Merrill Lynch Investor Conference

Transcription

1 Merrill Lynch Investor Conference Cape Town s Green Point Stadium - February 2009 Sun City March 2009 Pretoria Portland Cement Company Limited 1

2 Contents Regional* industry cement demand YTD analysis Macro economic drivers Prospects Supply and new capacity Cost drivers and cement prices Lime and aggregates Capital projects Empowerment Financial strength Conclusion Addendum * Regional = South Africa, Botswana, Namibia, Lesotho and Swaziland Dwaalboom Kiln 2 2

3 Regional Industry Cement Demand: YTD Analysis Cement demand from infrastructure projects, commercial projects and rural bag sales has remained relatively strong and/or resilient during Oct 08 to Feb 09 Construction (+5%), Readymix (-2%) and Resellers (-7%) Industry regional sales Oct 08 to Feb 09 down 9.7% Mpumalanga (+7.3%) & Botswana (+13.1%) Gauteng (-17.7%) & Western Cape (-20.9%) Regional Sales Split by Segment (Oct 08 to Feb 09) Resellers, 50% Blenders, 5% Building Construction, Civil 4% Construction, 6% Concrete Product Manufacturers, 13% Mining, 2% Readymix Producers, 18% Other, 2% 3

4 Regional Industry Cement Demand: YTD Analysis The predominantly rural provinces which have a high bag ratio and are not interest rate sensitive are helping to under-pin bag sales Limpopo (-2.4%), Mpumalanga (+7.3%), Botswana (+13.1%), North West (-2.0%) Rural provinces demand through retailers higher than urban provinces Retailers continue expanding in rural areas and showing good profit growth PPC estimates Rural demand now accounts for 25 to 30% of total regional sales 60% 55% 50% 45% 40% Sales Packaging Split 57% 43% 35% 30% Bag % Bulk %

5 Regional Industry Cement Demand: YTD Analysis Regional Sales Per Day Kt Rainfall (see next slide) Sales Days Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 5

6 Regional Industry Cement Demand: Feb 09 Analysis Commentators statements of concerns over Feb 09 industry regional demand More sales days lost due to rain in Feb 09 compared to Feb 08 PPC s Gauteng mill project lost 6 days construction in Feb 09 due to rain compared to 3 days in Feb 08 A loss of 3 extra days equates to a 15% loss of selling days in Feb 09 which if taken into consideration, indicates sales would have been in line with Feb 08 February Rainfall Figures Summer Rainfall Feb 08 Feb 09 % incr. % of Provinces (mm) (mm) sales* Freestate % 4% Gauteng % 31% Kwazulu Natal % 15% Limpopo % 8% Mpumalanga % 8% Northern Cape % 2% North West % 6% Total % 75% * Total Regional Sales 6

7 Regional Industry Cement Demand: Macro Economic Drivers Fixed Investment as % of GDP 24% Q % - 30% Fixed Investment %ge of GDP required for developing countries % 20 +ve trend continues Positive trend

8 Regional Industry Cement Demand: Macro Economic Drivers History shows that fixed investment (GFCF*) % growth is the best long term indicator of cement demand growth. The positive growth trend in GFCF is likely to continue for sometime given the infrastructure backlogs in the region and long term investment plans to overcome them * Gross Fixed Capital Formation Cosmo City Housing Development - Johannesburg 8

9 Regional Industry Cement Demand: Macro Economic Drivers R787bn Government infrastructure spend over next 3 years Government budgeted R45bn for housing Formation of Housing Development Agency in February 2009 Tasked to acquire, release and develop state, communal and privately owned land for low cost housing SA banks in better shape than most other countries National Credit Act implemented mid 2007 Home loans still being granted albeit under stricter lending conditions Interest rates down by 1.5% from their peak Analysts now forecasting -1% Mar, -1% Apr and further -1% by mid year Should re-stimulate residential market from 2 nd half of 2009 onwards 9

10 Regional Industry Cement Demand: Prospects In spite of all the global negativity, R415bn new and additional construction expenditure announced in past 6 months. See Major Construction Project Announcements addendum Infrastructure spend continues Eskom R343bn (Medupi, Kusile & Ingula in progress) SANRAL R25bn (Road construction) Transnet R80bn (Rail and port network upgrade) Gautrain concrete work ~60% complete (total project ~400kt cement) Lesotho Highlands Water Scheme phase 2 R7bn (Phase 1 ~ 1.5mt/5yrs) Commercial developments announced Hotels (10 City Lodges for 2010 World Cup) Mixed use developments incl. residential (Cradle City R35bn over 7 years) New & upgraded retail developments 10

11 Regional Industry Cement Demand: Prospects Residential (formal mortgage financed) Interest rate sensitive Decline in construction activity since early 2007 and cannot get much lower Large pent up demand for cheaper (R130k to R500k value) houses which are not fully government subsidised* Low cost housing (Government financed) Demand in 2009 of 2.15 million houses reaching 3.5 million in 2015* Government must start accelerating delivery Building plans passed (BPP) not accurate indicator of cement demand Incorporates data submissions from only 114 of the 280 SA municipalities Using value of cement in various building types then the value of 2008 BPP equates to only 14% of total cement demand Govt. housing not in BPP (~1mtpa cement /7% of total sales) *International Housing Solutions Research ** SUDEO IBC/PPC Research 11

12 Cement Supply - Imports Mt mt industry imports in 3 years Flat demand would require all 2009 capacity Locally Produced Sales Imported Sales Manufacturing Capacity 12

13 Cement Supply and New Capacity Mt Industry Demand Industry Maximum Capacity ---(Old PPC Kilns Retired) Completed Contracted / Building Investigation Stage PPC 1.25Mt/yr, Cimpor 0.6Mt/Yr: (2009) Imports PPC Mill 0.3Mt/yr (2010) Latest Revision : January 2009 Lafarge 1Mt/yr (2010) Growth 7.4% -3.9% 0%? 0%? 6% 13

14 Cost Drivers and Cement Prices Cement road distribution cost Drop in diesel price initially slow (start Q2 FY09) Coal Annual contracts not allowing much relief this year Dwaalboom kiln 2 Early days, but cash cost is looking very positive detail with ½ yr results Cement Prices Still one of the lowest in Africa Comparison of Cement Prices Country Index South Africa 1.0 Zimbabwe 2.0 Zambia 2.5 Angola 2.0 Nigeria

15 Lime and Aggregates Lime lower demand from steel and water purification industries Aggregates decline in demand from concrete product manufacturers and for steel industry metallurgical dolomite Sandton Underground Station Gautrain (March 2009) Precast Yard Gautrain (March 2009) 15

16 Capital Projects Batsweledi (new Dwaalboom kiln 2) Quicker than planned commissioning ramp-up Encouraging performance to date. Ntshafatso (new mill at Hercules) Due for completion Jul Sept 09 Se Kika (new 1.25mtpa factory at Riebeeck West) EIA decision awaited 16

17 Empowerment 15% B-BBEE transaction completed mid December 2008 Achieved level 4* B-BBEE value added supplier status on latest audit Highest in cement industry Enables PPC customers to claim 125% of cement value purchased from PPC toward their own B-BBEE rating Appointment of another 2 black non-executive directors in Feb 09 from BEE Strategic Partner Consortium * According to DTI B-BBEE codes of good practice 17

18 Financial Strength Strong cash generation from operations (R2.5bn FY08) Dividend cover policy remains range of X If dividend at low end of 1.2 X cover and there is cash surplus to requirements, Board will consider distribution thereof. Gearing targets gross debt/ebitda multiple - range of 2 to 3 times Interest cover ~ 5 times part of BEE borrowings will be consolidated NB: BEE IFRS2 charge for 6 months to March 09 (R468m as per shareholders circular 16 October 2008) 18

19 Conclusion Strong infrastructural demand outlook beyond 2010 and new capacity for growth coming on stream Leading producer and best geographical spread in southern Africa Excellent dividend yield history: At R29.00 share price 2008 dividends of R2.25 = 7.8% dividend yield Strong balance sheet, low debt and strongly cash generative Financial strength to explore acquisition opportunities 19

20 Addendum Port Elizabeth s Nelson Mandela Stadium February

21 Major Construction Projects Announced or Updated During the Period Sep 2008 to Feb 2009 Executive Summary Summary of Project Value by Province A total of R415bn worth of new projects or revisions* to projects has been announced in the past 6 months. While most of these are within South Africa some significant projects have been announced in neighbouring countries which are almost entirely dependant on sourcing their cement requirements from South African manufacturers. Apart from the national projects such as Eskom and ACSA, major development is coming from the Eastern Cape s Coega Development Corporation and various commercial; and residential developments in the Gauteng province. Mpumalanga, Gauteng and KwaZulu Natal are due to benefit primarily from power station and transport type infrastructure projects. The decline in low cost government housing initiatives is disappointing, but as the newly formed Housing Delivery Agency starts to take affect and the additonal funds budgeted for the new fiscal year become available new announcements should be forth coming. Province Project Value (Rm) National Projects Eastern Cape Gauteng Gauteng - Mpumalanga KwaZulu Natal North West North West & Limpopo Western Cape Northern Cape Botswana Lesotho Mozambique Namibia Total * Updated projects only include the additional expenditure announced.

22 Latest Revision: February 2009 Province City Major Player Project Status Date Value Posted (millions) Start Date End Date Comments National Various Eskom Capacity Expansion Update Oct-08 R Eskom plans to double its spending to R343bn (previously R150bn). National Various ACSA Further upgrade of airports by 2012 Update Jan-09 R This is for additional upgrades over and above the R22bn originally planned. National Various City Lodge New City and Road Lodges New Feb-09 R Q new City and Road Lodges to be built in various cities around South Africa Botswana Palapye Ministry of Minerals Energy and Water Resources Lotsane Dam Project New Sep-08 R Earth fill dam 1.4km long and 30m high, reinforced concrete intake tower, pump station for potable and irrigation water, water treatment plant, 6km irrigation water supply pipeline and administration buildings. Botswana Mma-Shoro Karoo Sustainable Energy Major Construction Projects Announced or Updated* During the Period Sep 2008 to Feb 2009 (6 months) Construction of a gas production and processing plant and a gas turbine power plant New Sep-08 R Q Jun MW Independent Power Producer station for peak load situations. Eastern Cape Coega PetroSA Project Mthombo New Sep-08 R The plan is a bbl/d oil refinery Eastern Cape Coega Coega Development Corporation Liquid Storage and Transhipment facility New Oct-08 R Mid Successful bidders will construct and operate a liquid storage and transhipment facility. Eastern Cape Port Elizabeth International Convention Nelson Mandela Metropolitan New Nov-08 R A 120 room hotel and international conference centre. Centre Municipality Eastern Cape Jeffrey's Bay Retirement Village in Jubilee New Dec-08 R home retirement village. Lakes Coastal Estate Eastern Cape Port Elizabeth Eastern Cape Low cost housing New Jan-09 R houses in the Nelson Mandela Bay and Buffalo Bay area Department of Housing Eastern Cape Port Elizabeth Emfuleni Boardwalk Upgrade (Phase 1 & 2) New Feb-09 R Jan 2010 Jul star hotel, conference facility, casino, restaurants, health spa and multimedia lake. Eastern Cape Port Elizabeth Mixed use development New Feb-09 R m 2 shopping centre, low, medium and high-density residential units and a m 2 regional shopping centre. Eastern Cape Port Elizabeth Rezidor New hotels New Feb-09 TBA room hotel Gauteng Johannesburg Nedbank Corporate Property Finance Kempton City Shopping Centre Redevelopment New Sep-08 R 325 Started Aug-10 Renovation of the mall to a mixed-use facility with 800 residential units and 8 500m 2 retail space. Retail Segment will be complete by Nov-2009 and phase 2 by Aug Gauteng Pretoria Capicol Villa Mall New Sep-08 R Mar m 2 retail space, 3 000m 2 offices, 6 000m 2 hotel, 5 000m 2 lifestyle centre. Gauteng Pretoria Capicol Zambezi Mall New Sep-08 TBA Live entertainment theatre, m 2 retail and m 2 parking space. * Updated projects only include the additional expenditure announced. Page 2 of 5

23 Major Construction Projects Announced or Updated* During the Period Sep 2008 to Feb 2009 (6 months) Latest Revision: February 2009 Province City Major Player Project Status Date Value Posted (millions) Start Date End Date Comments Gauteng Germiston Nu Citi Developments Shaft Citi New Sep-08 R 700 End 2008 Mid sectional title apartment units developed on old mine hostel land. It will also include retail space, recreational areas and service facilities. Phase 1: units Phase 2: Remaining units will be built on demand Gauteng Johannesburg Gold Fields South Deep Gold mine Update Sep-08 R Triple mine output to oz/y in five years from the current 270 expansion 000 oz/y Gauteng Johannesburg Barrow Properties Bryanston 88 New Sep-08 TBA 2008 Oct-09 3-story, 2 basement office park with 4 500m 2 rentable area. Gauteng Johannesburg Vlaming, Devcon, Waverley Office Park New Oct-08 R 700 Sep-09 Topflite m 2 of office space, of which m 2 will be initial phase. Gauteng Johannesburg Pan African Devco Pan Africa Shopping Centre New Oct-08 TBA TBA Mar-09 A m 2 mall and a m 2 taxi rank in Alexandra Township. Gauteng Johannesburg Amdec & Afhco Affordable housing in New Doornfontein New Oct-08 R 580 TBA TBA The conversion of the 26-storey (47 000m 2) Nedbank building to 924 affordable appartments and 6 000m 2 shopping centre. Gauteng Johannesburg Vlaming & Devcon Projects Cedar Office Park New Nov-08 R 90 End m 2 office park Gauteng Pretoria Ice Finance, Equity Estates, GP Property Investment Holdings, Nedbank and Absa Bank Menlyn Maine City Precinct Update Nov-08 R Jan-09 End 2010 This m 2 Shopping complex, parks, restaurants, residential units, offices and 2 x 4-star hotels development's cost has been increased from the initial R6bn Gauteng Johannesburg Nelson Mandela Children's Hospital New Nov-08 TBA A 308 bed children's hospital that will serve all the SADC countries Children's Fund Gauteng Johannesburg Phelang Bonolo Midrand Hospital New Nov-08 R Jun-10 Phase 1: 125 beds, phase 2: 75 beds. Gauteng Johannesburg Barrow Properties, 114 West Street New Nov-08 R 800 Nov-08 Early 2011 A m 2, ten storey office tower together with 2 200m 2 of retail Group Five and space and a m 2, 14 storey tower with a 288 room hotel. Amabubesi Properties Gauteng Johannesburg Liberty Property Refurbishment of Sandton City New Nov-08 R Soon m² extension of the mall, additional parking bays. Development Gauteng Johannesburg Nedbank Corporate Tanganani New Nov-08 R units, shopping centre, medical clinic and schools Property Finance Gauteng Consol Glass Greenfield glass factory New Dec-08 R Q Q The initial phase consists of two 400 ton per day furnaces. Gauteng Pretoria Living 4U African Renaissance Lifestyle Estate New Jan-09 R apartments (bachelor to 3 roomed), 410 townhouses and 142 houses. Gauteng Soweto Soweto Theatre New Feb-09 R 110 Mar-09 Apr-10 A 3 stage theatre complex seating a total of 690 people adjacent to the Jabulani Ampitheatre. * Updated projects only include the additional expenditure announced. Page 3 of 5

24 Major Construction Projects Announced or Updated* During the Period Sep 2008 to Feb 2009 (6 months) Latest Revision: February 2009 Province City Major Player Project Status Date Value Posted (millions) Start Date End Date Comments Gauteng Johannesburg Amari Land Cradle City New Feb-09 R May Phase 1 of the 912ha Cradle City precinct will comprise a m² business park combining industrial, office, retail and hotel Gauteng Sandton Rezidor New hotels New Feb-09 TBA 2010 A 500 room hotel. Gauteng - Tshwane - Mpumalanga Mpumalanga Department of Public Transport, Roads & Works KwaZulu Natal KwaMbonambi Umbani Power Company (Aldwich International, IDC, African Infrastructure Investment Fund, Rainbow Millennium Power KwaZulu Natal North Coast Ruwaad Holdings Theme Park based around King Shaka Moloto Rail Corridor New Oct-08 R TBA TBA A wide-gauge line similar to Gautrain to accommodate high speed trains Fluidised-bed Power Plant New Sep-08 R Apr-10 Jun-12 A 540MW power station. New Sep-08 R TBA 2014 Theme park with a cultural and historical focus. The 5 phase project will include the park, 20 hotels, university, hospital and about residential units. New Oct-08 R 450 Jan-09 Sep-09 Construction of a stage one rural housing project of 1000 units KwaZulu Natal Richmond Richmond Municipality Nhlakuza Low Cost Housing Development KwaZulu Natal Kokstad Enacu Consulting New Mamiesa Residential New Jan-09 R Development of 217 residential stands as well as 23 industrial sites. Engineers Development KwaZulu Natal Durban Independent Dr John Dube Memorial Hospital New Jan-09 R New 450 bed hospital, theatres, reception area, X-ray departments Development Trust and open parking. KwaZulu Natal Kwamashu Independent Dr Pixley Ka Seme Memorial New Jan-09 R New 450 bed hospital, theatres, reception area, X-ray departments Development Trust Hospital and open parking. KwaZulu Natal Newcastle Independent Madadeni Hospital New Jan-09 R bed hospital and 580 bed psychiatric facility. Development Trust KwaZulu Natal Umhlanga Old Mutual Expansion of Gateway Mall New Nov-09 R 229 Extension of Edgars, an additional m 2 of retail space, a new Investments Group Virgin Active Gym and a new four-storey parkade. Lesotho DWAF Lesotho Highland Water Project New Dec-08 R mid 2009 mid 2013 Construction of a new dam. Phase 2 Mozambique Maputo Department of Maputo Iron and Steel Project Update Oct-08 R Dec-08 This project has been revived after initially being cancelled. Industry and Trade Mozambique Maputo Rezidor Hotel Group Radisson Hotel New Dec-08 TBA Q room hotel located on the beach front. Namibia Windhoek Madison Property Freedom Plaza New Oct-08 R Nov-08 Dec m 2 mixed use precinct hotel rooms, 8 000m 2 retail Fund Managers & Swish Properties space, 180 residential units, m 2 office space, parking Namibia Walvis Bay Walvis Bay Corridor Group bays. Port Expansion New Dec-08 R Years Deepening of port and new infrastructure. Namibia Windhoek Accolade Sungate mixed-use & EPZ model New Feb-09 TBA Mid hectares of land divided into light industrial, commercial, retail, leisure and residential for a trade hub. Namibia Otavi Schwenk Group Ohorongo Cement Plant Update Sep-08 R Feb Cost estimate updated from R1.2bn to R2.5bn * Updated projects only include the additional expenditure announced. Page 4 of 5

25 Major Construction Projects Announced or Updated* During the Period Sep 2008 to Feb 2009 (6 months) Latest Revision: February 2009 Province City Major Player Project Status Date Value Posted (millions) Start Date End Date Comments North West Northam Platinum Booysendal platinum project Update Sep-08 R Dec The development of the larger mine, excluding the provision of a smelter, is expected to cost about R 7.1bn compared with the R 4.9bn estimated originally. North West Sephaku Cement Sephaku Cement Factory Update Oct-08 R 500 Jan-09 Dec-10 Cost estimate updated from R2.5bn to R3bn. North West Anglo Platinum & Styldrift Merensky Project New Oct-08 R New twin shaft system and concentrator. Royal Bafokeng Holdings North West & Anglo Platinum Housing Project New Nov-08 R Anglo will be building m 2 living units for its employees over Limpopo the next 5 to 10 years. Northern Cape Sishen Asmang Khumani Expansion New Sep-08 R Expansion of the Khumani mine Northern Cape Brandvlei Prison New Sep-08 R 450 Nov-08 Western Cape Cape Town Old Mutual Investment Portside New Sep-08 R m tall mixed use development with 24 office floors ( m 2 ) Group Property above a 10-storey hotel ( m 2 ) and retail (2 500 m 2 ) Investments component, with parking on five basement and eight above-ground levels Western Cape Blaauwberg Redizor Radison Hotel New Sep-08 R 320 Q room hotel in Blaauwberg. Western Cape George Tuta Thembalethu Shopping Plaza New Sep-08 R 750 Oct-08 Dec m 2 shopping plaza with retail and restaurant facilities. Western Cape Cape Town The Ideas Fund, Mzoli Gugulethu Square New Oct-08 R 350 Dec m 2 retail space. Properties, Khula and Group Western Cape Cape Town Old Mutual Investment Portside New Oct-08 R Oct storey mixed use development - hotel, office and retail. Group Property Investments Western Cape Cape Town City of Cape Town Bus rapid-transit system - Phase New Oct-08 R Mar-10 The entire project will be completed by 2020 at a value of R 10bn. 1 Western Cape Cape Town Office and retail development New Nov-08 TBA An 18 storey building consisting of m 2 office and retail space and 600 parking bays. Western Cape Cape Town Madison Property Canal Walk Expansion New Nov-08 R 250 Mar m 2 retail space and 800 new parking bays. Fund Managers Western Cape Gansbaai Urban Dynamics Romansbaai New Nov-08 R homes and a 30 suite boutique hotel. Western Cape Somerset West Kagiso Property Holdings De Beers Paardevlei New Nov-08 TBA 590 residential units and m 2 comercial development. Western Cape George Laritza Investments Eden Meander New Feb-09 TBA EIA Started m 2 Commercial development consisting of shopping centre, offices and mixed residential developments. Total R * Updated projects only include the additional expenditure announced. While PPC takes reasonable care to ensure the accuracy of the information presented, it shall not be held responsible for losses or liabilities arising from the use of this information. Sources: DataBuild, Engineering News, Mining Weekly, eprop, Real Estate Web, PPC Research Page 5 of 5

26 Disclaimer Certain statements contained in this presentation including, without limitation, those concerning the demand outlook, PPC s expansion projects and its capital resources and expenditure, contain certain forward-looking views regarding PPC s financial condition. Although PPC believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government action and business and operational risk management. While PPC takes reasonable care to ensure the accuracy of the information presented, it shall not be held responsible for losses or liabilities arising from the use of this information. 21