier this month I announced the winning of four of the five tenders that were canceled in May this year.
The awarded projects are:
- Mtentu Bridge: R3.428 trillion to CCCC MECSA Joint Venture (JV);
- R56 Matatiele Rehabilitation: R1.057 trillion to Down Touch Investments;
- Ashburton Interchange: R1.814 trillion to Base Major/CSCEC JV; Spirit
- EB Cloete Interchange Improvements: R4.302 trillion for Base Major/CSCEC JV.
Sanral lawyers contact Moneyweb
Sanral, through his attorneys, wrote a letter to Moneyweb asking for corrections to a published article that raised doubts about the compliance of two members of the joint venture partners who were awarded tenders.
It also issued a media statement on Sunday in which it presented “evidence of compliance on the part of the successful bidders” to address what it called “the growing narrative of irregularities and non-compliance in the award of bids to joint ventures (JVs)” called. with Chinese companies”.
Searches by Moneyweb of the Construction Industry Development Board (CIDB) contractor directory of two of the joint venture partners revealed the following:
- The registration of one of the companies has expired, and
- The other company was deregistered.
Sanral said Moneyweb was confusing the two joint venture partners with other companies with similar names, stressing that CSCEC South Africa (Pty) Ltd and MECSA Construction were the companies that were part of the JVs that won the tenders.
A search of the contractors’ CIDB register using the exact company names provided by Sanral yielded the following response to both searches: “There are no records to display.”
The CIDB has not yet responded to a request to verify the accuracy of the two companies’ registration status and comment on the conflicting information.
PPC ready to ship
PPC CEO Roland van Wijnen said Monday PPC was encouraged by Sanral’s recent announcements of awarding major construction projects in South Africa and the comments made in Finance Minister Enoch Godongwana’s recent medium-term budget speech about increased infrastructure spending.
“With additional capacity available to meet an increase in demand without additional investment, PPC is well positioned to support much-needed construction work across South Africa,” he said.
However, Van Wijnen said cement prices in South Africa are too low and the price needs to increase by another 15% for the South African industry to be profitable.
PPC increased the price of its cement in South Africa and Botswana by an average of 5% in the six months to the end of September.
It was reported that cement revenues in South Africa and Botswana rose 4% to R2.9 billion and despite cost control efforts, inflationary pressures squeezed margins, resulting in earnings before interest, taxes, depreciation and amortization (Ebitda) from R515 million decreased two R368 million.
Van Wijnen said cement margins in SA were falling because PPC’s energy costs had risen so much that it could not cover all of those costs through price increases.
He said PPC focuses on initiatives to offset input cost inflation to prevent post-inflation cost increases.
Advances in cement imports
Njombo said global supply chain constraints and a weakening rand led to a drop in cement imports to the Western Cape, which had a positive impact on cement sales volumes to the retail segment.
PPC estimates that cement and clinker imports fell by 32% over the same period.
Njombo said imports continue to threaten the long-term sustainability of the local cement industry, which is problematic for infrastructure expansion and socio-economic development.
He said the cement industry is still waiting for a response from the International Trade Administration Commission (ITAC) on its request for tariff protection on imported cement.
Van Wijnen said strategic actions have enabled PPC to further reduce debt and maintain its leading market position despite difficult and competitive trading conditions in its core market over the period
“We are well placed to meet any surge in demand as the rollout of the South African government’s infrastructure development plans gain momentum,” he said.
“At the same time, PPC has a strong financial position and the right focus to weather the current economic cycle.”
rationalization of industry?
Van Wijnen dismissed suggestions that without rationalizing the number of producers in the market, PPC’s cement businesses in South Africa would not be able to generate acceptable returns.
He said consolidation has never increased demand in the market in his experience.
“Ultimately, a successful industry in any country depends on capital investment and infrastructure projects,” he said.
PPC said its results for the six months to the end of September were skewed by the hyperinflation responsible for PPC Zimbabwe’s performance.
With the cessation of operations and the departure of PPC Zimbabwe, revenue increased by 9% from R3.9 billion to R4.2 billion.
Ebitda fell 12% to R580 million, with margins deteriorating from 16.9% to 13.7% due to significant increases in fuel and other energy costs.
However, cost saving initiatives and price increases improved Rwanda’s Ebitda margins.
Pre-tax profit rose 4% to R259 million from R250 million.
Total earnings per share fell 60% from 10 cents to 4 cents.
A dividend was not declared.
This article originally appeared on Moneyweb and has been republished with permission.
Read the original article here.
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