Merrill Lynch Conference Sun City - The Vault Merrill Lynch Conference Sun City March 2015 ... delivering ROIC > WACC Superior Growth and ... • BCom, MBA, CFA

1

Merrill Lynch Conference

Sun City

March 2015

Darryll Castle – CEO

Tryphosa Ramano – CFO

Azola Lowan – Investor Relations

2

Introduction

Operational Review

Corporate Update

Projects Update

Outlook & Questions

Agenda

3

Compelling Investment Case

Competitive

Position

• Strong market position in South Africa, Zimbabwe, Botswana and Rwanda

• Iconic brands and comprehensive reach

Pan African

Player

• Increasing presence on African continent

• Diversified portfolio across products and geographies

• Quality of portfolio

Clear

Expansion

Strategy

• Clearly defined rest of Africa strategy with significant expansion plans

underway; tangible progress made in Rwanda, Zimbabwe, DRC & Ethiopia

• Supported by highly regarded financial partners

Delivery and

Execution

• Demonstrating ability to execute complex projects and run businesses across

the African continent

• Entry point to fast growing African countries that require significant

infrastructure investment

Resilience

• Resilient performance through the cycle

• Well-demonstrated cash conversion ability

• Value enhancing strategic allocation of capital; delivering ROIC > WACC

Superior

Growth and

Margin

• Sustainable margins with high returns on investment

• Continued focus on optimisation and cost cutting

Capital

Structure

• Capital structure supportive of expansion ambitions

• Ability to access project financing across the African continent - > $400m of

project finance secured

4

Progress with Strategy

Keeping the Home

Fires Burning

strategy

• Channel management strategy embedded by the

acquisition of • Safika Cement (IDM)

• Pronto Readymix

• Ulula Ash

• Progress with 3 mega-plant strategy

Rest of Africa (RoA)

Expansion strategy:

• 40% of revenues by

2017

Rwanda: • 600 000 tpa plant to be commissioned 2H of calendar 2015

Ethiopia: • Stake in 1.4 mtpa plant to rise to 51%

Democratic Republic of the Congo: • Construction on 1 mtpa plant underway

Zimbabwe: • Construction of 700 000 tpa Harare mill underway

Further expansion opportunities: • Actively engaged in building a solid pipeline for growth

5

African Expansion Journey

• Clear expansion strategy

execution

• Truly pan-African footprint

• Building a quality portfolio

PPC Capacity Expansion (mtpa)

8.0

0.6

1.0

1.4

0.7 12

0

2

4

6

8

10

12

14

Current PPCcapacity

Rwanda(2015E)

DRC (2016E) Ethiopia(2016E)

Zimbabwe(2016E)

PPC capacity2017

50% growth

6

Solid Financial Metrics

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Revenue (Rm)

Revenue Growth (rhs)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

500

1 000

1 500

2 000

2 500

3 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EBITDA (Rm)

EBITDA EBITDA margin (rhs)

Solid financial metrics over time

• Resilient performance over time

• Revenue and profitability doubling in the

past decade

• Delivering superior returns to

shareholders over time

78% 80% 78% 80% 78% 79% 73%

64%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2007 2008 2009 2010 2011 2012 2013 2014

Dividends

Dividend payout Dividend yield

7

Enhancing Shareholder Value

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2010 2011 2012 2013 2014

ROIC versus IRR

ROIC

IRR ROA target = real WACC + (6.0%-10%)

IRR RSA target = real WACC + 3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2010 2011 2012 2013 2014 2020

ROIC excl expansion versus IRR

ROIC

IRR ROA target = real WACC + (6.0%-10%)

IRR RSA target = real WACC + 3%

• Continuing to deliver ROIC in excess of the cost of capital

ROIC to

> 20%

8

Darryll Castle (46)

CEO

• Appointed CEO of PPC in December 2014

• Darryll has extensive experience in the mining industry and served as a CEO of Trafigura Mining Group and

Anvil Mining, as well as COO of Metorex Group

• Darryll has a broad range of skills in corporate management, fund management, financial analysis, mining and

engineering.

• Darryll’s first-hand knowledge of various countries in Africa and emerging markets as well as deep relationships

built over the years are expected to add value

• BSc (Civil), BCom, MBA, CFA

Tryphosa Ramano (43)

CFO

• Appointed CFO of PPC in 2011

• Tryphosa was CEO of WIP International (a subsidiary of WIPHOLD focused on African expansion)

• Tryphosa also served as CFO of SAA, and prior to that, she was requested to join National Treasury, where she

set up a business unit with financial oversight of state-owned entities

• Tryphosa has served on a number of Boards, and is currently on the Airports Company of SA and Land Bank of

SA boards as a non-executive director

• CA(SA)

Johan Claassen (55)

MD – PPC Cement RSA

• Johan is a professional engineer who joined PPC in 1989

• He has served PPC in a number of key positions including as an executive in cement operations and lime

• He was previously employed by the Department of Water Affairs, progressing to regional engineer

• BEng (University of Stellenbosch), EDP (Wits Business School)

Pepe Meijer (54)

MD – International

• Pepe is a mechanical engineer who joined PPC in 1988

• He previously held the positions of executive group services, executive cement operations and various other

senior and general management roles across the cement and lime divisions of PPC

• Prior to that, he worked in the gold mining industry, with the last appointment being as section engineer, and in

the fishing/processing/frozen-food industry as group projects manager

• BEng, BB&A (Hons), MBA from the University of Stellenbosch

Experienced Management Team

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1. Change Management Programme Implementation • People and Culture

• Delivery and performance-driven culture

• Creative tension and constructive confrontation

• People structures and the role of the head office

• Creating a matrix organisation

• Profit Improvement Programme (targets to be communicated)

• Cost optimisation and reductions

• Improving operational efficiencies

2. Sales and Marketing • Strengthen management and enhance team on the ground

• Improved analytics of pricing and products

3. Expansion Strategy Implementation • Focus on delivering projects on-time and on-budget

• Focus on delivering business plans that ensure adequate

returns

4. Optimal Capital Structure • Managing debt levels to optimal levels

• Optimising balance sheet to position company for growth

CEO priorities

10

Operational Review

Women sort coffee beans in Addis Ababa, Ethiopia

11

• Positive growth in group cement sales volumes

for the first five months of F2015

• Declines in SA cement sales offset by sales by

Safika Cement, now consolidated

• Volume growth achieved in Zimbabwe, Botswana

and Rwanda

• Limited selling price growth achieved

• Overall margins under pressure as rising cost of

sales outstrips revenue growth, and rising

overheads due to expansion strategy

• Lime division has shown an improved

performance

• The aggregates and readymix division has been

impacted by reduced demand from project-related

construction customers

• Pronto Readymix, consolidated from July 2014,

has positively contributed to results

Operational update

12

South African Operating Environment

Source: National Treasury, SA Reserve Bank

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2011 2012 2013 2014f 2015f 2016f 2017f

Gross Fixed Capital Formation Final Household Consumption

Real GDP Growth

• Cement industry capacity rising at a time

when GDP is at a cyclical low

• Introduction of carbon taxes to negatively

impact the industry

• Dept. of Human Settlements to build an

additional 563 000 units by 2019

• Beyond 2016, optimistic that upswing in

cement demand will ensue

64 69

74 80

88 96

105

114

124

135

146

0

20

40

60

80

100

120

140

160

8.7% CAGR

growth 2014 - 2023

Key macroeconomic variables Residential & non residential (Rbn)

Housing units

Source: BMI

Source: Department of Human Settlements, National Treasury, PPC calculations

0

50000

100000

150000

200000

13

South Africa

Source: South African Revenue Services

• Rising imports into the Eastern and Western Cape provinces as well as aggressive competitor

pricing have resulted in volumes declining in the Coastal and Inland regions (ex Safika)

• Cement sales volumes (ex Safika) have fallen by single digits

• Aggressive competitor pricing has stretched PPC price premium to uncomfortable levels

• Selling prices have marginally decreased on the back of a tough operating environment

• Lower volumes result in margins being squeezed by fixed costs

Imported cement volumes by port of entry

-

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14

Durban PE & EL Cape Town

Tons

14

Zimbabwe, Botswana and Rwanda

• In-country cement sales volumes

exhibiting a pleasing trend while export

sales have reduced

• Export sales currently making up about

10% of total cement sales volumes

• Limited growth in domestic selling prices

while export prices remain attractive

• Improvements in cost management will

enhance margins

• Favourable impact of rand devaluation

• Cement sales volumes have

improved in the retail sector

as well as supply into the

Tonota road project

• Good cost management will

result in margins in this

business unit improving

• Cement sales volumes

continue to improve but

expensive heavy fuel oil costs

continue to offset the revenue

growth

Zimbabwe Botswana

Rwanda

15

Lime, Aggregates and Readymix

• Lime revenues showing an improving

trend on the back of improvement in

sales of burnt product volumes

• Improved customer mix and higher off-

take from key clients has benefitted the

business

• Good progress with cost containment will

likely see margins in the lime business

expanding

• Decreases in projects in operating zones

have led to weaker volumes achieved in

South Africa and Botswana

• Rising cost of sales in the aggregates

division will see margins reducing

• Pronto, consolidated since July 2014, is

contributing positively

Aggregates and Readymix Lime

16

Corporate Update

Chitungwisa Market, Harare, Zimbabwe

17

Investment Portfolio Management & Funding

1. Portfolio Management Process • Scarce capital allocation

• Expected returns on capital investments

• Tax guidance

2. Capex Guidance • Flexibility in prioritising and funding capex

3. Funding

18

• Developing Strategic

Direction of Group

• Cementing

Strategy into

action plans

• Cementing action plans

into projects

• Determining adequate

returns

• Allocation of capital

resources

• Prioritising portfolio

• Project management

• Funding solutions

(project finance etc.)

• Continuous

evaluation of

returns Scarce Capital

Allocation

Developing PPC

Strategy

Translating PPC

Strategy

Portfolio Planning

Execution of Portfolio

Re-evaluation of Portfolio

Investment Portfolio Management Process

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Expected return targets for Capital Investments

Return targets for capital investments are based on hurdle rates

• Group WACC is based on PPC market value and target gearing

• SA Hurdle rate = Group Real WACC + 3%

• ROA = Group Real WACC + country risk premium + project specific risks

Specific hurdle rate targets for capex

• Maintenance capex

• Compliance - no hurdle rate requirement

• Discretionary - hurdle rate requirement

• Growth capex - hurdle rates requirement

• Economically justifiable to improve efficiency

• New business opportunities

Mechanisms to mitigate investment risks

• Project financing for RoA with no recourse to group cash flow

• EPC contracts and Project Managers

• Investments are structured

20

Tax Guidance

• F2014 effective taxation rate fell to 30% following the revenue authority’s favourable

assessment of prior year taxes

• PPC’s effective taxation rate going forward will range between 30% - 34% mainly due to

withholding taxes for foreign subsidiaries

• The table below summarises the applicable taxation incentives:

• VAT is refunded when operations commence in all geographies

21

• Capex in South Africa to be driven by construction of a new kiln at Slurry (SK9)

• Successfully secured non-recourse project finance of over $400 million for expansion

projects

• Zimbabwe (88% debt: 12% equity/ Zim cash flows)

• DRC (60% debt : 40% equity) – 90% of equity contribution already paid

• Rwanda (60% debt : 40% equity) – PPC equity 100% paid

• Ethiopia (70% debt : 30% equity) – PPC equity requires additional $13m (for 51%)

• More than 80% of PPC’s equity contributions has been paid *Currency sensitivity

Capex Guidance

Capex F2015 F2016 F2017

Maintenance

Capex R400m - R500m R450m - R550m R500m - R600m

Expansion

Capex: SA R500m - R600m R500m - R600m R100m - R150m

Expansion

Capex: RoA R2bn - R2.7bn R1.1bn - R1.6 bn R700m - R1bn

Total R3bn - R4bn* R2bn - R2.8bn* R1.3bn - R1.7bn*

Flexibility in funding capex

• Internal options • Phase/defer capex to

maintain flexibility

• Optimise project costs

• Reduce discretionary capex

• External options • Bank loans and facilities

• Domestic medium term note

program

• Project financing

• Internally generated cash

• Review of dividend policies

22

Funding – PPC long term gearing

• Debt projected to peak in 2017 between R10bn – R12bn

• Debt/EBITDA cover anticipated to remain within covenant levels (non-recourse is removed)

1.1

1.3 1.2

1.6

2.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

11 000

12 000

2010 2011 2012 2013 2014 2017

Debt to EBITDA (Rbn)

RSA ROA Debt/EBITDA

R10bn - R11bn

23

• Debt will peak at between R10bn to R12bn in 2017 due to debt drawdown on projects

• Debt rose by R2.3bn in FY14, with interest costs escalating by ~ R100m p.a.

• This was due to PPC’s African expansion strategy

• Interest on project debt is currently being capitalised and will be expensed when production

commences

Increased Borrowing from 2013-2014

F2013 Borrowings

F2014 Borrowings

BEE Debt R 2 792 million R 2 810 million

Bonds R 645 million R 2 395 million

Rwanda R 110 million R 605 million

Total R 3 547 million R 5 810 million

24

Projects Update

Chitungwisa Market, Harare, Zimbabwe

25

African project execution strategy

Execution of Projects

PPC –Highly experienced special projects team supported by the business to ensure in-country expertise is developed

Sinoma - Appointed as EPC contractors for PPC projects in Zimbabwe and the Democratic Republic of the Congo

Holtech – Consulting engineers with over 45 years experience servicing ~800 cement industry clients in 80 countries

Ercom – Indian consulting engineering company that has worked on 105 cement plants across the globe

Sinoma clients

* Execution of projects approach

applies mainly to PPC driven

projects – e.g. DRC, Zimbabwe

26

Project Update

Rwanda

- Production of new 600 000 tpa plant to commence in 2H of 2015

- Steady ramp-up period expected in first six months with full production achievable thereafter

- The existing 100 000 tpa kiln will be decommissioned

Democratic Republic of the Congo

- Construction of 1mtpa plant progressing well; commissioning remains set for end-2016

- Electricity infrastructure is on our critical path and delivery is in the hands of SNEL#

- Current indications suggest that delivery will be on time to ensure commissioning

Zimbabwe

- Construction of the 700 000 tpa Harare mill is progressing well and commissioning remains set for 2016

Ethiopia

- Once outstanding documentation is finalised, PPC will increase its stake in Habesha to 51%

- Majority shareholding will allow for greater access and influence on this project, which will mitigate potential delays

# Société Nationale d’Electricité

27

CIMERWA Ltd, Rwanda

About Rwanda

Population 12.3 million

Urbanisation 19%

GDP per capita $ 704

Cement consumption per

capita

52kg

Real GDP growth forecast 6.5%

Retail price of cement $240 - $290

per ton

Current national cement

production

120 000

tonnes

Source: International Monetary Fund

Busi Legodi

CEO of

CIMERWA Ltd

PPC’s new 600 000 tpa plant

28

Democratic Republic of the Congo

About the DRC


Urbanisation 34%



capita

26kg



per ton


production

1 000 000

tonnes


Construction site of PPC’s new 1 000 000 tpa plant

29

Zimbabwe

About Zimbabwe


Urbanisation 29%



capita

76kg



per ton


production

1 500 000

tonnes


Construction site of PPC’s new 700 000 tpa mill

30

Habesha Cement, Ethiopia

Transporting of kiln shell section (top) and construction

site image below for new 1 400 000 tpa plant

About Ethiopia

Population 94 million

Urbanisation 17%



capita

115kg



per ton


production

9 000 000

tonnes


31

Outlook

Skyline of Kinshasa, Democratic Republic of the Congo

32

• Focused on delivering on African expansion projects and

continuing to efficiently manage businesses across the

continent

• Capital structure supportive of current projects however

constrained ability to execute further expansion projects

• Tough trading conditions likely to persist for the remainder of

F2015 in South Africa

• Acquisition of Safika Cement cushioning decline in volumes

• Fruition of government’s infrastructure plans supportive of

cement demand

• Awaiting pronouncements from ITAC regarding cement

imports

By 2017 – PPC to benefit from recovery in the SA business

as well as production ramp-up of expansion projects

Outlook

33

Questions?

34

Investor contacts

Darryll Castle Chief Executive Officer

Tryphosa Ramano Chief Financial Officer

Azola Lowan Investor Relations

Vuyo Nombila Investor Relations

Tel. +27 11 386 9000 www.ppc.co.za

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

35

Addendum: Southern African cement industry map

36

Disclaimer

This document including, without limitation, those statements concerning the demand outlook, PPC’s expansion projects and its capital resources and expenditure, contain 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.

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Merrill Lynch Conference Sun City - The Vault Merrill Lynch Conference Sun City March 2015 ... delivering ROIC > WACC Superior Growth and ... • BCom, MBA, CFA