Merrill Lynch Sun City Conference March 2018 Mokate Ramafoko Combined expertise of more than 100 years. 8 MERRILL LYNCH SUN CITY CONFERENCE MARCH 2018 Top-up transaction to achieve

E X E C U T I N G O N P R I O R I T I E S

T h i s i s o u r s t o r y o f r e s i l i e n c e i n t h e p u r s u i t

o f s h a r e h o l d e r v a l u e

Merrill Lynch Sun City Conference March 2018

2

MERRILL LYNCH SUN CITY CONFERENCE MARCH 2018

CONTENTS

2

E X E C U T I O N I N P U R S U I T O F S H A R E H O L D E R VA L U E

Our investment case

Operational review

Delivering on strategic prioritiesStrategic action plans

6

1

5 2

34 Strengthened group financial position

1. Our investment case

1.1 Our investment case

1.2 PPC is well positioned as a market leader

1.3 PPC has exposure to regions with solid economic fundamentals

1.4 Strong management team appointed

1.5 BEE III transaction summary

4


1.1 OUR INVESTMENT CASE

P P C i s w e l l p o s i t i o n e d to d e l i v e r l o n g te r m

s u s ta i n a b l e s h a r e h o l d e r va l u e

4

Quality asset base with ~40% capacity being new

Strong leadership and senior management team with combined expertise of more than 100 years

Well developed footprint in Africa with strong presence in southern & East Africa

Market leader in more than 80% of markets we operate in

Improved liquidity and deleveraged balance sheet

POSITION ● ASSETS ● MANAGEMENT

Improving free cash flows as major capex has ended

RoA delivering good results, especially Zimbabwe and Rwanda

5


1.2 PPC IS WELL POSITIONED AS A MARKET LEADER

5

Rwanda Capacity650 000 tpa

Ethiopia Capacity1.4m tpa

South Africa Capacity7.0m tpa

Zimbabwe Capacity1.4m tpa

1

4

1

1

DRC Capacity1.2m tpa

Botswana

1

1Market leader in southern Africa

In top 4 in the markets in which we operate

Revenue (March 2017) R9.6 billion

EBITDA (March 2017) R2.1 billion

Capacity (cement) 11.7 mtpa

Plants 18 plants

Lime factories 1 factory (1mtpa)

Aggregate quarries 4 quarries (4mtpa)

Readymix plants29 plants (100 000 m3 per month)

Cement capacity replacement value (EV)

˜US$2.7bn @US$230 per tonne

M A R K E T L E A D E R I N S O U T H E R N A F R I C AI N T O P 4 I N E M E R G I N G R o A M A R K E T S

6


1.3 PPC HAS EXPOSURE TO REGIONS WITH SOLID ECONOMIC FUNDAMENTALS

6

Cement consumption per capita (kg) for selected countries

Cement consumption per capita (kg)

Countries of operation

Population growth

Consumption per capita

Urbanisation

1

2

3

P P C I S W E L L P O S I T I O N E D T O TA K E A D V A N TA G E O F O P P O R T U N I T I E S I N E M E R G I N G M A R K E T SA S P I R AT I O N I S T O B E A N A F R I C A N C H A M P I O N

302

34

9149

247 278

391333

292219

605

220

0

100

200

300

400

500

600

700

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Co

nsu

mtp

ion

per

kg

GDP per capita (US$)

Germany

Australia

Vietnam

South Africa

US

UK

Botswana

82 Zimbabwe

Brazil

India

EthiopiaRwanda

DRC

7


1.4 STRONG MANAGEMENT TEAM APPOINTED

S U P P O R T E D B Y A N E X P E R I E N C E D A N D W E L L D I V E R S I F I E D M A N A G E M E N T T E A M

CEO Johan Claassen

CFO Tryphosa Ramano

MD Southern Africa Njombo Lekula

MD International Mokate Ramafoko

Combined expertise of more than 100 years

8


8

Top-up transaction to achieve an effective 30% BEE shareholding

The transaction will be a 24.6% top-up transaction at PPC SA Holdings (a wholly-owned subsidiary housing South African operations)

Transaction participants include employees, communities and black entrepreneurs

Funded through a notional vendor financing (NVF) structure as used for BEE II

Vests after 10 years, but communities component will be perpetual

Taking into account the residual BEE shareholding of 4.3% at PPC Ltd (BEE 1 – 1.80% and BEE2 – 2.47%) , the effective BEE shareholding in respect of SA operations will be 30% post implementation

As BEE II transaction will mature in December 2019, the 24.6% top-up transaction will cushion the company from doing another top-up should the currently promulgated 26% BEE ownership requirement be retained

The IFRS 2 charge is in line with similar transactions of this nature

A fairness opinion which will be made available for public inspection

1.5 BEE III TRANSACTION SUMMARY | SENS ANNOUNCEMENT 14 DECEMBER 2017

8

B E E I I I T R A N S A C T I O N I S E X P E C T E D T O B E I M P L E M E N T E D B Y E N D O F F Y 1 8

2. DELIVERING ON STRATEGIC PRIORITIES

2.1 FOH – FOUR strategic priorities (Group)

2.2.1 Priority action plans in November 2017

2.2.2 Progress on key priorities

10


HUMAN CAPITAL

FINANCIAL

OPERATIONS

OPTIMISATION

2.1 FOH – FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS

FINANCIAL

OPERATIONS

HUMAN CAPITAL

F 1

2

4

1

2

3

4

O

H

1

2

3

4

Optimal capital structure

Liquidity

Financial discipline

BEE III

southern Africa Cement – R50/tonne improvement to profitability

Rest of Africa Cement – operationalise businesses with key focus on ramp up and route to market (RTM)

Materials – maintain cash generation and entrench value chain

Adopt value based management principles

HR solutions

Talent management

High performing organisation

Organisational culture

3

D E L I V E R S U S T A I N A B L E S H A R E H O L D E R V A L U E

Group

10

11


Priorities November 20173 months progress

12-18 months progress

1 Finalise debt re-structuring to lengthen and the smooth Group maturity profile

2 Finalise DRC debt restructuring

3 BEE III implemented

4 Implement R50/tonne improvement to profitability (PIP Phase II)

5 Optimise RTM, raw materials and plant efficiencies in RoA

6 Grow and develop globally competent teams(fit for purpose)

7 Ensure value based management philosophy will create long term sustainable success

2.2.1 PRIORITY ACTION PLANS IN NOVEMBER 2017

11W E H A V E S U C C E S S F U L L Y E X E C U T E D O N K E Y P R I O R I T I E S

12


2.2.2 PROGRESS ON KEY PRIORITIES | WHAT WE HAVE ACHIEVED

What we said

What we achieved

Financial

What we said

What we achieved

Operational

What we said

What we achieved

Human Capital

Optimal capital

structure

• Significant progress made with Group debt funding package

• Group net debt to EBITDA at 2.1x (Sep 2018) – balance sheet deleveraged

SA Cement

• Alternative fuel initiatives progressing well

• Cost optimisation programme underway to deliver targeted savings of R50/tonne

• Progressed with integration of Safika into SA Cement

• Overall good cost control

• Improve systems and resources

• Review & harmonising of policies across Group

HR Solutions


• Developed tax risk matrix across Group

• Developed funding and liquidity framework

Materials

• Rationalisation and integration underway

• Entrench value chain through cement pull through

• Recognition of performance

• Focus on the well-being of employees

• Fit for purpose

High Performance Organisation

BEE III

• Significant progress on BEE III structure

• On track to announce terms structure before March 2018

Adopt Value Based

Management

• Project underway to align the Group

• Measurements and metrics being established

• Leadership to set the tone at the top• Ensure that the behaviour of employees

resonate with the ethos of PPC

Organisation Culture

Liquidity

• Completed re-structuring of DRC funding –24 month capital payment holiday

• Negotiations with EPC contractor to acquire an equity holding is progressing well

• Significant progress in lengthening and smoothing maturity profile

Rest of Africa

• Operationalising of businesses progressing well

• Implementing RTM strategies• Localisation of input cost progressing well• Energy mix progressing well with Rwanda

cost of production down

• Focus on development of leadership and young talent

• Entrench succession planning

Talent

A L I G N I N G O U R O P T I M I S AT I O N T O E N S U R E D E L I V E R Y

3. STRENGTHENED GROUP FINANCIAL POSITION

3.1 FOH – FOUR strategic priorities (Group Finance)

3.2 Investment in a diversified portfolio of assets

3.3 DRC de-risked | steps taken to reduce balance sheet impact

3.4 Deleveraged balance sheet and improved maturity profile

3.5 Key drivers of free cash flow

14


HUMAN CAPITAL

FINANCIAL

OPERATIONS

OPTIMISATION

3.1 FOH – FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS

FINANCIAL

OPERATIONS

HUMAN CAPITAL

F 1

2

3

1

2

3

O

H

1

2

3

Optimal capital structure – long term gearing target, maturity profile, liquidity

Developing centres of excellence across the Group

Performance culture geared towards shareholder value

Financial disciplines and processes which include:

Entrenching governance structures

Implementing BEE III

Embedding ERP systems across the Group

Entrenching standardised policies and procedures

Financial portfolio optimisation – cost of capital & hurdle rates vs returns, capital allocation priorities, dividend framework

Free cash flow generation

G R O W I N G S U S TA I N A B L E S H A R E H O L D E R VA L U E T H R O U G H E F F E C T I V E A N D E F F I C I E N T F I N A N C I A L S T R AT E G Y

Group Finance

14

15


15

2119

28563038

2058

1035

518650 750

9001000 1000

1200

0

500

1000

1500

2000

2500

3000

3500

FY14 FY15 PF MAR

16

FY17 1H17 1H18 FY18 FY19 FY20

Capex E (Rm)

Actual capex & PPE Lower range High range

3.2 INVESTMENT IN A DIVERSIFIED PORTFOLIO OF QUALITY ASSETS

15

Capacity build-up 2015 – 2018 (mtpa)

P P C H A S I N V E S T E D > $ 7 5 0 M S I N C E 2 0 1 4 I N A Q U A L I T Y A S S E T P O R T F O L I O P E A K C A P E X I N F Y 1 6

-50%

Capex guidance

8.00.65 8.6 0.4

1.21.4 11.6

1.0 12.6

0

2

4

6

8

10

12

14

Capacity in2015

Rwanda* Capacity in2016

Zimbabwemill

DRC* Ethiopia Capacity in2017

SK9 Capacity in2018

+34.9%+8.6%

Capex guidance (Rm)

FY FY18 FY19 FY20

Southern Africa 450 - 600 650 - 800 800 - 1000

RoA 200 - 400 100 - 200 100 - 200

Rest of Africa capacity increased to 4.7mtpa

FY18 still expected to be within guidance

range

*Change in product mix

16


S U C C E S S F U L D E R I S K I N G O F P P C ’ s B A L A N C E S H E E T

3.3 DRC DERISKED| STEPS TAKEN TO REDUCE BALANCE SHEET IMPACT

16

1) Moratorium on capital repayments in the DRC

2 year capital repayment moratorium

Next capital repayment scheduled for January 2020

New interest rate 6 month US$ LIBOR plus 975bps

PPC support for DRC for FY18 within

previous guidance

This has been funded from internal cash flows

UPDATE ON OPTIONS

Negotiation with EPC contractor progressing well18 - 24 month extension of ~US$24m EPC contract retention fee

Negotiation with funders with regard to debt restructuring completed

Conversion of ~US$24m into equity subject to due diligence

2

17


- 500

1,000 1,500 2,000 2,500

FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

RSA RoA

Post re-structure debt maturity profile* (Rm)

3.4 DE-LEVERAGED BALANCE SHEET AND IMPROVED MATURITY PROFILE

Group debt continues to reduce as PPC is not drawing on debt facilities

As at end Jan 2018

Net debt below R4.0bn (R4.4bn Sep 2017)

Gross debt below R5.0bn (R5.4bn Sep 2017)

Group Gross debt/EBITDA 2.1x – 2.3x (2.6x Sep 2017)

Group Net debt/EBITDA 1.7x – 1.8x (2.1x Sep 2017)

Restructuring of SA debt

Effective cost of funding is expected to reduce from ~13% -14% to 10% - 11%

Current debt maturity profile (Rm) Group debt profile (Rm)

0.0

2.0

4.0

6.0

2,000

7,000

12,000

Mar-16 Jun-16 Mar-17 Jun-17 Sep-16 Sep-17

Gross debt (lhs) Net debt Gross debt/EBITDA (rhs) Net debt/EBITDA

17

*Includes DRC capital repayment moratorium *Based on current RSA utilisation

1

Capital structure Metric

Target capital structure (equity : debt) 70:30 (Intrinsic value)

Target Group Gross debt/EBITDA 3.0x – 3.5x

Target RSA Gross debt/EBITDA 2.5x – 2.8xThrough the cycle

W E H A V E I M P R O V E D G R O U P M AT U R I T Y P R O F I L E A N D L O W E R E D B O R R O W I N G C O S T S

18


3.5 KEY DRIVERS OF FREE CASH FLOW

CAPEX Major capex spent in prior years FY18 capex spend within guidance

18

FINANCE CHARGES• Reduced debt levels• RSA effective funding rates reduced

CASH TAX• Section 12 Incentive and 12 C allowance of the income tax act results in approximately

R700m – R900m tax deduction in the year of production in South Africa

DRC DE-RISKING• Reduction in deficiency funding

1

2

3

4

E X E C U T I O N T O D E L I V E R I M P R O V E D F R E E C A S H F L O W S

4.1 OPERATIONAL REVIEW

O P T I M I S AT I O N O F R T M A N D P L A N T E F F I C I E N C I E S

I M P R O V I N G C O S T R E D U C T I O N A C R O S S O U R O P E R AT I O N S

D E L I V E R O N R o A B U S I N E S S P L A N S

4.2 SOUTHERN AFRICA

4.2.1 FOH – FOUR outlook (southern Africa)

4.2.2 Continued price recovery in a difficult trading environment

4.2.3 Operational overview

4.2.4 Imports

4.2.5 Supply demand dynamics

4.2.6 Three mega plant strategy capitalises on our footprint

4.2.7 Slurry kiln 9 project update

4.2.8 Slurry complex overview

4.2.9 Operational efficiencies

4.2.10 PIP Phase 2

4.2.11 Carbon tax

21


HUMAN CAPITAL

FINANCIAL

OPERATIONS

OPTIMISATION

4.2.1 FOH – FOUR STRATEGIC PRIORITIES FOR THE NEXT 12 TO 18 MONTHS

FINANCIAL

OPERATIONS

HUMAN CAPITAL

F 1

2

3

4

1

2

3

O

H

R50/tonne improvement in profitability

Talent management

Organisation culture


Realise SK9 benefits

Supply chain optimisation

Optimise RTM

Alternative fuel and plant efficiency

Safika cement integration

Structure optimisation

Implement value based management principles

C O S T O P T I M I S AT I O N T O D E L I V E R M A R G I N I M P R O V E M E N T

southern Africa

1

2

3

4

21

22


22

I M P R O V E M E N T I N V O L U M E S N O T W I T H S TA N D I N G P R I C E I N C R E A S E S

Average Selling Price (ASP) Trends

Source: PPC Research

4.2.2 CONTINUED PRICE RECOVERY IN A DIFFICULT TRADING ENVIRONMENT

22

Price increase

ASP indexed from January 2015

Price increase

Pricing bottomed

23


SOUTH AFRICA – 9 MONTHS FY18 OPERATIONAL UPDATE

Realised cement pricing up 2% in this period

Pricing momentum maintained

Further price increase of 2% – 5% implemented in Jan 2018

Cement volumes

Estimate that the industry declined by 3% – 4% for calendar 2017

PPC volumes declined 1% - 2% for 9 months to Dec 2017, improvement compared with interim performance

Portfolio effect of PPC’s national footprint

Update on the Western Cape drought impact

PPC operations have been secured from water input perspective to ensure continuity of supply

Cement manufacturing not a water-intensive process

Operations totally self sufficient from own surface water sources. These can potentially last for at least several months

Full bouquet of both water conservation and augmentation measures implemented since mid-2017

De Hoek plant commissioned a reverse osmosis plant of 700 000 litres per day at the end of Jan 2018

1.2 million litres utilised to date

We continue to engage with local government as construction is viewed as a priority economic sector

4.2.3 OPERATIONAL UPDATE | PRICING BOTTOMED IN SOUTHERN AFRICA

23

P R I C I N G I S A N I M P O R TA N T FA C T O R I N S TA B I L I S I N G M A R K E T S

24


4.2.4 IMPORTS INCREASED BUT STILL WELL BELOW THE 2014 PEAK

0

200,000

400,000

600,000

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Total Imports (t)

Durban PE&EL CPT

Total imports have increased by 23% for Jan – Dec 2017

Western Cape imports increased by 18%

Still well below the peak in Q4 2014, ~11% of total cement volumes

The bulk of the imports have been from China

The major port of entry has been Durban and PE and to a lesser extent Cape Town

R/US$ exchange rate has continued to strengthen since Jan 2016

24

R/US$ exchange rate

11.7

7.008.009.00

10.0011.0012.0013.0014.0015.0016.0017.00

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

25


4.2.5 SUPPLY DEMAND DYNAMICS

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

'00

0 t

on

ne

s

Annual cementitous supply and demand in South Africa, Botswana, Lesotho & Swaziland

Industry demand Industry demand locally produced Industry Capacity (with SK9) Annual % change in demand

• SK9 PROVIDES PPC WITH NEWEST TECHNOLOGY IN THE DOMESTIC INDUSTRY

• IN 2020 AN ESTIMATED 3MTPA OF INDUSTRY CAPACITY WILL NOT MEET EMISSIONS REGULATIONS

• AFTER 2020 THE INDUSTRY WILL BE RUNNING AT HIGH CAPACITY SUGGESTING ADDITIONAL CAPACITY WILL BE REQUIRED

25

New entrant

New entrant

PPC - Dwaalboom

PPC SK9

26


4.2.6 THREE MEGA PLANT STRATEGY CAPITALISES ON OUR FOOTPRINT

26

P P C H A S T H E M O S T D E S I R A B L E C E M E N T D E L I V E R Y F O O T P R I N T I N S O U T H A F R I C A

• Well positioned for alternative fuel • Favourable proximity to market

WESTERN CAPE 1mtpa *

PPC footprint enables:

• Integrated plants and depots to serve key markets

• Portfol io effect del iver ing prof i tabi l i ty

• Abi l i ty to del iver at lowest cost through opt imal sourcing

9

3

3

2

3

1

Botswana

* Grinding plant only

Key

Port Elizabeth

Polokwane

Lichtenburg

Cape Town

Saldanha

* Riebeeck

De Hoek

Richards Bay

Port Shepstone

East London

Durban

Newcastle

Gaborone

Nelspruit

*Johannesburg

1

• SK9 newest technology• Increased optimal sourcing

opportunities, increased competitiveness

SLURRY 2mtpa* 2

• Pioneered six stage pre-heater technology in South Africa

• Modernised plant • Waste product substitution• Increased energy efficiency

DWAALBOOM 2mtpa*3

1

2

3

*cement capacity

PPCPPC Mega plant (3)

PPC Grinding plant (3)

27


27

The R1.7bn SK9 project is 90% complete and scheduled for commissioning in 2Q 2018

SK9 is a new 3000tpd production line utilising the latest cement technology

This project will be delivered on time and within budget

The efficient Slurry complex will be able to deliver 2.0mpta

4.2.7 SLURRY KILN 9 | PROJECT UPDATE

27

S K 9 W I L L E N H A N C E P P C ’ S C O M P E T I T I V E P O S I T I O N T H R O U G H C O S T, T E C H N I C A L A N D E N V I R O N M E N TA L E F F I C I E N C I E S

28


4.2.8 SLURRY COMPLEX OVERVIEW | 2.0MTPA CAPACITY

28

New Old Old with upgrades

Coal feeding system

Overhead crane

Coal, clinker, gypsum storage

SK96 stage, pre-calciner,

grate cooler

Road and railClinker dispatch system upgrade

90kt(3x30kt)

Clinker silos

3 kt

Clinker dispatchFinishing Mills

(4x mills)

Packing Plant2x rotary packers

2x palletisers

Cement

SK8 RM4

2 x 60kt limestone

Quarrylimestone, shale

Blending Bins

GCT

Water injection upgrade on GCT to work with bag filter

Raw meal extraction system

Stacker and Reclaimer sized for the complex

Feeds both RM4 and RM5 raw materials feed

per millNew limestone

reclaimer and new limestone

New weighbridge for raw materials

Bag filter<30mg/Nm3

RM5

Proportioning plant

Additive material storage

Raw material receiving station

Weigh bridge

Limestone Reclaimer

Raw meal 9,5kt

3 000 tpd 900 ktpd

Total Clinker

1.6mtpa

2 400 tpd 720 ktpa

Shale conveying system

T H E S L U R R Y C O M P L E X I S A B R O W N F I E L D S E X PA N S I O N W H I C H C O S T ~ U S $ 7 0 – U S $ 9 0 / T O N N E

29


W E C O N T I N U E T O E X E C U T E O N D R I V I N G E F F I C I E N C I E S

Logistics savings on a R/tonne basis

4.2.9 WE CONTINUE TO DRIVE OPERATIONAL EFFICIENCIES

PIP phase I exceeded R650m

Improvements in operational efficiency were mainly due to:

Restructuring the business to meet operational requirements

Multi-skilling and training of employees

Optimising outbound logistics

Improving energy efficiency

Fixed Costs of Production (Real Rm based to 100) Cost of Production per tonne (based to 100)

60

80

100

120

Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17

Fixed costs of production (Rm) Rand per ton

0

50

100

150

Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17

Rand per ton VCOP Rand per ton VDCOP

29

Based to 100

• VCOP – Variable Cost of Production• VDCOP – Variable Delivered Cost of Production

30


What we said

Revenue Enhancement

Strategic cost

reduction

Cost efficiencies

• Implemented price increases in August 2017 and January 2018

• Secured volumes by enhanced value added technical support

• Integration of Safika Cement

• Organisational restructure of Head Officeand Operations

• Embed tyre burning in the Western Cape

• Hercules kiln 5 (HK5) mothballed

• Optimisation of logistics

4.2.10 PIP PHASE 2 - PROGRESS MADE ON R50/TONNE SAVINGS

30

• Enhanced product portfolio• Product strategy implementation• Price escalation strategy • Entrench strategic partnerships

• Complete Safika Cement integration• Drive plant efficiencies to reflect

operations requirements

• Slurry kiln 9 complex coming online• Embed the 3 mega plant strategy • PE kiln 4 mothballed • Implementation of alternative fuels in the

Western Cape • Implement alternative route to market sourcing

What we achieved Next 12 – 18 monthsWhat we did

2 0 0 - 3 0 0 B A S I S P O I N T I M P R O V E M E N T I N E B I T D A M A R G I N O V E R T H E N E X T 2 - 3 Y E A R S

20%

30%

65%

Target saving based on

R50/tonne

10% - 20%

40% - 60%

20% - 40%

31


OVERVIEW ACCOUNTING IMPACT

2018 budget speech indicated that the carbon tax will be implemented from 1 January 2019

The current tax structuring proposes R120/tonne applied to CO2 emissions

PPC qualifies for the basic allowance of 60%, and other allowances including process allowances, carbon budget and trade exposure (once regulated) which increases the basic allowance

PPC anticipates that the impact of carbon tax is likely to be in the region of ~R80 – R100m for cement and lime per annum

PPC is continually looking to reduce its carbon emissions

Mega plant strategy – use of efficient kilns

SK9 – modern efficient technology – commissioned in Q2 2018

Use of alternative fuels – replacement of coal

Carbon tax will be treated as an excise tax which is an indirect tax

No direct impact on the PPC’s income statement same treatment as VAT which is also an indirect tax

Accrual on the balance sheet until payment is made

Ideally this tax should be passed on to the consumer

4.2.11 CARBON TAX UPDATE

31

4.3 Rest of Africa4.3.1 FOH – FOUR strategic priorities

4.3.2 Overview

4.3.3 Key drivers

4.3.4 PPC positioned to benefit from rapid urbanisation

4.3.5 Some key projects driving demand

4.3.6 Progress made on key priorities

4.3.7 Route to market overview

4.3.8 Rwanda operational review

4.3.9 Zimbabwe operational review

4.3.10 DRC operational review

4.3.11 Ethiopia operational review

S T R O N G P R E S E N C E I N G R O W I N G U R B A N C E N T R E S O F T H E C O N T I N E N T

33


HUMAN CAPITAL

FINANCIAL

OPERATIONS

OPTIMISATION


FINANCIAL

OPERATIONS

HUMAN CAPITAL

F 1

2

3

4

1

2

3

O

H

1

2

3

4

Renegotiation of funding agreements

Financial discipline to align to the Group

Skills development and talent management in the local market

Embed organisational culture inline with Group,incorporating local requirements

Improve liquidity to meet foreign payment obligations

Value based management principles

Operational efficiencies in all markets

Optimise RTM strategy in all markets

Energy mix optimisation in Rwanda, DRC & Ethiopia

Optimise raw materials sourcing (coal, gypsum) & packaging

Structure optimisation across all regions

Rest of Africa

L E V E R A G I N G G R O W I N G A F R I C A N M A R K E T S W I T H L O W E R P E R C A P I T A C E M E N T C O N S U M P T I O N

33

34


30% - 35%1.4mtpaZimbabwe

50% - 60% 170 - 255

Annualised capacityutilisation

EBITDAmargin at steady state

Average retail pricing US$/tonne

4.3.2 OVERVIEW OF REST OF AFRICA CEMENT

34

30% - 35%1.2mtpaDRC Ramp - up 150 - 200

30% - 35%1.4mtpaEthiopia

Ramp - up 80 - 100

30% - 35%0.65mtpa Rwanda 60% - 70% 205 - 235

W E L L P O S I T I O N E D T O G A I N M A R K E T S H A R E I N E M E R G I N G M A R K E T S

35


Real GDP growth % Net FDI % of GDP

4.3.3 REST OF AFRICA KEY DRIVERS

35

REAL GDP

• Strong growth in Ethiopia and Rwanda

• Zimbabwe recovering

FDI FLOWS

• Strong FDI flows in Ethiopia and Rwanda

• Zimbabwe stabilising

Source: NKC

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017E 2018F 2019F 2020F

Ethiopia Rwanda DRC Zimbabwe

36


P P C I S I D E A L L Y P O S I T I O N E D A R O U N D F A S T G R O W I N G C I T I E S

URBAN POPULATION % 80% OF WORLD GDP IS DRIVEN BY CITIES*

4.3.4 PPC IS IDEALLY POSITIONED TO BENEFIT FROM RAPID URBANISATION

36

Source: AfDB statistics 2016

* World cities report 2016

PPC PRESENCE

http://www.google.co.za/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwjL7K2k-vzYAhUJxxQKHUH-DFwQjRx6BAgAEAY&url=http://www.economist.com/node/21013884/all-comments&psig=AOvVaw0fr2mmU8xmpmxOnnMQ6A4s&ust=1517307827984043

http://www.google.co.za/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwjL7K2k-vzYAhUJxxQKHUH-DFwQjRx6BAgAEAY&url=http://www.economist.com/node/21013884/all-comments&psig=AOvVaw0fr2mmU8xmpmxOnnMQ6A4s&ust=1517307827984043

37


4.3.5 SOME KEY PROJECTS DRIVING DEMAND (CURRENT AND FUTURE)

37

• New Bugasera International airport • Inland Port – Magerwa• HQ Power peat plant• IDP model villages and affordable housing projects• Expansion of Rubavu airport• Ancillary infrastructure development

(access roads, warehouses etc.)

Rwanda

Zimbabwe

DRC

Ethiopia

• Hwange thermal power station

• Victoria Falls shopping mall project

• Gwayi/Shangani Dam

• Beitbridge – Masvingo highway

• Caledonia affordable housing

• Batoka Gorge hydro power station

• CITE DU FLEUVE village project in Kinshasa• Ancillary infrastructure development

(access roads and rail upgrade into interior) • Inga project

• Goods and passenger railway between Addis Ababa and Djibouti

• Grand Ethiopian Renaissance Dam on Nile river• Approximately US$2billion allocated to Road projects in 2018• Geothermal power project (1000 MW)• Koysha Hydro-dam (2000 MW) in the South of Ethiopia

starting 2018

http://www.google.co.za/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwikkOX6p8TZAhWJoRQKHYuOBk8QjRx6BAgAEAY&url=http://onlineethiopia.net/2016/09/africas-clean-energy-megaprojects/&psig=AOvVaw24i4soYWAWjINgGuU7jhCO&ust=1519759546603485

http://www.google.co.za/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwikkOX6p8TZAhWJoRQKHYuOBk8QjRx6BAgAEAY&url=http://onlineethiopia.net/2016/09/africas-clean-energy-megaprojects/&psig=AOvVaw24i4soYWAWjINgGuU7jhCO&ust=1519759546603485

38


4.3.6 PROGRESS MADE ON KEY PRIORITIES

RTM strategy Concluded agreements for alternative energy source In place to gain market share and grow volumes Export strategy developed to gain forex

Operational efficiencies Identified thermal energy inputs to be sourced locally and preserve forex Implementing business architecture to support growth in volumes Identified alternative extender to optimise product mix

RTM strategy Entrenching strategy with market share > 20%

Operational efficiencies Renegotiating electricity tariff structure Power planning to reduce maximum demand charge Multi-skilling and job rotation to increase productivity Right-sizing at all levels

Funding Renegotiation of funding agreements progressing well with additional

capital holiday imminent

ZIMBABWE RWANDA

Liquidity management Identified export opportunities to neighbouring countries Local sourcing of key input materials in progress Packaging material and consumables

Operational efficiencies Entrenched RTM strategy in the north of Zimbabwe to support

volume growth (>40%) Diversifying product mix with SURECAST representing 10% - 15% of

volumes, none in the previous year

Raw material optimisation Identified 4 potential deposits to extend limestone reserves from 11.5 to

approx. 16 years. Drilling is in progress to quantify. Completed 2 sites, await results

Also identified larger deposits in the eastern DRC , with ongoing engagements

Operational efficiencies Localising raw material inputs progressing well, diversified sources for

gypsum and coal Project to localise thermal energy costs with methane gas is in progress

38

ETHIOPIA DRC

E X E C U T I N G O N O U R P R O M I S E S

39


4.3.7 ROUTE TO MARKET STRATEGIC OVERVIEW

39

DRCDEFEND AND GROW

DEFEND AND GROW

RAMP-UP PHASERAMP-UP PHASE

Rwanda

Zimbabwe

DRC

Ethiopia

40


SPOT RETAIL PRICE (US$)

4.3.8 RWANDA OPERATIONAL REVIEW

RWANDA DOMESTIC MARKET SHARE 9 MONTH FY18 OPERATIONAL UPDATE

Cement volumes increased by 20% - 30% compared to previous year due to:

Successful route to market strategy

Excellent service delivery

Product consistency and technical support

Significant increase in exports

Retail cement pricing remained fairly stable

40

COST BREAKDOWN

B Y M I D - 2 0 1 9 W E E X P E C T T O B E A T F U L L C A P A C I T Y

••

41



4.3.9 ZIMBABWE OPERATIONAL REVIEW

ZIMBABWE DOMESTIC MARKET SHARE 9 MONTH FY18 OPERATIONAL UPDATE

Overall domestic cement volumes increased by 30% -40% compared to previous year due to:

Enhanced product portfolio following launch of Surecast in March 2017

Excellent service delivery

Product consistency and technical support

There has also been an upsurge in construction activity as citizens are on a drive to convert their monetary investments to property

Net realised selling price marginally higher in dollar terms

41

COST BREAKDOWN

W E A R E A C H I E V I N G F U L L C A P A C I T Y O N C L I N K E R

50%

55%

60%

65%

Mar 16 Sept 16 Sept 17

Energy15%

Maintenance7%

Labour & overheads

27%

Transport18%

Raw materials & other

19%

Dep14%

42



4.3.10 DRC OPERATIONAL REVIEW

DRC RAMP-UP VOLUMES 9 MONTH FY18 OPERATIONAL UPDATE

The DRC operation commenced with sales in April 2017

Increased market share to 25 – 30%

Proven route to market strategy implemented to grow volumes with key focus on:

Building strategic partnerships

Technical support to customers

Enhance service delivery

Excellent product quality

Focus on construction and CPM segments

Alignment of fixed cost to plant ramp-up completed

Key focus is for DRC to generate positive cash flow

42

COST BREAKDOWN

G A I N I N G M A R K E T S H A R E I N A C H A L L E N G I N G M A R K E T

Energy42%

Maintenance8%

Labour & overheads14%

Dep14%

Other22%

43



4.3.11 ETHIOPIA OPERATIONAL REVIEW

ETHIOPIA RAMP-UP VOLUMES 9 MONTH FY18 OPERATIONAL UPDATE

Production commenced in June 2017

To date presold ~300kt of which slightly more than 50% has been dispatched

Retail selling price reduced due to devaluation of Ethiopian BIRR against the USD

The provisional acceptance certificate (PAC) has been completed in December 2017

Technical agreement between PPC and Habesha has been established to support ongoing operations

Full ramp-up of Habesha will be in 12 - 24 months

Expected to account for profit and loss for 3 months in FY18

43

COST BREAKDOWN

U N L O C K I N G O P P O R T U N I T I E S I N D E V E L O P I N G M A R K E T S

Energy40%

Maintenance6%

Transport12%

Labour & OH10%

Dep6%

Other26%

4.4 Materials

4.4.1 FOH FOUR strategic priorities

4.4.2 Aggregates & Readymix, Lime

44

45


HUMAN CAPITAL

FINANCIAL

OPERATIONS

OPTIMISATION


FINANCIAL

OPERATIONS

HUMAN CAPITAL

F 1

2

3

1

2

3

O

H

1

2

Financial discipline through integration

Skills development and talent management

Organisation culture in line with Group

Value based management principles

Improve operational efficiencies through integration

Structure optimisation

Entrench the value chain through cement pull-through

Focus on cash generation and working capital management

C A P I TA L I S I N G O N O P P O R T U N I T I E S I N Z O N E S O F N AT U R A L A D VA N TA G E G O O D P L AT F O R M F O R C E M E N T VA L U E C H A I N O P P O R T U N I T I E S T O R E P L I C AT E M O D E L I N R o A

Materials

45

46


Aggregates & Readymix Lime

Pricing

Under pressure due to a competitive market

Reduction in volumes due to

Exposure to the Gauteng market

Significant reduction in construction projects in Gauteng

Aggregates exposure to the readymix market

Pricing

At similar levels to the previous period

Volumes declined marginally due to

Significantly exposed to the domestic steel industry

Major client shutdowns during the period

Non-extension of milk of lime contract

4.4.2 AGGREGATES & READYMIX, LIME - 9 MONTH OPERATIONAL REVIEW

46

5. STRATEGIC ACTION PLANS

O P T I M I S I N G O U R C A P I TA L I N V E S T M E N T S TO D E L I V E R LO N G T E R M S U S TA I N A B L E

S H A R E H O L D E R VA LU E

48


5.1 STRATEGIC ACTION PLANS

48

1. Capital portfolio optimisation & implementation

2. Commissioning of SK9

3. Optimisation of the Rwanda plant

4. Implementation of VBM* Principles

1. Implementation of BEE III

2. Full integration of Safika Cement

3. Implementation of RDF** supply pipeline in the Western Cape

4. Actively pursue the repatriation and utilisation of funds in Zimbabwe

1. Optimisation of Dwaalboom

2. Implementation of the de-risking options in the DRC

3. Entrenchment and optimisation of business processes across the Group

4. Measurement and monitoring of VBM Principles

6 MONTHS 6 - 12 MONTHS 12 - 18 MONTHS

*Value Based Management Principles**Refuse Derived Fuels

Questions

50


INVESTOR CONTACTS

50

Anashrin PillayInvestor Relations

[email protected]

+27 11 386 9000

www.ppc.co.za

mailto:[email protected]

http://www.ppc.co.za/

51


51

This document including, without limitation, those statements concerning the demand outlook, PPC’s expansion projects and its capital resources and expenditure, contains certain forward-looking statements and views. By their nature, forward-looking statements involve risk and uncertainty and 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 be 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, other government action and business and operational risk management.

Whilst PPC takes reasonable care to ensure the accuracy of the information presented, PPC accepts no responsibility for any damages, be they consequential, indirect, special or incidental, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and the information published in this document is unaudited.

DISCLAIMER

51

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