Good morning, everyone. Welcome and thank you for joining us at PPC's Capital Markets Day. My name is Kwame Antwi, and I'll be your host or MC for this evening. As usual, we are hosted by the Group CEO, Roland van Wijnen, and his executive team. We also have a number of PPC senior management team available here as well to join us. Before we start, there are some housekeeping rules. This webcast is also being broadcast live, so for those of you in the room, please turn off your phones. If you need to use the bathrooms, it's in the passage on your left-hand side, you will see the ablution facilities.
For those of you that want access to the Wi-Fi as well, the passwords are on the sides of the walls, so you can see that and log on to it. As I said, we are being broadcast live, so we need to try and keep a tight schedule. If you ask questions and the questions run over, we will defer to the end, because at the end of the presentation, we'll have quite a long question and answer session to be able to engage with management team. Also, if you want to ask a question, please identify yourself, both of you those people in the room and also on the webcast. Raise up your hands, identify yourself, where you're from, and then we'll direct the questions to the responsible individuals.
Yeah, without taking too much of your time, let me hand over to Roland and the team to take us through the presentation.
Thank you, Kwame. Good morning, ladies and gentlemen, here in the room, as well as those online. It is a pleasure to host you today at our Capital Markets Day. It's been quite a while that we had an opportunity to interact like this. And as we do it in these days, it's so-called hybrid. We'll take the questions both from people in the room as well as those that are online. As mentioned by Kwame, we will try to stick to the schedule that we have set out for the day. I will, after my welcome and a few introduction slides, hand over to Njombo, who will take you through South Africa and Botswana, one of our key markets. Afterwards, we have a Q&A session on that market, particularly. We'll have a break around 11:30, and we continue.
Sorry, a break around 11:15 A.M., and we continue at 11:30 A.M. with our international operations, starting with Zimbabwe, followed by Rwanda, and again, a Q&A. We have no more topic on the DRC on this list, as you have seen. As we have announced previously, we have restructured the DRC. We've actually finalized. I put my signatures on the documents earlier this week, and therewith we are well underway as we have announced that we will deconsolidate DRC out of our PPC Limited numbers. In the afternoon, we'll spend some time with Delon, our Head of Operations, on the topic of industrial excellence and decarbonization. You will see throughout today that industrial excellence, in order to mitigate cost increases, is crucial to the success of PPC in the past, in the present, as well as in the future.
Throughout today, you will hear a number of examples on how we mitigate cost increases in our business through specific dedicated actions that will address variable and fixed cost. After that block, we'll start to close out today with a financial section where Brenda will talk you through the capital structure that we have in mind, the capital allocation principles that we follow, and a rough idea of the capital outlay that we see for the coming years. Then I'll wrap it up with a little bit of an outlook, and then we have another session around Q&A. That will bring us through the whole day. I look forward to it.
I hope it will be an interactive day where you have an opportunity not just to ask your questions to myself and my colleagues in the ExCo, but also to the broader management team that we have with us here today. We have the business unit heads of both our Cement Inland, our Cement Coastal, our Materials business, and we have the Finance Director of our International Operations. We are well covered for all the areas that you might want to dive into. Without further ado, this picture is hopefully well known by now. PPC is a purpose-led and performance-driven organization. The purpose of PPC is to empower people to experience a better quality of life through the products and through what we do in the communities where we operate and what we do with the development of the people that work with us.
There is no business that doesn't have and start with fulfilling a customer need. We are, and you will see that throughout the day, customer-focused. We want our customers to be loyal. We want our customers to understand the value that we deliver to them and therewith extract the prices that we demand for our services. No business can serve its customers without engaged people. You will hear throughout the presentation today the enormous importance that it is not only to have engaged people, but also to have skilled people. That goes from artisan, welder, operator, all the way through to myself. Obviously, in a business like ours, that is a high fixed cost business and a high cost business, cost control is key. Cost control you will achieve through process excellence.
All of that governed by proper government structures, social responsibility, and of course, a financial performance at the end. We are well aware that nothing in a business turns without the money that you and our lenders entrust us with, and you are demanding a certain return on that capital. So that makes the loop round. This picture has been referred to as the rocket or the sausage, depending a little bit on how you look at it. When we think about PPC and where we take this company forward, we obviously look at the strategic context in which we operate. The strategic context can be summarized in these six bulbs. There is of course, more detail behind it. But if you look at our markets, we have distinct markets. We have South Africa and Botswana, which can be characterized as a more mature market.
Modest growth, but relatively low risk if you compare it with some of the other markets in which we operate. Sufficient capacity. You will see throughout today that South Africa has sufficient clinker capacity in the country to serve the cement needs for the foreseeable future. With some of the projects that you will hear about today, we know that we can actually extend that clinker into more cement without having to build big, new expensive cement plants. That in contrast to East and Central Africa, DRC, Rwanda, Kenya, Uganda, Ethiopia, Zambia, Tanzania, those are immature markets, high growth markets. Markets with more risk as we are very familiar with after our investments that we made in this part of the world. A need for new capacity. There is insufficient capacity in these markets to deal with the growth that they are facing.
Relatively high risk, as I mentioned. Around us, we see increased stakeholder awareness of climate change and the role that the cement industry and the concrete industry has to play to decarbonize the building materials that we all need for the infrastructure that we need to build in all the countries where we operate. That also gives opportunities for new revenue streams, low carbon building materials, and we'll touch upon those today as they will start to play a bigger role in PPC over the next 10-15 years. We have made a deliberate decision that our capital allocation will be focused on Southern Africa. Now, if you see that back in the context that I just mentioned to you before, East and Central Africa is a high growth market and will require capital to keep up with the demand.
We will be looking for other partners to work with us in order to serve those markets as we go forward. We also do that in the context of the fact that our human capital at the moment is relatively thinly spread over a wide part of the geography throughout the continent. By focusing on Southern Africa, we want to make sure that the position we have across South Africa, Zimbabwe and Botswana, as strong as today, will get stronger as we move forward. It is no secret that we come out of a phase that we have dubbed here stabilization. A difficult phase that PPC went through in the last three to four years. We've come out of it successful. We have strengthened our financial position.
We decoupled the international business balance sheets in DRC, Rwanda, Ethiopia, Zimbabwe, completely from PPC Limited, and therewith every territory is self-sufficient. Specifically important was the restructuring of the debt in the DRC that now has been restructured and has no longer the recourse back to the group. That enabled us to reduce the South African gross debt to EBITDA to less than 1.3 at the end of February, coming off more than when we were in March 2022, just before we saw the impact of the lockdowns. You will hear today that Zimbabwe is now completely debt-free. The last debt payment was made in December last year, and therewith Zimbabwe is debt-free as we speak today. Rwanda is on that trajectory as well, and if things play out as we expect, Rwanda will be debt-free in financial year 2025.
We've also worked on the optimization of our portfolio and have divested from non-core businesses, PPC Lime and Botswana Aggregates. All those transactions have been completed, passed, and the proceeds have been applied to reduce the South African debt. We launched last year our decarbonization strategy, and we'll touch upon that today because we do see the necessity for a business like PPC to contribute to reducing its impact on climate change and on global warming. Without speaking too much about ourselves in the room, we celebrate PPC 130 years in this very year, a milestone that we're proud of.
If I just add up the cement experience that is sitting in this room, I will easily pass 130 years between the few people that we have with us today, despite the fact that we even have a few youngsters in the room, which is always a pleasure to see. Within PPC, we use a visualization of a journey that we have been going through, and this is the journey map at group level. Coming out of the stabilization phase, entering in the phase where we want to strengthen the leadership position that we have carefully built up over the last 130 years with a focus on Southern African cement and materials, with a focus on operational equipment efficiency, OEE. You will hear that term a couple of times today, and it's an important term for us.
An OEE for equipment like a kiln, which is a key piece of equipment in our factories. If I say to you that OEE is 100%, it means that that kiln is running 24 hours, 365 days a year at the designed capacity, at its best possible capacity. That 100% you will never achieve because a kiln will need times of maintenance. The benchmark that the cement industry would always strive for is to have an OEE for their main equipment that is higher than 85%. You can calculate more or less what that means in downtime that we see as acceptable for maintenance. You will hear about OEEs throughout the presentation and the actions that we have to bring that OEE to 80%-85%, and the financial benefits that that will have on the variable cost to run our business.
That will drive a further improvement in cash generation. Throughout today, you will hear the word, and I actually saw it three times on this slide, of prudent capital allocation. We are very strict when it comes to how do we apply our capital, where do we put our CapEx? Probably if you loosen up some of the business unit managers here, they might moan a little bit about the fact that for every little thing that they would like to buy in their plants, they would have to go through quite an approval process to make sure that we spend that capital right. That they actually earn the right to apply that capital to their business. Dividends come back on the horizon.
We have been in a position for many years where we were unable to pay dividends, and we have been very grateful for the patience that many of you here in the room and online have displayed. We would like to come back to territory where we pay dividends on a regular basis. Accelerating decarbonization and starting to explore low-carbon revenue opportunities are then the next phase that would enable us to go forward in the future in a more expansionary phase. Right now, our focus is on strengthening what we have and drive the value creation out of that. That makes PPC a compelling investment case. Extremely performance and return-focused, with leadership positions in the markets where we operate, with a good asset base.
An asset base that, for example, here in South Africa is capable of dealing with any uptick and upswing in demand, as we demonstrated during the post-lockdown phase, where there was a sudden spike and PPC was the only player in the market that could serve the needs of their customers. Therewith, we are well-positioned to take advantage of upside that we see in the growth of infrastructure demand, not only in South Africa, also in the other geographies where we operate. We have mapped out a value-accretive plan for decarbonizing our business. All the initiatives that Delon will speak about later today have a positive NPV in their projects, and he will explain to you why all these projects have a positive NPV and are not only CO2-reducing measures.
We now have a healthy capital structure, a good capital structure, and Brenda will speak about the simplicity that we apply in our thinking what the best capital structure for our group is going forward. As I mentioned to you before, we have an experienced and highly motivated team to deliver upon the promises that we make to our board and to our shareholders and other stakeholders. The focus areas of today will therewith be consistent throughout all the countries that we'll speak about. How do we strengthen our market leadership position? How do we extract values from our customer base? How do we drive operational efficiency? What is it that makes it possible for us to expand our margins despite the cost increases that we have in our major cost drivers, which are, not surprisingly, electricity, coal, and transportation.
We'll talk about the acceleration of decarbonization, and throughout today, the word performance-driven culture will come back and back and back. Underpinned by a strict capital allocation framework in order to enable us to create stakeholder value and deliver above the market expectations of shareholder returns. A committed team, I said. A committed team along a number of points. We're instilling throughout the business, whether it is our Executive Committee or the operators in the plant, a mentality where we want people to run the company with the mindset of a long-term owner that has in mind the fact that he's working with capital provided to him by shareholders and funders, and that there has to be a return on that money, otherwise our growth will come to an end.
We therewith also made a deliberate decision that we'll prioritize initiatives and capital for margin improvement over unsustainable growth of the top line. We are not chasing the revenue line. We are chasing, and hard, the cost line in order to expand our margins. If the revenue line comes, it's great because we're ready for it. We know we're ready for it. We cannot influence the market to the extent where there will be big infrastructure spend, to the extent where the imports will be taken out of the markets, all things that we lobby for. What we can control is the cost in our business, is running the most efficient kilns and running them well. Therewith, I have come to the end of my introduction.
Before I hand over to Njombo, we do open the floor just for a few questions that you may have on what you have heard so far, either here from the audience or people online.
It seems that the audience here is not used to the fact yet that, you know, this is a live event, that you can actually speak up. You can't hide behind your camera. Switch my camera off. We don't have anything online as well.
Okay. If we're all anxiously awaiting Njombo's view on South Africa and Botswana, I will hand over to you, Njombo. Thank you very much.
Thank you. Good morning. Unlike Kwame, I'm operating on South African time, so it is morning. All right. Today I'm gonna tell you about these three aspects of our business, which is the market, our operations, and our people. In terms of the market, I'm gonna tell you how we strengthened and how we intend strengthening our market leadership position in South Africa and Botswana. How we intend to improve our operational efficiencies. Lastly, tell you about our people. In PPC, we always say our people is our strength, and that's what is important in our ability to be able to deliver the results that we talk about.
Firstly, I just wanna talk about the capacity in South Africa, and just if you look at that map, we basically cut it off with that blue line and we talk about what we call the inland region at the top and the coastal region at the bottom. If you look at that map, we basically talking about the capacity which is about 16 million tons per annum of active capacity, and a total capacity of 19 million tons in South Africa. In active capacity, we're talking about all the kilns that are actively operating and ready to operate. This is one of the challenge. If you then look at the market size, we're sitting at around 14 million tons, which means we've got this over capacity in the market.
Yes, the biggest challenge, various challenges in the areas in which we operate. If you look at the coastal region, obviously the imports are the biggest challenge, with imports coming into the Western Cape and coming into the Eastern Cape in Port Elizabeth. We do have some challenges in the inland. One of them is the concept of blending, and that is encouraged mostly by the availability of extenders in the inland market, so we do have a blender rivalry. The biggest issue with blenders is just the input costs are so low, to extend, and that creates a price issue. We also do have internal imports coming from Namibia, and also Mozambique is starting to creep in, with the capacity that has been actually extended in those regions.
I'll tell you a little bit more about that as we go along. We are in a business whereby obviously it's dependent on the infrastructure. When we look at the challenges that I've mentioned, we actually see opportunities as well. Conservatively, we've estimated that the domestic demand will grow by 2.5%. If we look at the base as 2021 in terms of the consumption, we're saying should we get the relief on the imports, that will add another 1.1 million. Then at the 2.5% average growth, we add another 1.5 million tons and estimate that SA demand by 2025 will reach about 15.8. Now, if you think back on the volumes and capacity that I mentioned, we're still okay to be able to meet that.
Now, the government has announced an infrastructure at about ZAR 595 billion, and if we estimate about just 10% of that taking off, we're looking at another 3 million demand that will come through. All of that, for us as PPC, the upside is that we believe that we have the capacity that we can bring in immediately to take advantage of this particular growth, and that's why we see this as an opportunity for our business. Imports, it's been quite a challenge. We have actually seen that if the government is quite serious about assisting the industry, it does have an impact. If you recall, around 2015, 2016, we got the relief with the tariffs that were imposed on the Pakistani cement.
You can see when you look at the graph that we actually saw a reduction in the cement. Actually the Chinese imports vanished completely. The Pakistani cement lingered around because we had Lucky Cement that only had about 14% tariffs imposed on them as opposed to the others that went up to about 47%. However, what then happens with the importers, they switch to another country. Basically, they switched to Vietnam, and we started seeing this escalation of imports coming from Vietnam in and around 2018, and they continued. Dampened a little bit about the COVID-19 situation, but they still continue to increase. Now, one of the challenges is that Vietnam has become a primary importer or exporter into South Africa.
We are looking with the ITAC application was to just cap this situation where importers just jump from one area to another. However, it has been very slow. We're working quite hard with the government to try and see if we can really get a relief against those unfair competition. Currently, we're also looking at an opportunity to see if we can impose the same or prove dumping from areas like Vietnam, which has been proven and all the data shows that Vietnam is currently dumping into South Africa. That's one of the areas in which our focus is gonna go into. Now, on the inland region, the blender activity has stabilized, and this is good in terms of the pricing in the market. The reason...
The main reason for the stability on the blender activity is because of the reasonable pricing that has been done by the producers in and around 2019, 2020. If you recall around 2019, we went on a double-digit increase and there was following from the industry. Basically, as it stands, we've got three big blenders and a lot of other smaller ones. Of the three, they are actually backed by manufacturers. If you look at it, technically, that's basically used as their own route to market into the bag market. Considering that the pricing of the input material is actually starting to get to reasonable levels, that also caps the destruction of price by the blenders. Now we talk pricing.
Again, if you recall where we come from, there was a lot of price erosion as the new competitors came into the market, and unfortunately, that coincided with the reduction in demand after our eight days of the World Cup. We basically took a decision in 2018 into 2019 to say we're going to go for a double-digit increase. What is interesting is it's still not yet at the levels that we would like to, which are sustainable. However, the most interesting part is that the industry followed, and we are able to keep those prices. The indication is that the industry is actually on the path of recovery as far as pricing is concerned. This is always a challenge when the demand is not increasing enough.
There is always that risk that somebody will renege on the pricing. Also the increase in input costs is basically forcing us to really try and recover those in the market. So far the trend is actually looking very good. Now in our business, the trick is to understand your market. What we pride ourselves with as PPC is our understanding of the playing field and the market structure in which we operate. Our BI team has done quite a lot of work in the recent past years to try and understand where does our product go. As you can see on the picture, the industrial and the construction, that's what the infrastructure project of the government would actually influence. This is areas where we're quite strong.
The most important is that if you look at the industrial, 95% of that product is in bulk. Mostly the bulk product we've got full control over in terms of where it ends up and the pricing that we can put into the bulk product. That's what goes mainly into the industrial side, and that ends up in the infrastructure. Then also on the construction side, especially on the inland region, we've got an offering of bins, which we basically are able to supply into all those codes, be it residential or non-residential. We've got these 8-ton bins, which are doing very well in terms of distribution of product in and around the inland area. Then when we look at the retail, currently it's between 60% and 65%. It peaked last year, just after the hard lockdown.
We should be, in a normal situation, running at between 50%-55% on that retail sector. Now, one of the things that we have done as a business is to start considering how we can strengthen those partnerships with the retailers 'cause you do need them as a route to market. However, we also have a special focus on what we call the end user. Most of our marketing is focused on that end user because what we actually try to do is to get those individuals that use our product to ask for PPC by name. With the retailers, the pricing of product is just equally important for them in terms of being a revenue generator or cash generator for them.
Therefore, we look at value propositions that are in partnership with them in terms of how we can be able to create more value than putting focus on the pricing. That understanding comes from the fact that we try very hard to get to a situation where we work on what we call a delivered model. That delivered model gives you enough info about where your product ends. Being able to generate that kind of information, then you are able to get hold of all the leverages that you can move to get at least the value proposition rather than the focus on the pricing. What are those initiatives that we've put in place to improve our profitability? Based on the previous slide, we looked at optimizing our existing assets to improve profitability.
We talk about optimizing customer portfolio. When we talk about optimizing customer portfolio, it's basically to look at the best margin customers that we can be able to deal with. There is quite an upside on the construction and industrial. We have spent quite a lot of effort in making sure that technically we are still the leaders in the market. The construction and industrial sector, those people are more concerned about the quality of the product than the pricing of the product, because they actually inevitably use the product to produce something that they sell on, whether it's roof tiles, bricks, or any other construction product material. On the industrial, in most cases, it's civils, and there is a lot of liability for a construction that has not gone right.
The focus in terms of them is the quality of the product. We also focus on the zones of natural advantage. Now that is in two ways. One is that we are in a logistics business in some way. When we reduce the logistics costs, and that reduction of logistics cost is to focus on areas that we can still get the highest margins instead of stretching ourselves, increasing our lead distance, and ending up with high logistics costs. We also spend quite a bit of time in terms of our supply chain as well as our BI to get a lot of data from the market, which then helps us to utilize data-driven models in terms of delivery of our products.
We've just last year launched our OSM, which is an optimum solution-sourcing model or dynamic sourcing models, which then gives us an opportunity to balance between our production and delivery from a proper source to a specific customer that is driven by the margin that we generate on that. Our supply chain team has spent quite a lot of time in terms of optimizing of those. Roland mentioned earlier that throughout the day we will be talking about optimizing on our operations. We talk about the clinker reduction initiatives that will reduce production costs. The LC3, that is the calcined clay, specifically for our Coastal business. Calcined clay is basically an extender that we are working on. It's got advantages in the sense that that will relate to.
You can produce calcined clay in a kiln. You're utilizing about 40% less coal in producing the calcined clay. That translates to about 60% reduction on carbon because you're obviously not burning it up to the same extent as what you do with clinker. That then can be used as an extender with quality benefits. We're looking at reduction of between 15%-20% on the cost of the clinker that you will produce, and that obviously will translate to the cement pricing. We also look at enhancing the total value proposition in terms of the quality, I mean, the product that we offer into the market. In terms of that, fit for purpose at lowest cost, we basically look at our SURE RANGE.
When we launched the SURE RANGE, the whole idea was to say we need to have products that are purpose fit. We have launched a precast specific product, which is used mainly in CPMs, the guys that make bricks or preformed products. The advantage of it is the fast setting time, and it actually adds a lot of value to somebody that basically depends on the setting time or ability to turn the molds around. That has done very well in both large CPMs and also the small brick makers that we have targeted as in terms of that product. We also leverage the materials business. We call it a basket of offering, but basically we just take a construction site and making it our playground. We don't just go there and sell ready-mix or aggregates.
We also see that as an opportunity to put our cement products into the market. There's an integrated approach in terms of how do we approach a construction site as a PPC, and that has given us a lot of advantage. Speaking of the materials business for us is very important to extract value, especially in a competitive environment. If you look at the map there, we are quite strong in what we call the inland area with regards to our materials business, and that consists of the ready-mix business. We've got 24 operations throughout the inland region, and then we've got two aggregates quarries, as well as two sites for fly ash.
One is at the power station in Kriel, and the other one is at Ngodwana, which we actually constructed together with Sappi, where we get some fly ash there. That gives us an advantage in terms of being closer to the Gauteng market as well as being in the Mpumalanga market. Biggest issue with materials is that it is a very good value protector for our business. Now, if we go deeper into some of the insights on how does this add value to us. If you look at the ready-mix concrete, for instance, we are maximizing the cement pull-through at very good margins. We don't sell the cement to Dave, for instance, at a price that we are not willing to get out of the market.
In fact, if he had a choice, he would be getting his cement from elsewhere. Most importantly, it accounts for between 15%-18% of our inland bulk sales. Without Dave, that would be volumes that we would have to go and get somewhere. As I said earlier, that also provides us an opportunity to do that basket offering by improving the cement product portfolio. Dave and his team are basically one of those specialized concrete manufacturers with the specialized concrete mostly in the mines, and as well as the warehousing. They do very specialized floors.
If Dave starts talking to you about the beauty of concrete and all the innovations that they do, and that gives us that technical expertise in terms of how we get the product into the market. As I mentioned earlier, the fly ash is basically an extender, and it is a key input into our products in terms of the extension factor to save the clinker. I'll tell you a little bit more why that clinker factor is so important to us. It's also a strategic input in terms of the decarbonization strategy, because from an environmental impact, fly ash it is actually a waste product.
What we're doing at the moment with all the other CPMs that are utilizing the product, like your tile manufacturers, tile cement manufacturers, we are actually focusing on increasing our classified ash sales into those, which has got a much better margin than the unclassified ash. We also have a potential to be able to put up another plant at Kusile as soon as the power station is stabilized. We have been awarded an opportunity to do so, and then that guarantees us the ability to be able to take the fly ash business and the advantages that comes with that business forward.
Aggregates, normally, when people look at PPC aggregates, we are very much into the west of Pretoria, and we don't seem to have a very big coverage, but it is a profitable business and it's got very much diversity. It's not your typical aggregates business that sells aggregates into concrete. We actually have a very diverse range of products from chemical, agri-lime. We sell dolomite into the steel industry. For instance, Mooiplaas has got metallurgical and construction grade dolomites, which we basically sell into the steel industry. We sell some of the products from Mooiplaas into areas like Sasol for chemical treatment of their waste. Laezonia has got a very special rock called amphibolite, which is used in road construction.
that is one of a kind in terms of like, availability in and within the inland region. What we focus on in terms of the aggregates business was to expand our current zone of natural advantage. The aggregates business is set to cover a radius of about 30 kilometers. We've expanded that now, and we are about 70 kilometers in terms of our radius and still a potential to can grow that. That is with clever logistic solutions. We've also optimized our customer portfolio, and by doing that, we increase our margins. In the customer portfolio, we look at direct sales, specifically to what used to be traditionally known as informal markets. When you do direct sales to that, you get even better margins in terms of getting into those sites.
If we get to the next slide, we spoke quite a lot about the ambition for a three mega plant strategy and implemented it, and it's starting to deliver benefits in terms of cost reductions. As we said, there is a strong focus on industrial excellence and increasing output from those. We've settled on operating most efficient kilns. If you consider at Dwaalboom, we've got two, Slurry two, and De Hoek two. Those are the three mega plants. Basically, in each one of those, we've got Kiln one and two and Kiln eight and nine and Kiln five and six on the different sites. The idea about last year, we were talking about swing kilns, which means the first kiln will be a swing.
Now we're starting to talk about standby kilns, because throughout that process of utilizing those swing kilns, especially with the high demand, we actually got those kilns to be operating quite well. Basically, now they are so available that we can switch them as and when we want. Obviously, we would like to focus on the most efficient kilns in terms of the production and switch on the standby kilns as the demand comes up. That claim that we are able to take advantage of any upswing in the market is based on the fact that we've got those kilns available to take up any upswing in the demand. When we talk about the clinker factor reduction, we're talking about an ability to reduce our cost of production and the carbon intensity in terms of extending our cementitious products.
Again, we talk about this OEE, which Roland mentioned earlier. When you start operating at OEE of above 80%, then it means you've got reliable equipment and you've got efficient equipment, which means your product, I mean, your process is optimized. When you do that, if you consider that starting up a kiln, you need to utilize extra fuel to actually get it going without getting any production. When your OEE is improved, which means your number of downtime is reduced, then it means you're actually doing very well in terms of your energy consumption. I'll tell you just now about how energy is so important to us, and obviously, you get sustainable higher outputs from your units.
If you look at our costs and what contributes to our cost of sales, as I said, we. In the logistics business, distribution cost contributes about 27% of that, and the one big one is electricity as well as coal. Basically, all of those are energy that we require into driving our business, and that is the major cost drivers for our business. The focus is to offset those variable cost increases. When we talk about distribution cost, we have done a lot of work on our supply chain to maximize the utilization of dedicated transport, which means you negotiate the numbers or the fees or the rates to an optimal rate in terms of the distribution. When you know and have a very structured market, then you have this so-called fixed address.
You're able to then optimize in terms of the transport cost. Using smart allocation in terms of our optimized sourcing model and also driving higher payloads. We basically have discussions with the transporters to say, when a truck is supposed to be loading 32 tons, it should load 32 tons, nothing less than that, especially on the bulk. Just to give you an idea, in terms of our contract fleet, that translates to about ZAR 8 million savings a year when we manage to get the contracts correct that we can be able to optimize on dedicated transport. Some of the inflationary savings can amount to about ZAR 10 million. One interesting one is the lead distances.
Just by changing the distances and optimizing the sourcing, we are actually to make about ZAR 12 million per annum on the lead distance. There's quite a very good contribution that comes from a very dedicated and optimized sourcing or supply chain department. In terms of electrical energy consumption, as we mentioned earlier, when you have control over your equipment and you can run it when you need to, Eskom rates have got different segments of rates. There is a certain rate that we get charged in terms of the demand charge in winter. Specifically on the Western Cape, it's quite a significant cost. Now, when you've got those high OEEs, you actually have control over when do you run your units and when do you run or not run them.
Because of the reliability, you can actually predict how you will be able to meet demand. In that case, we are able to actually stop the units and do the maintenance at the time that the cost of electricity is quite high, and we optimize in terms of the electricity costs. We can pick and choose when we want to run our equipment, and therefore, we are able to participate in that Eskom peak pricing program. Obviously, the increase in the extension factor of clinker plays a very big role in terms of our running of our milling units in reducing the electrical consumption. Coal is a very big factor, as you've seen, the energy cost in terms of our cost of production.
We do look, Johan and his team in the Western Cape, they're spending a lot of time looking at how they can improve on the alternative fuels to replace the coal. If you look at the 5% coal reduction translates to about 2% reduction in your variable cost of clinker production. It is a very important element in terms of how it would have an impact in your cost of production. When we look at the inland, we have a choice of running SK-8 or SK-9. If we run SK-8 efficiently, we actually are able to produce all the clinker on SK-9 and not have to run SK-8.
You're talking between 8%-10% of the cost of clinker variable on the SK 9 in terms of the production of the clinker. The increase in extension factor on the clinker, when you talk about the 1% reduction for clinker extension, that translates to about, for inland, ZAR 7.2 million, just on a 1% reduction of clinker usage. It is a very important element in terms of how does that translate into the costing. Now, the one focus area that we have is retaining and developing talent across all business. It is very important to build critical skills and competencies. Cement is a very unique industry with very unique skills, and we want to believe that we've got the best of those skills.
For us to be able to do that is to ensure that our people strategies are able to ensure that we give our employees an experience where they believe that it's a unique experience within the business. We talk about employee engagement. I'm sure at some stage Roland will tell you about our JABALI program that we run in PPC to improve employee commitment and engagement into the business, as he stated earlier. The most critical is our stakeholders and the stakeholder management and the compliance, obviously, with the rules of the land. That's a focal area for us going forward. Now, you can put a lot of effort into talent. However, to retain that talent, you have to have a talent management plan, which is something that we are working on.
We've actually declared the upcoming year as the year of talent with a lot of programs that are focused on retaining and improving our skills levels in the business. Lastly, just to sum it up, we been talking about how do we make our business sustainable. We spent quite a bit of time entrenching our route to market. We spoke about the three mega plan strategy, and that has resulted in a very good fixed cost savings onto the business. We optimized our manning. And yes, we did have to say goodbye to some of our colleagues to restructure ourselves to be able to meet the challenges of our market. We implemented that optimum sourcing model, and it has delivered value in terms of reducing our cost of delivered product.
I think for me, the highlight is the integration of the materials business under the leadership of Dave, which has really delivered value not just to the materials business, three businesses, but also to the cement business in the inland. Now we talk about strengthening our leadership position, and basically, we have to have ourselves in a situation where we continue to optimize our existing assets and obviously improve our profitability. We are very comfortable that we've got sufficient capacity, so there's no need for major expansion CapEx for us to be able to operate in an environment where there is an upswing in demand. We've enhanced our product portfolio. We're spending a lot of time. We're not putting in new products.
However, we're looking at those products and saying, "How will we align those products with the decarbonization in mind and actually making cost-effective products?" As has been said, we're focusing on plant efficiencies with the OEE. Yes, we have to earn our cost of capital, so we're looking at accelerating the decarbonization plan and making it part of an integrated way of doing business and exploring, again, low carbon specific initiatives which will create new revenue streams. The ash provides a lot of opportunities within that, but there is all other initiatives that we do in the business. The AFRs in terms of the coastal and inland business provides an opportunity to do that, and we're restructuring ourselves to be able to meet those requirements.
The future, yes, with the sufficient capacity that we have, there's no need for major CapEx expansion, but we need to scale up the new revenue streams. As I said, alternative building technologies, AFRs, that presents us an opportunity to create a lot more value going forward. I thank you. I have brought my team here. Bheki Mthembu is the Head of Inland. Dave Miles is Head of Materials. Johan Vorster is the Head of the Coastal Business. I thought, I told them when I get questions, I'll direct them to them. Any questions? Yes, sir.
Hi, Paul Whitburn from Rozendal Partners. A question around the margins. I mean, when you look at that price increase over the last six years is about 10%. We've got inflation coming at us at a much higher rate now. Assuming no government infrastructure spend, you can't get the imports out of South Africa, do you think your price increases will stick? And what sort of guidance do you give for SA sort of EBITDA margins going forward with all these initiatives that you've currently got going? Thanks.
Okay. There's a part that I will be reluctant to answer, and that's giving you a guide on margins. Yes, you have a point. The input cost, especially when we look at the fuel and all of that. I must compliment the team. We've done a lot to negate some of those input costs and inflationary costs with all the initiatives that we've put in place. However, in terms of the market, we have seen a positive trend in terms of competitors actually understanding that it's not about the volume, but actually the profitability of the business. We are at a point where we ourselves decided we're not gonna go out chasing price, but actually quality earnings for what we do. That has been positive.
However, this industry still needs good price increases to be able to recover. That's for sure.
Hi, hi there. Charl de Villiers from Ashburton. Just given your three mega plant strategy, can you just give us a bit of insight in terms of the cost differential for the kinda standby kilns that you do have available should demand pick up in the future? What is that cost differential?
I think I mentioned earlier in terms of the comparison between SK9 and SK8 in Slurry, that you're looking at, Bheki?
The differentiation for the inland kilns, which is kiln 8 and 9 at the Slurry plant, you talk about the variable cost differentiation, which is as a result of coal heat consumption. Efficiencies on coal on kiln 9 gives you better variable cost. When you run 8, it's 8%-10% increase on variable costs.
Merrick from Comesa. Just a quick one on the calcined clay opportunity. Is that specific to PPC, or is that a benefit that the whole industry can sort of capitalize on?
Johan?
The calcined clay is replacing the clinker in the cement. In the coastal region, we've got high cost of coal and manufacturing of the clinker. The extenders in the inland are ash, slag. To put investment in the, I think, inland is firstly there's less clay deposits in the inland, so the coastal region of the Western Cape is best positioned. Internationally, of course, there's other opportunities for the players that are beyond RSA borders.
Yeah. Calcined clay is very new in cement, but I mean in Europe there has been some advances in terms of the usage of the calcined clay. In South Africa or actually we will not be the first in Africa but in South Africa we'll definitely or Southern Africa be the first in terms of utilizing calcined clay. It's newer technology and it has been proven.
Good morning. Anthony Clark, Small Talk Daily. Can I just pick up on a comment made in this morning's operating update that you've seen little uplift in the government demand for cement given the locally produced guidance that you gained. Then you mentioned that you're looking to get some sort of tariff relief or protection under ITAC from Vietnam. Can you give us a bit more color on those two parts, please? You know, what is going on with government? Secondly, ITAC is fairly good at giving out protection if there's a well-deserved case. How far down the track are you with that? Thank you.
Okay. There's two questions in one. I think the first one is on the government infrastructure project. The designation was given, and we welcomed it, but it is not very useful if government is not spending money. The government spend has been quite slow in terms of implementing those projects that they've spoken about. There is some traction on the side of SANRAL. They're starting to spend money, and there is a lot of tender activity around that, and we're hoping to benefit from that. Actually, the designation of the government spend has not actually given any benefit as yet. The second part of your question in terms of the ITAC application. Obviously, there is a process that needs to go through. I take.
In terms of the application for protection, it takes much longer than actually proving a dumping case. That's why we're tossing around with having looked at the Pakistani import timelines and, when those timelines approached, we were able to get granted the relief on Pakistani. At that time, the idea was that we will at least reduce the imports, but obviously they switched to Vietnam. We thought to avoid the switching, let's rather go for an ITAC application, which is a longer route. At this point in time, as an industry to the CCSA, we're looking at both avenues as to applying for protection against specifically Vietnam and at the same time doing the ITAC application. It has taken long.
Rowan Goeller from Chronux Research. Njombo, when it comes to costs, we can see fuel and coal are going to be going up. But are there any other costs that might over the next three to five years have any consequence for you and that might be changes to carbon tax, emission reductions costs that you might need to do on your plants? Is there anything you need to do to sort of comply with regulations outside of normal cement costing?
No. Well, there is, yes. In terms of our packaging cost, that's one area that is of a concern. We have looked at alternatives in terms of sourcing of the packaging, and we seem to be successful with that. The team has done very well to abate some of the increased costs of packaging. In terms of the carbon tax, we have been given again a relief until 2024 from the government in terms of the increases. We still have our rebates that the government offers in terms of the carbon tax.
However, we're working in the background to demonstrate that, and what is encouraging is there is an acknowledgment that cement industry is a hard to abate industry, which then it's a recognition that it will be very difficult for us to get to the levels that South Africa is signed up for. However, yeah, we've got a break till around 2024.
We have some questions from the floor, boss. I think that's for you, Roland. The first one is from Muren Rajaratnam. He says, "What is the replacement value of your assets?
Thanks. Replacement value of our cement assets. If I look at South Africa, we've got about a capacity of 6 million tonnes. I'm looking at Njombo as well. If you count $200-$300 per tonne, you'll probably come to about $1 billion, about ZAR 15 billion. I would guesstimate for our South African cement assets, more or less.
The second question is from Jonathan Bloch. He's from Allied Minerals and Petroleum Pty Limited. He says, "You're speaking about managing transport costs. In general, you've got three costs: electricity, coal, and transportation. What are you doing about them?" You've discussed that already. So I think we can skip that. The next one is from Charles Boles from Titanium Capital. He says, "Please can you clarify on slide 18." If we can go back to slide 18.
Slide 18.
The blender slide.
Blender slide. It did fall back.
It's there.
That's there.
He says that, "Are you saying that blender A, B, and C are owned by clinker manufacturers? And if that's so, why would the industry be under such pricing pressure? i.e., why is it rational for the manufacturers to debase prices like that?
No, they are not owned by clinker manufacturers, period. Secondly, it is an opportunity to get to the market in some of those manufacturers because the blender is closer to the extenders, and therefore they are able to take a bulk product and put it into the market. Rationality, we can debate that, but actually, that saves a producer from putting up a unit that is closer to the market, and that's the model they choose. This particular trend has gone on for quite some time to an extent that some of the suppliers into those channels have lost their channel into the retail market, and this is the quickest and the easiest to get into that channel.
All right, we have more questions. The next one is from Chris Reddy, All Weather Capital. He says, "What are your timelines regarding receiving regulatory approval to curb imports?" That's number one. "Why do you think this process is taking so long? Please, can we get your views on the competitive environment in SA? Then, who is gaining and who is losing market share?" And then he says, "Regarding the input cost inflation and impact on margins, how much of this can be offset by price increases and how much by your cost containment strategy?" So it's quite a lot. So maybe let's start one by one. Your first one, timelines on getting regulatory approval.
I wish I knew. Look, we have been engaging with the government, and we expect that, you know, we will get some response. What we have decided as an industry is to say what other avenues can we be able to utilize for ourselves to, as I said, maybe go for a particular country in terms of the importation.
Okay. He says, "Why do you think the process is taking so long?
I think we need to understand that behind every one of these, there's bilateral agreements that the government has got. We're not operating as an island as South Africa. Therefore, there is a lot of processes that the government has to go through in terms of, obviously, putting something like that into place.
The next question, it says, "Can you give insights into the competitive environment in South Africa?
I think we went through a period whereby the environment in South Africa was about making sure that you get all your volumes out and get the cash flow right. With effect from around 2018, 2019, I think the industry was in a very terrible state that they realized that it's very important to drive margins up. It's also for the benefit of the country. We were getting into a situation where we are operating an unsustainable business. The current situation is that outside the imported product, the local manufacturers are actually trying very hard to create value for their shareholders.
Okay. His last question is saying, basically, he wants to understand with regards to dealing with input cost inflation. Says, "How much of that do you intend to recover from price increases, and how much of that do you intend to recover through your cost containment measures?
It's very difficult to give percentages, but actually we've done enough on our fixed cost. You can only reduce your fixed cost up to a certain level, and we've actually done enough in terms of that. From a variable cost point of view, as we have indicated, most of those initiatives are focused on the variable cost to reduce that variable cost. Now, the issue is inflationary increases will be there and mostly driven by events of the day. If you look at the price increases on the fuel. They were unforeseen, and they are there. We always have to do all sorts of things to say, how do we negate those? Basically, if we...
Even if we didn't have current fuel price increases, we would actually be improving our margins because those initiatives will still be in our plans.
You've got another question from Marc Ter Mors, SBG Securities. He says, "What is your view on the continued recovery of demand in the retail sector, basically retail cement demand, given the increases in interest rates?
We do expect that, and we have seen the slowdown since after the post-lockdown. However, the industry has been supported quite a lot by private sector, and those developments are still taking place. We do watch approved plans, both on industrial level and households, and we still see activity on that. In some areas or regions that we operate, we see an increase in approvals of those, specifically this part of the region. With all this, internal migration from Gauteng to the Western Cape, that has had a positive impact on the residential market, and that is positive from a retail point of view.
Last one is from Lonwabo Maqubela from Perpetua. He says, "Assuming that SK9 is the benchmark in terms of energy efficiency other than SK8, how do your other kilns compare?" Then he says, "If they are below SK9, is there capital required to get them to a more comparable level?
Actually, the other two kilns will be Dwaalboom. Dwaalboom and SK9, virtually the same technology, Dwaalboom 2 that is. The De Hoek kiln, it's a different technology, but again, now you have an element of different input costs. In terms of the costing of the two will be very different, but DK2 and SK9 very comparable.
Well, that's all from the webcast.
Sorry, just two questions. In terms of the current pricing pressure on fuel and coal, do you have any sort of longer-term pricing contracts or hedging in place that defers that pressure materializing in your margins or is it immediately reflective? The second question, you flagged Mozambique as a new source of imports into SA. Can you maybe just speak to the landed cost of Mozambican product relative to SA production and what sort of spare capacity they're sitting with as a country? I suppose ultimately, if the ITAC comes into place, does it also cover Mozambique or not?
Let me start with the last comment. If we get the ITAC application in terms of protection, then yes, it will cover every import because it's not country-specific. If we then apply for a specific country, then it means we will have to do one for the region as well. Region is guided by all other aspects in terms of the agreements, again, in terms of the regional bilateral agreements. In terms of the amount or the capacity with regards to Mozambique, it fluctuates quite a lot. It's very difficult. We spent some time studying the Mozambican market in terms of the capacity and the market structure. It all depends on what happens in Mozambique. When there was talk about oil, Mozambique did not have enough capacity. In fact, we did export to there.
As there was a problem with that, then it slowed down and there is all of a sudden overcapacity. It's a moving target in terms of how much is there. I can't remember the other question.
Contracts.
Oh, contracts. In terms of coal, yes, we do have contracts, and it's also guided by the export coal indexes. But we do have long-term contracts. With fuel, it's very difficult to actually land a long-term fuel contract. We are basically bound to the fluctuations in terms of the coal. With our transporters, we have some kind of a leeway in terms of when does the price increase kick in into the rates.
We don't have anything on the webcast.
Okay.
Yeah. We'll take a break.
Thank you.
We'll return at 11:50.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as The First Portland Cement Factory Limited, until in 1908, there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement.
At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE products. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous. Many businesses lost their way, while others had to reassess their futures.
At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years. We are in the business of empowering people to experience a better quality of life.
In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as The First Portland Cement Factory Limited, until in 1908 there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa.
1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartebeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do. In 1992, PPC celebrated one hundred years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996 we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Cement Pitches Programme, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE product. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SureRewards, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you. Our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement factory. In 1902, it became known as The First Portland Cement Factory Limited until in 1908, there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than 250,000 bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened the CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE product. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, Sure Rewards, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, the De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908 there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than 250,000 bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Cement Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. In 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup. PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers.
In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE product. In 2020, the year we didn't see coming. Nothing about 2020 or 2021.
Good morning and welcome back those who are joining us online. As per the agenda, I'll first start with Zimbabwe. Today we'll cover a few topics around Zimbabwe. As Roland mentioned when he started, you know, we have a fairly strong financial position with our debt fully repaid now. Perhaps you're all asking yourself, "What are you gonna do with the cash?" I'll show you some of the work that we've done in terms of being able to repatriate some of the cash to our shareholders, and our plans to also continue entrenching our market leadership position in that market. How do we do that? We'll cover some aspects around obviously reducing or improving our efficiencies. Lastly, our efforts to invest in our people, not only for now, but also for the future.
This is a very simple slide, but there's a lot of effort behind this slide. You know, when SI 133 was introduced in Zimbabwe, we had a significant debt exposure, and I'm pleased today to say that in December of last year, the debt in Zimbabwe is fully extinguished. This is basically, you know, the principals were actually paid by the authorities as part of the legacy debt. The business in Zimbabwe continued to also pay for the interest because we paid interest on a biannual basis. I would like to thank our team in Zimbabwe because, you know, they really supported us through this process in ensuring that, you know, relevant engagements do happen with the authorities in Zimbabwe.
I mentioned that we've paid our interest out of our own cash. This picture just shows a split between forex sales and domestic currency sales in this financial year. You'll see that approximately 55% of our sales are actually foreign currency denominated. We've got various initiatives that we've put in place. The sources of this foreign currency, we've actually implemented the diaspora platform. It was quite an innovative solution. Basically, it allows Zimbabweans out of the country to buy cement from anywhere in the world, and we deliver in country, and they pay in foreign currency. It's something that's still at an infant stage in terms of growth.
I think in the next few months, there will be a lot of effort put in place to try and market this quite extensively because I think it can unlock quite a lot of value. As part of this, the launch of this diaspora platform, we actually got a sign-off by the Reserve Bank because we actually took them through the process to make sure that we respect all the required legal requirements. The other part of our domestic forex is coming actually from domestic sales. This is what we call free funds. I think we've always mentioned the whole issue of free funds. Lastly, FDI-funded projects also contribute quite extensively to some of our foreign currency earnings.
What I mentioned earlier about free funds is that we can easily repatriate the cash. If you look at the next slide, you'll see that in the last 18 months, we've been able to pay PPC Ltd dividends amounting just more than $10 million. Now with our debt extinguished, we've got two options, obviously, to reward our shareholders and secondly, to obviously continuously invest in our business and making sure that we entrench our leadership position. I think more importantly, if you look at this slide at the bottom, you'll see that since 2010, this business has been able to. We have been able to get close to $95 million out of Zimbabwe.
I know there's a lot of pessimism around Zimbabwe, but it actually shows the potential of this business going forward to the group. I think now that I've sort of increased your excitement around the ability to get cash out of Zimbabwe, we need to also understand the market a little bit, and also what are we planning to do in this market to make sure that we continue rewarding our shareholders with some returns. We had a few operations in Zimbabwe, only three integrated cement plant. Our plant is located down here, and we also have another integrated plant up in Harare. You also have another integrated cement plant here in the middle of the country. The rest of the others are actually grinding station.
This is our Harare grinding station, and we have a Bulawayo grinding station here, which actually shows that we've got a fairly nice network, because the bulk of the cement in Zimbabwe is consumed in the north and a smaller portion, probably 40%, or maybe 35%-40% in the south. We are positioned. We are well positioned in that regard. You know, we are surrounded obviously by other, you know, by Zambia, where we know there's excess capacity in Zambia, and we've seen some imports coming from Zambia into the north.
We've, you know, seen from Dombo that there's obviously overcapacity in the south, you know, in South Africa, which obviously, you know, it's a threat to our business in Zim. The question is, you know, what is happening in the market? What do we see in the market? Domestic market, we've seen from 2016 steady growth over the years. In 2022 we've seen sharp growth. What one should be careful as well about the peaks that you see in Zimbabwe because some of the peaks, for example, in 2018, 2019, they were driven by, you know, exchange control regulations changes, because people saw cement as a way to protect their money, so they actually put money into housing.
What we've seen also in recent times is a very strong growth in individual home, you know, in retail driven by individual home builders. Another beauty about the diaspora influence, because there's a lot of money coming from the diasporas put back into the country for housing. Because most of the Zimbabweans that left the country, they obviously intend to come back, and they want to actually come back to a solid house. We've seen that being a big driver. The other part is we've seen quite a strong investment in infrastructure projects. I'll touch on that as we go down further to show how our bulk volumes have evolved over time, driven by strong CPM and infrastructure projects.
With this growth, we've maintained our margins in Zimbabwe quite stable, actually above the mid-50s%, quite strongly in that market. We actually command quite a very strong position in Zimbabwe. At this slide, actually, everybody spoke about. We spoke a lot. Roland introduced the concept of OEE. If you look at the red graph here actually shows cement equivalent capacity. Meaning if you take all the clinker capacity in Zimbabwe and you convert it to cement at a clinker factor of on average 67%, this gives you the total cement capacity. What you see here is you say, "Well, how is this going up?" If you look at here, the overall OEE of the industry, and we estimate it to be not far from 70%, because of various issues.
One is power is a big issue in Zim. We had a lot of, you know, power instability, power outages. Secondly, historically, there was most of the players did not invest well into newer technologies, efficient capacities, or even in maintenance CapEx that actually over time starts to catch up with some of the players in the market. What we actually estimated here is, you know, assuming this, you know, we all jack up OEE from, you know, the low 70s to 82, 84, how does that, you know, relate to our forecasted growth in cement demand over a period?
You can clearly see it's very tight, and that's why, you know, after the ban of imports in Zimbabwe, the government had to open borders because one of the competitors had a major breakdown that created a huge shortfall in the market and the borders were temporarily opened just to be able to serve the market. Therefore, what we're saying is, you know, we need to do something to make sure that the market is self-sufficient at all times. We’ve looked at, you know, combining some of our decarbonization initiatives also with capacity increase. In the interim, I mentioned that we’ve won a tender of 400,000 tons of fly ash coming out of the new power plant being constructed.
The aim is to convert that as an extender, to obviously, you know, increase our volumes. Secondly, you'll see, when Brenda talks about the CapEx, there's a peak on maintenance CapEx in Zimbabwe. The idea is, you know, with a 45-day stop that we have mid-April to do the bag filter, the environmental project retrofit, we would like to at least address most of the issues that we're actually experiencing with regards to reliability, so as when we start that plant, we are able to sort of fill up the market with enough clinker. So this is what is giving us this projected increase at the top here is coming from our decarbonization initiatives. That also includes our plans for LC3.
A lot of work has been done, and we are actually looking at, obviously, increasing our clinker capacity, in a much more carbon-friendly manner. This actually just shows you, basically, you know, our market, a simplified version of our market. I think Zim has been quite instrumental in really re-defining, route to market strategies. I think we've been a leader in that market. When we started introducing container strategy in that market, everybody thought, you know, this is not going to succeed. I mean, you know, containers, basically the model was you take your own customer, you know, in town, and you start expanding that customer into the rural markets and making cement accessible into those rural markets.
What happened over time is we grew these customers so well and induced into new markets that our volumes coming out of retailers actually at some point were at 10% of the total sales. What that means is you actually have much stronger retention because, you know, that growth is actually linked to your container strategy. The second thing that we've also you'll see on the next slide, it's actually about how do we better serve the CPM market and construction. We've actually you know, we are the first to introduce bulk in Zimbabwe, including bulk spreaders for road construction, because there's a lot of road projects that are underway, and we've introduced bulk spreaders in that market. That actually gives us an edge, and everybody's following.
There's quite a lot of some of these innovative solutions that we've put in place. In retail, we are the first to introduce pelletized cement and to this day, you know, we are actually the leader when it comes to pelletized cement in Zimbabwe. Okay, I think I spoke a little bit earlier about our bulk. If you look at historically where we started with bulk, I remember in 2020 I gave the guys. Actually it was 2019. We gave the guys, our team in Zimbabwe, a target of 60/20/20, and that was at the time when there was huge foreign currency shortage. Then we said, "Look, you know, because bulk of our foreign currency requirement is for packaging." We said, "Try to get to 20% paper," because paper was produced locally.
60% on polypropylene, because, you know, at least you reduce your, you know, your import requirements. 20% bulk, because bulk, there's obviously no need for packaging. We actually were able to get additional bulk tanker capacity, and you can see how these volumes have grown quite nicely. This was not done in isolation. We coupled this with provision of bulk silos, because there's no point of having a bulk tanker without a silo. We provided our customers with silos. We bring bulk, we put into our silos, and we actually were able to calculate the turnover out of those silos, as part of, you know, KPIs for our customers. That has actually worked quite well for us.
If you look at it in ton steps, we've seen quite a strong stability on the bulk volumes, which really shows that, you know, we're retaining most of the customers as part of this exercise. From a product offering, you'll see we offer quite a wide product offering, and to make sure that we cater for different market segments. The one area that is obviously developing in Zim is the mining sector. You've seen on the previous slide on segmentation. It's a sector that requires, obviously, you know, specialized product, and we are tapping more and more into that space.
As you've seen in the news recently, there's a lot of investment on the mining sector in Zimbabwe, so we need to be at the forefront in making sure that we can serve that segment quite well going forward. I think most of the stuff here in terms of the initiatives I've already covered. There's another thing that we, you know, we are working on. It's obviously something that we've actually developed in the DRC. We call it DigiCement. DigiCement is basically an app where you can, you know, to increase access and penetration in the micro-retail sector, because with that app, you can do small drops to micro-retail.
It's something that we are copying in other markets to make sure that we've got much, you know, wider penetration into the micro-retail sector. I've covered most of the stuff I mentioned here. Yes, you know, we can manufacture all these beautiful products. If you look at our cost structure in Zimbabwe, you'll see 50% of our costs are actually inbound logistics, outbound logistics, as well as raw materials. You'll say, "Well, where is power and thermal energy?" You know, we are in the land of coal, so at least coal prices are not that high. We've made a commitment that Delon will touch on with regards to TCFD.
You'll see some of the initiatives are touching on the 10% of coal and electricity. But it's not purely just cost, and I must emphasize because there are other benefits to that. The reason why we spend time on electricity and coal is it has got multiple rippling effect. One is obviously cost. Two, decarbonization. Three is sustainability of supply. As I said earlier when I showed you the demand supply curve in Zimbabwe. What really impacts on the industry performance is stability of power supply. The reason why we're doing this solar project is to make sure that we can at least sustain the high level of operation out of our plant and not have disruptions and obviously disappoint the market.
If you look at the raw materials, bulk of it is actually clinker that we had to import because, you know, suddenly we're running out or, you know, because of the reliability, and we wanna bring that down, you know. By making sure that we get our kiln to design capacity and even beyond, we are able to also bring some of the raw materials costs significantly down. On the inbound logistics, the nature of our footprint is we're moving clinker from Colleen Bawn. We rail it to Bulawayo, and then we rail it further to Harare. That we cannot change, you know. That's the nature of
What we can do with optimized expansion, we can reduce the volumes that we actually have to move from the clinker source into the grinding station. That can help to us to at least reduce the inbound logistics cost. Outbound is really, you know, I think with our footprint, actually our outbound logistics cost, I think we are not too bad in terms of controlling our sourcing and making sure that, you know, we've got an optimized sourcing model. As I mentioned, things like maintenance, what we do in terms of the CapEx, maintenance CapEx, we are investing in technologies that has got much lower maintenance requirements or maintenance cost, overall.
Obviously, you know, the other focus, as I mentioned, is on the clinker factor reduction. We've secured strategic raw materials for extension that actually positions us quite well going forward. Obviously, you know, fixed costs, you'll see there's an element on the next slide where we actually talk about some of the initiatives, including automation. Actually, I think with the project that we are doing at Colleen Bawn with artificial intelligence, we'll be probably the first plant in the continent to run on artificial intelligence. The aim is to do, you know, proactive diagnostics and making sure that, you know, we run our plant at the highest efficiency levels.
That's actually one of the exciting projects that we are working with an OEM to make sure that we take our operation to the next level. Coupled to that, we're also doing OT IT integration, and this is aimed at really making sure that, you know, there's all the operational data gets linked directly with your ERP system, and you just do a reconciliation of the numbers monthly, and then you are able to generate your reports real-time. You know, you don't have to run multiple spreadsheets. That's a project that we are doing this coming financial year. The others, as I said, in April, we have this 45-day stop.
We'll really address all the, you know, issues that we've had on the on our kiln, and we actually have the groundbreaking of our 20-MW and 10-MW solar project in April. Construction has started. The aim is to actually have one of them up and running before the end of the calendar year. You know, that's we're pushing the service providers to get that up and running. 'Cause the sooner we get that, it means, you know, our investment in the maintenance of this kiln will start to yield results. Because there's no point of having this beautiful kiln, but then power is an issue. That's why we're pushing for that. I think, you know, this for me, you can't have all these succe sses without people. We've done...
We've made quite, you know, a lot of strides in Zimbabwe with regards to the investment in people. We actually revamped our whole HR team. We've set up a learning and development team. In fact, my colleagues last week, they were in Zimbabwe attending, you know. We organized a corporate finance training with one of the GIBS professors in Zimbabwe to make sure that we lay a solid foundation. As Roland said, we need to have an entrepreneurial mindset, you know. In everything that we do, we need to think of how do we unlock value and create value for shareholders. That's quite important. These are some of the topics that we'll cover going forward with our team.
We've actually launched our online platform in Zim with some of these online institutions, where it allows our people to do a whole lot of training online, get tested, get certified, and it's a structured program where each individual will have, you know, individual development plans for the year. It's quite exciting. I think it's for me a fundamental step. If we really look at the future of this industry, it lies in solutions in, you know, decarbonized products. The thing is, how do we prepare people for that future? We have to make sure that we lay a foundation now.
I think if you look at, you know, in South African context, I think people have been moving from one industry to one industry, but there's not been quite a lot of effort to really build new talent from the bottom. I think that's quite key. If we really want to see this industry making leaps going forward, a lot of deliberate actions have to be put in place to develop talent. This is actually what we're doing. We've actually brought in quite a lot of Zimbabweans, diasporas back into the country. For me, it talks to a topic of diversity. You know, it's very important. Single-minded, it's a problem.
For many businesses, you need to have people with different mindsets because that's where we challenge each other, and we challenge our decisions and that's what we've seen, you know. Because being involved, exposed to one environment over time, it starts to define, you know, your horizon. But by bringing people that have seen, you know, other part of the world, still Zimbabweans, it actually brings that little bit of diversity in the team. I think Roland mentioned, I think for me, one of the things that makes me passionate about this company is the purpose. You know, if you look at not only with our own employees, if you look at what we're doing with communities.
In Zimbabwe, I mean, we've started now making all our overalls at the plant. The communities are making all our work suits. The uniform for the children, 'cause we have school at Colleen Bawn, manufactured by the ladies from the community. For me, these are the projects that really touch my heart because, you know, you cannot have an oasis in a desert. We need to make sure that, you know, we develop people around us. I think to summarize what we've discussed earlier, I mean, around Zimbabwe, for me, you know, I'm not gonna bore you with a whole lot of details, but I think for me is cash generation, reward shareholders, and strengthen our market leadership position. Obviously, accelerate a whole lot of decarbonization. I think those are the four main things, you know.
If nothing changes with regards to the legislation in country, we will continue obviously to reward our shareholders who have been quite patient with us over time. I think that's it on Zimbabwe. I don't know if there are any questions. Today I'm surrounded by, you know, people that are smarter than me. They will be able to answer all the difficult questions. Yes, Marie. I'm certain a hyper question will come, so I have a hyper specialist here.
Charl de Villiers from Ashburton. Just around your local currency versus foreign currency sales, I know you target to try and match as much of your local cost base with local currency sales. I mean, how are you doing on that? Does that 46% of local currency sales actually offset your local cost base? Just maybe talk to that mix, if you don't mind.
I can answer that, but I'll ask Chrissy. Chrissy is the FD of PPC International, so she can answer that one.
Thank you very much for the question. Indeed, the cost structure is also skewing towards the same ratio. We always try as much as possible to match our cost to the revenue that we are generating in foreign currency. There's no exposure from our side. I would say that in terms of Forex, our generation, in terms of the revenue, we're even much higher compared to how much we are paying in Forex for our costs.
Thanks, Chrissy.
Maybe just to clarify on your ability to repatriate cash. You said, I think you can repatriate in line with the extent to which sales are generating Forex. Does that mean you can essentially repatriate 100% of the sales revenue generating Forex as a dividend? I mean, your payout ratio would never be that high. Or is it a case of the split in profits that you can pay out in line with the Forex local currency sales?
To answer that is if everything you call, you can. But I mean, you still have foreign currency input costs. You know, that you need to make sure that you can run your business on a sustainable basis.
Okay. Then just maybe to clarify the economic benefits that are expected from that fly ash project and the LC-III CapEx project as well.
Well, yeah. I'll start with the fly ash. You know, we're getting this fly ash close to nothing. We'll basically cover the logistics costs from the source to the plant. What it does is it will still be delivered cheaper than your clinker. Every replacement of clinker with fly ash, you know, has got an impact on obviously your variable cost positively. On the LC3, it's, you know, two ways. One is you also minimize your inbound logistics cost because it's closer to your grinding station. Two is the cost of producing calcined clay is much lower than producing clinker. And three, because the market is clinker deficit, you're actually even able to sell clinker into the market to make sure that actually you fill up the entire market with product.
You can actually generate even double revenue, not only from cement, but you can even, you know, fill up the market with additional excess clinker that you may have.
You're repeating, Roland.
Thank you. So can we get to the next one? Thanks, Kwame. Yeah. A jewel in the middle of East Africa, Rwanda. We've spoken a lot about CIMERWA before, and I will touch on, you know, where we are in terms of our market leadership position. A lot has been spoken about maximizing our clinker capacity, and I'll touch base on where we are and why there's been some delays. I think one needs to also put that into context. Obviously, you know, how that will translate into cost competitiveness and our ability to defend our position in that market. The other thing I'd like to include is, you know, I think Roland mentioned it, the growth there, it's really, you know, is cash hungry.
You know, one needs to look at what are the options if there's a need for growth. Simplified market, small country, 13-odd million people, two cement plants, one integrated, other one is a grinding station that came in, was commissioned last year. What we have seen from the startup of the grinding station, not real impact on our market, our volumes. Not impact really on pricing because I think we sort of we've seen stability overall in terms of pricing. Unfortunately, we're surrounded by countries with excess capacity like in Zim. There's quite a lot of cement coming from Tanzania because there's quite an excess capacity here. We've seen some cement coming out of Kenya.
This became actually quite. We never really had a lot of cement out of Kenya until the government did a classroom project. Because the classroom project, there was huge sudden demand that we had to fulfill, and the excess was actually imported from Kenya, and I think that started to open a door for imports out of Kenya. It was not really a major issue historically. Now with the border between Uganda and Rwanda open, we will expect to start seeing some developments with cement coming out of Uganda. There's also with the discussions happening here around the DRC being part of the East African Community, we will start...
I think we'll start seeing more movement as well, you know, within this entire region, including Burundi and obviously South Sudan, because then they will be part of community. We're also doing our part because, you know, you'll see on the subsequent slide, we're doing quite significant volumes. Actually, this year is a record volumes into that region. I think we're growing them quite nicely. We're doing quite substantial export volumes into the north and south of Kivu, you know, as part of our foreign currency earning strategy. If you look at, you know, the market, CIMERWA, I mean, we've seen, you know, compound annual growth rate of about 6% since 2016. Quite very nice, steady growth.
Unfortunately, if you look at the domestic clinker capacity converted to cement and this, you know, and the demand, sorry, and the grinding capacity and the demand, you'll see that, you know, there's a huge shortage of clinker. This is also because there's, you know, not adequate limestone reserves in the country, and I'll talk about what are we doing about that to make sure that we extend our life of mine. Clearly what it means is, you know, the base of your cement product, which is clinker, has to be imported somehow to really fill up the demand in the market, or cement has to be imported into the country to support the demand.
market, you know, also still, you know, retail, we're growing this sector, micro retail, quite strongly. You'll see what I mentioned about exports. Not a big market when it comes to concrete product manufacturers. You know, if you remember, Zimbabwe is double digit. It's quite a very small market. But you know, there's quite strong construction, and you'll see on the next slides when I talk about some of the developments in construction what is happening there. Again, we introduced bulk in Rwanda. Obviously, we were the only manufacturer, and one can argue. But when we started with the first bulk tanker and the aim was, you know, let's test the market and see if bulk will be acceptable.
What we've seen, the biggest challenge in most of these markets with bulk is infrastructure of your customers. If they don't have a weighing mechanism, they tend to not believe in bulk, you know. The minute they can start seeing actually, you know, I don't have to remove all the bags and, you know, throw them away, and they can have infrastructure, they will switch over with ease. Over time, we've seen, you know, some reluctant some are. Now with all these infrastructure projects coming up, we've actually set up silos at most of our big customers to try and obviously link the bulk with the silos. This peak is mainly driven by the airport projects that
project that we are supplying. We've actually increased our bulk capacity and some of our transporters, you know, have really put in more trucks. We've seen a very nice growth, you know, this year, and we expect this to grow quite nicely in a new financial year. You know, we have this product range and you'll see here, this is not a big market for the short customer and in the short term, you know. Because clinker deficit market, if you can engineer your products to have achieve the highest strength for civils, you know, you don't have to go for much purer cements. This is exactly what we've done. We're selling a 32.5 and a SUREBUILD that is actually ideal for civil works.
It gives you the right properties. It actually addresses the requirements and the needs of the customers. This just shows our exports over time, you know, as we've been going into new territories. Again, in terms of, you know, continue growing your exports, you know, because you've got better margins, you know, foreign currency. Bulk quite key for us. We've actually appointed an excellent technical engineer who's really supporting our real growth in the construction sector in CPM. I think we will start because, you know, these customers are quite unique in terms of your offering. You know, it's more about, you know, technical support and offering a solution more than anything else.
At the moment, I think we, you know, we've really exhausted. When we started our plant in Rwanda, we spoke about phase one of the bottleneck, and I think this graph will just show you the work that has been done. For me, the biggest argument always had was it doesn't help to address the moisture of the limestone while your base is shaky. We actually wanted to make sure that we address reliability of the plant before we address the last part. A lot of work has been done to really up the reliability to a point where, I mean, we, you know, we've reached quite relatively good performance out of that plant before we do the last part.
Actually we've now done recently Pareto analysis, where we're seeing that this is one of the bottlenecks that is actually impacting on our performance and is actually something that we will also address in the next 18 months, to make sure that, you know, we can reach full capacity of this plant. You'll see how we've gradually built up over time. This is quite excellent because I think you've also seen on the trading statement, our volumes are gradually growing. It's not because we spend a lot of money on the dryer. This is still coming. What delayed this process, I think it's important to mention it, is COVID.
You know, we wanted to do a technical DD visit, and unfortunately, the suppliers are in China. China is closed. We, you know, this was delayed until we actually agreed on alternative countries to visit. The visit was done in January, and this should actually be tabled now, you know, for review by the board, the governance process. This is really, I think, the last icing. Then we should be able to get to, you know, maximum capacity. We've also done quite a lot around clinker factor reduction. You know, I think last year we announced when we actually mentioned that our clinker factor increased quite drastically, where we actually saved, you know, this was quite a huge saving because of clinker factor reduction.
We are now looking at also, you know, newer innovative technologies available there to energize and activate cement performance with maximum extension. So that means, you know, with the same amount of clinker, you can actually sell more cement. I think for us that is quite attractive considering that, you know, our limestone reserves are not in abundance. When we get additional reserves, they may come at a cost, so we need to obviously find ways to offset that, going forward. This is a cost structure of CIMERWA. You know, for me, this has to do with the maintenance. You know, for example, it has to do with the design, from the beginning of this plant.
I think they Chinese supplier, few flaws in the quality of the equipment, and that's why we've changed the bigger components now. What is remaining is the cooler. The bulk of this is really what we've seen with the performance of the cooler. You know, this will be addressed when we do the cooler project. As expected, coal is a bigger component, but there we've combined coal and alternative fuels. I think CIMERWA is our flagship when it comes to replacement coal substitution because we're substituting more than 10% of our coal at the moment in Rwanda. This is a great milestone for us because coal is our biggest cost in that market. We've actually
You know, it's a question of availability. You know, plastics. Plastic is not allowed in Rwanda, so you can leverage on, you know, some plastic floating around. So we rely on, you know, we're doing, you know, all sorts of things from palm kernel, rice husk, and all of these things, to diversify our fuel energy sources. I think, you know, this has been quite a fantastic milestone that the team has made over time to really continuously push the envelope. We are looking for additional sources of these AFRs, to see how we can diversify our energy mix. Distribution, you'll see, you know, we are close to 300 kilometers away from the key market of Kigali. It's expected that your distribution cost will be quite significant.
However, we have also strong presence in the proximity of the whole plant. That's great. Gypsum is also, you know, an important product. If we just look at coal and electricity, it's roughly 33%. It's quite significant. By getting the plant to nominal capacity, you're addressing both, you know. Because you'll get your plant energy consumption to optimum level and also for the same amount of power that you use, you know, your divider increases, meaning your kilowatt-hour per ton gets better. Voila. That solves the problem. That's why it's important that we address those two projects, the cooler and the dryer, because it will solve all of these things. I mentioned clinker factor and fixed cost.
Again, you'll see strong drive on OEE. As Roland mentioned, OEE is availability, quality we assume is one, and your production index. Production index without a dryer is obviously, you know, obviously impacted. We need to drive that production index up so as we can maximize this our capacity. The cooler has also been the biggest. I mean, we're losing quite substantial hours because of the cooler. Replacing this, you know, scores us quite significant volumes. In fact, we've done the calc, you know.
The payback is almost a year.
Sorry. The payback is almost a year. Thanks, Roland. Then, you know, we're doing some R&D work at the moment to see what are the options that we have to actually even extend our cement further. That's some of the work that we're working on. Alternative fuels, I've mentioned, we're looking at new sources in different even in the neighboring countries to try and further diversify our energy mix. Bulk, we spoke about it. I think we also do the same project where we, you know, we simplify, automate, and standardize our processes to obviously take away management's time from, you know, generating reports, but more thinking about, you know, the outcome of the performance. Journey map, I think we've covered most of the stuff.
I think what Roland mentioned as well is, you know, we're looking at the debt of our business. Rwanda has been self-sufficient. They've been servicing their debt. It's getting closer. Yeah, you know what it means. You know, obviously, we are targeting reduction of clinker factor. I've mentioned as well that in Rwanda we won a tender of fly ash coming out of the new power plant. It has started. We're getting drips and drabs. As this scales up, you know, it can give us anything between 50-100,000 tons of fly ash, which is quite instrumental in driving our volumes even further. That's it. Thank you. Over to you, Kwame.
Any questions?
Just given the short life of mine and from what I understand, the limestone deposits are potentially quite far away from the existing plant. I mean, how does that change the cost structure if and when you do decide to tilt the plant to a new limestone deposit?
Thanks, Roland. Yeah, I forgot actually to mention the issue of limestone. There is work locally. I think we've exploited all the reserves in country. We are now looking at, obviously, the neighboring countries for additional reserves. We are working. You know, a particular reserve at the moment. Once it's firmed up, obviously there will be incremental costs in terms of our limestone costs. But it's better to start now with the dilution, and not to exhaust the existing limestone and come to the end with limestone costs that are high.
That's why it's important that we also address the cost structure of the overall business to make sure that even with this limestone at whatever dilution rate, we are able to maintain some level of good performance or margins over time. I hope that answers your question. We are aware of the likely impact on, obviously, on your clinker cost. What can we do to reduce your clinker cost? If you look at just power, maintenance, it can give you anything between $4-$7 a ton that we can actually leverage on. That offsets, you know, this limestone cost increase.
Well, the benefit of online, please identify yourself, please.
Rowan Goeller from Chronux Research. Mokate, can you run through demand, please, that we're seeing in Rwanda? There's been some big government projects, but what do you see going forward? And then also talk to the export markets, particularly the DRC, but is anything happening in Burundi? 'Cause I think initially that was meant to be a reasonable market for your plant.
Okay, I'll start with the last one. We haven't done anything in Burundi. It has mainly been in the north and south of Kivu, and purely because of, you know, the geopolitics. I think, you know, things are getting slightly better. Even when that market opens, we're really well-positioned because we are much closer to Bujumbura. So we'll definitely exploit that market. We've got some intel on the ground to understand a little bit about the market because, you know, the minute we press the button, we need to have a full understanding of that market. I don't know if that answers your question. This one, you want me to take you through this?
The demand from DRC.
Oh, demand from the DRC. On the eastern part of the DRC, I'll be quite honest with you, I don't have the exact demand because, you know, the eastern DRC is quite long. We know basically markets closer to us, we're probably estimating, you know, something close to 10-15,000 tons a month, you know, that part of the lake. Okay.
Nothing from the workforce. We'll break for lunch.
Thank you.
Just some concluding remarks.
Thanks, Mokate. Just a few concluding remarks before we break for lunch. We still have five minutes in between. I'd like to fill those. I hope you have gotten an understanding of the focus that we have on our key cost drivers. For us, you know, this is a bit of bread and butter when we talk about electricity consumption, coal consumption, transportation, et cetera. I understand that, you know, some of this has to translate into numbers. When we looked at our foreseeable future in January, because our financial year starts, of course, first of April, so we make our budgets January, February. We were looking out and said, for South Africa and Botswana, you know, let's not count a lot on the volume growth. If it comes, it comes, it's great, we're ready for it.
Let's look at, you know, what do we see in terms of cost inflation. At the time, we were looking at a high single-digit figure in our numbers. Then when we looked at our variable cost increases, we were looking at something that is half of that, and that's where the margin expansion can come from without having the volumes yet counted in. Now obviously, you know, when a certain gentleman, if you want to call him like that, in Russia, decided to move into Ukraine, and we saw what happened to fuel prices, coal prices, and probably consequential knock-on effects. We need now to see how that will play out. Over time, we see that what we have in place on variable cost actions will keep us well below the cost inflation, whatever that cost inflation number is gonna look like.
In Zimbabwe and in Rwanda, we have similar types of actions in place, and on top of that there, you have a more favorable market environment, so you have got volumes. In Zimbabwe, we have enough, call them expansion projects in the pipeline to catch up with that volume increase through the fly ash and the calcined clay that we mentioned. Whereas in Rwanda, come FY 2025, FY 2026, you know, we're reaching the maximum that we can do with that plant, and then we need to start looking, how do you position CIMERWA within the region to continue its leadership position. I think that is what we are focusing on in a nutshell.
You know, what are the cost elements and how can we constantly make sure that we are halving the inflationary pressure so that the rest can then be passed on a price element as well in the market. Rowan?
Roland, quite a few primary production sectors in the world are passing on surcharges or thinking about surcharges now to cover the big increase that's coming in cost inflation. Is this something that you've seen in the global cement market, and is it something that you can do possibly?
We've had that discussion with, especially with the South African team. There is pros and cons to it. You know, the moment you put a temporary fuel surcharge in place, you know, when do you pull it out again, right? I have seen it. I've seen it work. I've seen it not work. My personal preference is to pass on your general cost increase so that it sticks over time. Because the moment you start pulling in something temporarily, you know, you're actually upsetting the market a little bit. You're creating uncertainty in the market. What you'd like to do, especially as a market leader, is to create this certainty and stability. You know, people have gotten used to the fact prices increase in January and July, and they know more or less in advance what the price increases are gonna be.
One discussion that we now need to have is that we say, "You know, maybe we need to pull that a bit forward, this July moment, because what we face now in terms of cost increases, we need to recover faster." Yeah, it is. In short, it is a discussion point. My preference is just to stick with normal price increases and not do temporary, surcharges.
Last one. Hi there. It's Charl de Villiers from Ashburton again. You haven't spoken much about the price increases or price changes you've seen in both Zim and CIMERWA during the presentation. Can you just give us a bit of an update as to what you're seeing on the ground in terms of maybe dollar pricing as well, as opposed to local currency?
CIMERWA, our dollar pricing more or less flat, because of the import parities that are dictating it. In Zim, slight increases in the dollar pricing. For us, in both these markets, you know, you're running their EBITDA margins. Let's forget Zim's hyperinflation accounting. If you take a normalized accounting system, you run both the markets at about 30%, give or take, EBITDA margins. EBITDA margin expansion there is unlikely to happen. There will be natural forces to keep it at that level.
Can we have lunch?
Now we're gonna have our lunch here, Kwame. We reconvene at two, right?
No.
No?
Earlier.
Just-
If we can maybe come in at 1:50 P.M.
We'll be back at 1:50. For the people online, we restart at
1:50 P.M.
1:50 P.M.
Yeah.
All right. Enjoy the lunch, guys. Thanks.
Thank you.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as The First Portland Cement Factory Limited, until in 1908, there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years. Two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them. We know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality product, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE products. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, the De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908, there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam.
Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant: our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do. In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
They've won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP 21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE product. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous. Many businesses lost their way, while others had to reassess their futures.
At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility, and we know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years. We are in the business of empowering people to experience a better quality of life.
In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908, there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa.
1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartebeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do. In 1992, PPC celebrated one hundred years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
They've won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality product, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE product. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as The First Portland Cement Factory Limited, until in 1908 there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than 250,000 bags of cement were used to complete the well-known Hartebeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant. Our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996 we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened the CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE products. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SureRewards, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, the De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908 there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
We've won the World Cup.
PPC is proudly South African, and in 1996 we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Cement Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE products. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, the De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as The First Portland Cement Factory Limited, until in 1908, there was a final name change.
1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than 250,000 bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. In 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. In 2018, PPC launched the application-based Sure Range products. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908, there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement.
At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant, our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do. In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable. PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality product, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. 2018, PPC launched the application-based SURE RANGE products. 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous.
Many businesses lost their way, while others had to reassess their futures. At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SureRewards, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years.
We are in the business of empowering people to experience a better quality of life. In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, the De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Portland Cement Factory. In 1902, it became known as the The First Portland Cement Factory Limited, until in 1908, there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement.
At the time, this was the largest construction project undertaken in South Africa. 1910 was also the year PPC was listed on the JSE. In 1923, more than a quarter of a million bags of cement were used to complete the well-known Hartbeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant: our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do.
In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
Have won the World Cup.
PPC is proudly South African, and in 1996, we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches Program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. In 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened the CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE product. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous. Many businesses lost their way, while others had to reassess their futures.
At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country, where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you, our PPC family. Together, we are stronger. Here's to the next 130 unshakable years. We are in the business of empowering people to experience a better quality of life.
In this corner of our great continent, we are a manufacturing powerhouse, delivering proudly African products that are as exceptional as they are unique. All dreams begin somewhere. In 1888, Edouard Lippert gained permission from President Paul Kruger to set up a local cement factory on the outskirts of Pretoria. In 1890, Paul Kruger formally opened the Hercules Cement Factory, which still exists today. In 1892, De Eerste Cement Fabrieken Beperkt was registered as the company to operate the Pretoria Cement Factory. In 1902, it became known as the First Portland Cement Factory Limited, until in 1908 there was a final name change. 1910 was the year that South Africa achieved independence from Britain, and the Union Buildings, designed by Sir Herbert Baker, were built with PPC cement. At the time, this was the largest construction project undertaken in South Africa.
1910 was also the year PPC was listed on the JSE. In 1923, more than 250,000 bags of cement were used to complete the well-known Hartebeespoort Dam. Despite the global hardship and seemingly insurmountable difficulty of the Second World War, PPC set new production records in 1943 and 1944, with all PPC's factories working at full capacity. Throughout our growth, our triumphs, and our successes, one thing remained constant. Our commitment to our people and to our stakeholders. Our values have always reminded us that our people are our strength. We are customer-focused, and we strive for excellence in everything we do. In 1992, PPC celebrated 100 years, and two years later, in 1994, we celebrated with the world as Nelson Mandela was inaugurated as the country's first democratically elected president.
The time to build is upon us.
In the same year, PPC reached an agreement with Botswana Development Corporation to construct a cement blending plant and depot in Gaborone. In 1995, our beloved Madiba asked South Africa to unite behind the Springboks. The odds were stacked against them, but we know our capacity for greatness is immeasurable.
They've won the World Cup.
PPC is proudly South African, and in 1996 we launched SUREBUILD, the first branded general-purpose cement on the market. In the same year, we launched PPC Pitches program, an initiative that created 1,050 concrete cricket pitches and practice nets, allowing new talent to emerge. Today, we continue to support school cricket pitches through the JP21 and Temba Bavuma Foundation. In 2001, PPC acquires ownership of Portland Holdings Limited in Bulawayo, Zimbabwe. In 2010, we were delighted to be part of South Africa's historic role in hosting the 2010 FIFA World Cup.
Goal. Bafana Bafana.
PPC was a proud supplier to numerous infrastructure projects in preparation for the 2010 World Cup. We are proud of our role as a leading multinational producer of materials and solutions across Africa, delivering consistent quality products, technical services, and world-class service and solutions to our customers. In 2012, we increased our African footprint. Together with IDC, we jointly acquired a stake in Ethiopia's Habesha Cement Share Company. In 2013, we committed to the Democratic Republic of Congo's Barnet Group to build a cement factory. In 2015, Rwanda's Prime Minister Murekezi opened CIMERWA plant in Bugarama. In 2018, PPC launched the application-based SURE RANGE products. In 2020, the year we didn't see coming. Nothing about 2020 or 2021 was business as usual. The only thing that was certain was uncertainty. The collateral impact of COVID-19 has been momentous. Many businesses lost their way, while others had to reassess their futures.
At PPC, our adaptability has always been our strength. PPC introduced a first for the industry, SUREREWARDS, a consumer loyalty program. As a leading manufacturer, we couldn't sit back during this difficult time in our country where unemployment is at an all-time high. In 2022, we are poised to define a new chapter. This year, PPC celebrates 130 years of making a difference. 130 years of uniting a country behind an unshakable brand that we all love. We look back with pride and gratitude, and we celebrate the prospect of a future filled with so much possibility. We know that none of this would have been possible without you.
Okay, welcome back everybody. Trust everyone's had a good lunch. Unfortunately, now for the graveyard shift, and I'm now gonna start talking a lot of technicals. Hopefully, we'll bring it back down, bring it back to some operational information that you've heard along the way, and how that translates into some of the cost initiatives that we are driving. Throughout the day, you've learnt of our focus areas around industrial excellence. Again, just to emphasize, and I'm gonna touch on it a bit later, this is simply about getting our units to run as efficiently as possible and consistently. I think that's the most important thing to understand when we're talking about getting the industrial excellence up, and you'll see some numbers later as well. We're also gonna touch upon, again, alternative fuels and resources.
As mentioned in various phases of today's update and presentation. Specifically with some more details on what we're currently doing and what we plan to do in the next short to medium term. We will also touch on some topics on product innovation and how this relate back to areas of clinker factors reduction, how it could relate back to improving our processing efficiency. More importantly is how these three pillars feed into our decarbonization commitments that we've recently put down in November of last year, which I will touch on in the following slide. At this point, it's important just to recap.
In November of last year, we published our first TCFD report, and this was a milestone achievement for us 'cause we've put down some firm commitments on how we wish to drive decarbonization and reduce our CO2 footprint overall. In the short term, coming off a base from FY 2020, we said we're going to reduce our CO2 by 10% from the current or the FY 2020 levels of 756, down to a level of 680 kg CO2 per ton by FY 2025. Now, at this point, I want to also bring your attention to the CapEx allocation that you see there. A lot of that CapEx that you see we've been allocated and translated back to the impact on CO2, has been very much touched on by both Mokati and Njombo throughout today's presentation.
Apart from driving decarbonization, it's embedded in the value creation and the cost reductions that we have put into our plans going forward. Beyond FY 2025, we've made some medium-term targets without highlighting specific CapExes in this regard. But here with the aim of, again, bringing through projects in a systematic basis to help us drive our CO2 from 680 kg CO2 per ton in FY 2025, down to a very ambitious target of 550. Again, putting a peg on the ground, but ensuring that what we put down drives us towards this number. As you can appreciate, beyond FY 2030, it's extremely difficult to make really firm commitments, and also to take into account that we operate in an economy that has to just transition.
has to be responsible in terms of how we reduce our dependency on coal, for example, and what socioeconomic impact that will have. Beyond that, we are committed to always reevaluate the technologies that will come online that will be available to us, and also legislation that's going to help us along the way, because we need that support of legislation in order for us to drive this decarbonization going forward. Here's a first insight into some of the technicals. I thought it was useful just to give an understanding of what exactly is our CO2 footprint. You heard the term earlier on of hard to abate. Now, cement, by its very nature, uses limestone.
Limestone in itself has what we call calcium carbonate, which, when processed in the kiln, is transformed into clinker, and then gases that are processed from the kiln are then predominantly sent out in the form of CO2. This is what we refer to as hard to abate. It exists in the raw material, and we have to process it, and this currently makes up about 40% of our CO2 footprint. Moving on from the raw material, from an electricity point of view, we are an electricity-intensive processor. As such, using electricity from a grid that's predominantly supplied by coal-fired power stations results in very high grid emission CO2 factor.
As a result, just by virtue of the fact in the regions we operate, we do see an impact on electricity usage, and this contributes to about 10%. Moreover, I think our biggest contributor comes from, again, the very nature of the fuels we use, and this is predominantly coal and diesel, which currently is probably 98%-99% from a group point of view. Let me stress that, 'cause it varies from site to site. This contributes almost 50% of our CO2 footprint.
Again, you can see what a focused optimization around reducing coal usage will have, not only on CO2, but also the cost side of the equation. Just as a last slide on what we committed to in the TCFD report, you'll see a lot of parallels here in terms of what I presented a bit earlier, but three slides away, where we spoke about enablers of decarbonization. Now, in context of what I just shared in the previous slide, you'll see what an impact of clinker factor reduction can have. If you have a high CO2 footprint driving clinker factor, you can absorb that and bring that down to much lower levels. The use of renewables to reduce our dependency on a grid that has these high CO2 grid emission factors.
The use of alternative fuels, this is a big, big lever and a big swing that will help us in reducing this CO2 footprint, but also from a cost point of view, how we drive those cost of sales down from coal consumption. Then again, a term that Roland started with, overall equipment efficiency. I will unpack that in the next slide in a bit more detail. Zooming in into the specific drivers for industrial excellence and decarbonization, what we've put down there is at a group level, we're currently sitting at an OEE level of around 74%. Over the next, let's say 2-3 years, up to 2025, we want to bring that up to 85%. Within the cement industry worldwide, that is the benchmark figure.
What that simply means is we are running our operations at its best demonstrated practice, or what you could call its design output, if not better, but also ensuring that we reduce stop starts, which is a serious detriment to energy efficiency within the cement process. This OEE journey will have to be supported by specific CapExes that will enable us to systematically increase this going forward. I'll touch on some of them in the next slide. From a output point of view, Mokati mentioned some of the key projects that we have lined up for Rwanda. And I'm just going to give you a bit more detail on, for example, why the limestone dryer is so important. Now, currently, we process limestone, like I said, together with other materials.
Our current inability to produce enough of it hinders us from running the kiln at its maximum output. The main reason for that is due to the high inherent moisture that exists within that specific deposit and the fact that Rwanda sits in a region that has rainfall for probably 11 or 12 months in a year. It's extremely critical in taking that operation up to its design capacity. From a cooler upgrade point of view, again, specifically at Rwanda, from various Paretos and root cause analysis and from the downtime analysis, we see the potential to improve runtime by almost 20-25 days, and that has a huge impact on the overall volumes that we can produce. Again, focused CapEx aimed at getting our outputs up to a sustainable level.
Coming closer to home, you're going to visit the Slurry facility tomorrow, and one of the key constraints that exists there in getting the production up relates to what we call a process fan. This is a fan that pulls out these gases from the kiln system, which is currently capacity constrained. Again, from detailed analysis done by the operations team, we focus on some of the design changes that's required that will unlock this value at this kiln operation, together with one or two. A lot of the CapEx is also focused on equipment maintenance. I think one of the ones that was mentioned earlier referred to SK 8. Again, we plan to get that kiln up to an optimum level. When it's required as a standby kiln, it will be able to perform at its optimum efficiencies going forward.
Again, very focused based on Pareto analysis, RCAs in terms of what was required at that specific kiln line. Another example, specifically at our Slurry operation, at our milling unit, we're looking at a specific rotor replacement. Again, identified as one of the key drivers of downtime, which we would hope to address in the coming shutdowns and then unlock a lot more runtime going forward and reliability. Now, it goes without saying just by, again, addressing outputs, addressing runtime, it will have a knock-on effect on energy efficiency and will enable us to run at our required heat consumptions going forward. More than that, just from, let's say, a more technical process point of view, there's also certain interventions that we are targeting. For example, you'll see it tomorrow, what we call our preheater structure.
How we can improve the efficiency at which our energy input into the system is better absorbed. These are specific interventions aimed at driving that improvement in energy absorption. From a product development point of view, you'll hear terms like grinding aid, strength enhancers, and we are continuously focusing on that, and that's specifically from a final product point of view. We're also taking that to the next level, where we're gonna look at how we can use that to drive our clinker factor. Also from a processing point of view, how can we use certain products which we are currently looking at feasibilities of testing to improve even the kiln operation, and that will come through in the next, let's say three to six months.
The next slide talks of, again, a key buzzword from today and a key focal area for us of clinker factor reduction. I think before I go into some of the details of it's always useful just to again re-emphasize the definition of clinker factor reduction. Typically, in the cement industry, it's a commonly accepted practice to take your intermediate product, which is clinker, and then you add extenders or what we call supplementary cementitious materials. These are materials that have similar reactivity to clinker, not at the same levels, but when combined with clinker, it ends up through the milling process and in your bag as you see it. That has the overall impact of reducing its CO2 footprint because usually these SCMs have a lower CO2 footprint than clinker.
Over the next, let's say 3-4 years, we are looking at reducing our or improving our clinker factor by roughly, let's say between 80%-20% by FY 2025. We're gonna do this once again by looking at all our products and looking within the confines of the standards, how we can maximize this. Moreover, from a clinker point of view, we will look at how we can improve our processes to improve the reactivity of the clinker. Improving the reactivity of the clinker allows one to add a lot more of these extenders going forward. Then again, lastly, the product enhancers, which again is well-established within the cement industry, and we just continue to focus on that to see what improvements can be gained from there.
Some of the examples mentioned today, I'm not gonna go over to all 'cause it was covered in detail. Increasing the use of fly ashes, increasing the use of pozzolans, slags where available. The one part I probably would like to mention is looking at opportunities for reclassification. Because as you gain access to these fly ashes, it gives you the opportunity for example, to reclassify a CEM II into a CEM IV, which has a significantly lower clinker factor and a significantly lower CO2 footprint. But we will have to do that in a responsible manner, ensuring our premium product offering is not compromised in any way. Again, the strength enhancers, I think I've touched on. The one that I want to just give some insight on, in a bit more detail is around calcined clay.
Calcined clay as a process, it simply requires the use of a raw clay, which is abundant across various regions of our operations, but not necessarily at the right quality. It requires a lot of work on the mining site to ensure that we do the right testing, get the right material specification to be used for processing. Now, one of the key features of calcined clay is the fact that it can be produced at a significantly lower cost simply because it requires between, let's say 30%-40% less energy input. Moreover, there is no CO2 that comes out from this process as a result of the material itself. By default, you're looking at, again, immediately close to a 50% CO2 reduction if you compare clinker to calcined clay.
The other key feature of calcined clay is that it's very reactive. That pushes the boundaries in terms of how far one can go, again, within the confines of the standards, which is typically the EN standards which we operate. I would say within a worldwide context, it is something that has gained increasing interest over the past 18-24 months, specifically in Europe. It's also being currently utilized in Brazil as well in the South American region. It is something that's very key for us in driving our CO2 footprint, but also from a cost point of view. Looking at thermal energy reduction, simply put, leading up to 2025, we are going to aim to reduce our thermal energy reduction by 10%.
Again, it's talking to all these various initiatives around getting the runtime up, getting the production up, but also in terms of optimizing the recipe, optimizing how much of this limestone we put into our kiln. Because as you've seen, it's a big contributor. If we can reduce that, we will be able to optimize how much energy is required in the process thereof. Mokati touched on automation. I think it's also important to highlight at this point, we currently do have some level of automation, specifically within our South African operations of what we call high-level control systems. You can liken it to something like an autopilot one would see on an aircraft.
Again, specifically, set up for different operations based on specific parameters, all focused on driving improved thermal efficiencies, lower electrical energy consumption, and also assisting the operator along the way to better understand the process. The AI solution was touched on. We've actually started the first, very first phase of this project, where we did a baseline assessment of our CIMERWA operation with the specific OEM. The purpose of this baseline assessment is to establish basically the gaps, establish what can be achieved, and also then in terms of getting firm deliverables and commitments in terms of what efficiencies one would attain as we implement this over the next 12-18 months. The last area, and it was covered as well, but I think important to mention, is on training and development.
Across our operations, we are going to also look at our graduate development program. We are currently revising a lot of the content around it, firstly, to make sure that it's up to date, but also what can be added. For example, initiatives around getting AI integrated into our graduate development program. We're going to relook at that and get that going again. I think another key one is what we have within our operations. We call it an audit system. It's a production audit system, but it basically has all the minimum practices and benchmarks required across the various operations that has to be implemented to ensure that efficiencies are driven, systems are in place, and also learning takes place.
Those are some of the initiatives from a training point of view, which is crucial for us going forward. Alternative fuels. Here, again, at a group level, you see we are currently sitting around, let's say, 3%-8% substitution rate in terms of coal, and we wish to gradually get that up to 20%. Even that, at a group level, is an aggressive target given the markets that we operate and our dependency on coal, and there's many factors that will have to come into play to enable that to happen. In terms of tires, and you'll have the pleasure of seeing our tire facility at De Hoek tomorrow, we're currently sitting at between a 5-7 thermal substitution rate, and we aim to take this up to 20%.
Important to note here, currently, we are feeding whole tires, which is not as easy as compared to if you had a shredded tire, which is easier to process, easier to burn. Some of the long-term ambitions involve around getting those tires in a certain form that will enable that. More importantly as well, we are also investigating the use of tires over other operations. Currently, our project management office is investigating the viability of this. Tires are becoming available within the South African context, not necessarily within a Zimbabwe or Rwandan region 'cause there's different dynamics there. Within the South African context, we see significant opportunities in this regard. Specifically in Rwanda, we currently use a lot of biomass. Mokati mentioned palm kernels, rice husks as well, and we also have what we call pit.
We're currently sitting actually closer to the 12% mark in terms of substitution rate, and our short-term plans is to get that up to closer to the 20% mark in the next two years. Another key intervention that we're going to look at from a feasibility point of view is the use of refuse-derived fuels. A well-entrenched, let's say, waste-derived fuel used in the European market. To enable that to happen, there's many levers that need to be pulled as well from a legislative point of view to ensure there's certain processing fees that can be generated from this. This talks to the low carbon revenue streams. Yes, it can be done. The technology exists, but we need certain enablers to assist us along the way.
That being said, the feasibilities are on the way to see what is the art of the possible across our various operations. In terms of renewables, I think across the group, I'll talk to SA first. We are quite an advanced stage in terms of getting PPA agreement signed off. And it varies from site to site. It depends on location and also what's required. The strategy here is to, again, do it in a stepwise process. Currently, we're looking at electrical energy replacement in the region of between 10%-15% from a solar PV plant. Also included that is some facilities that will have rooftop solar applications as well. I just want to draw your attention back to the Zimbabwe operation, specifically Colleen Bawn.
We are putting actually a 30-MW solar PV plant to be supported by a 20-MW battery backup system. Even with that in a PPA agreement, we were able to get a very competitive rate. The bigger importance of the battery backup is that it addresses a key issue from our OEE point of view, 'cause power supply is a big challenge for us in Zimbabwe, as was highlighted. This battery backup will enable us to run the kiln for close on to 3-4 hours additional. It won't be automatic, but it will enable us to get our process back up within, let's say, five minutes, and then we will push on. That stop-start removes so much of inefficiencies. Brings in more volumes of clinker as well, and in the long run, will improve our OEEs.
Just from a power wheeling point of view, just to highlight, we are currently investigating certain power wheeling arrangements. That is probably, I would say, probably another 6-12 months from now before we can say it's firm and signed. But it's definitely part of the play and part of the mix that we see as significant opportunities to us. Yeah, I think just summarizing again on this, we spoke about the stabilization phase and just from an operational point of view, and Jumbo mentioned our mega plant strategy. We've also focused on bringing more efficient kit into the mix, specifically SK9, as recent as 2019. It's about stabilizing our operations from that point of view. We've also ensured our SURE RANGE offering has been consistent throughout our operations.
It's fully implemented now, so we have that as a solid base on which to build on. Then in the next phase of strengthening the leadership position, it's all about, again, driving the OEE, accelerating the decarbonization. I think the key one here is integrating renewables, 'cause it's not yet part of the play, and that will have a significant upside for us. Then also to start exploring these low carbon revenue streams. LC3 could be one of them, the RDF that I mentioned. It's about embedding that, let's say in the next two to three years leading up to FY 2025. Then in the expansion phase, I think we will just build on this. Once we've embedded these renewables, we will look to accelerate that to greater levels.
Probably 30%-40%, depending on the economics at the time. There are certain limitations in terms of ensuring base load requirements are met for certain operations. We will continue to drive that. We will hope to then start maximizing these carbon revenue streams where the legislation by that time is more enabling, is more supportive for us to embrace that. Just finally, from a CO2 point of view, ultimately to get to net zero, it cannot be done with some sort of carbon sequestration, some sort of carbon utilization. Has those technologies in the longer term become more viable economically, we will look at integrating that, but it's very much technology dependent. There's more to be gained for us by just focusing on strengthening our leadership position. I think that's it.
Rowan Goeller from Chronux Research. If you look at your decarbonization strategy and projects, most of them look like they're going to be saving you money, so there's probably a positive NPV, which is fine. Given, though, that the world is definitely, you know, focused a lot more on ESG type of factors and decarbonization, is it prudent for a cement company, let's say, to try and create a greener product? Given that maybe your competitors in South Africa possibly aren't. They're, I mean, largely still in the stabilization phase to be charitable for some of them. But what is your longer-term focus? Do you want to try and produce a product that is good for the world and the environment? Or do you wanna produce a product that is cost competitive in South Africa?
If so, are you adding some benefit and you are getting some decarbonization or you're moving yourself off the grid, which is probably gonna save you costs. Where do you sit ultimately strategically as a cement company, given, you know, globally, cement is a difficult place to be because it produces carbon. You're probably right that the only way you can get rid of that is you sink it into the ground or inject it into cement when you're throwing the cement. What do you think is PPC? How are you gonna go about it? Are you gonna try and make a responsible product when your competitors might not? Or are you really gonna focus on where you can cut costs?
Go ahead. Okay. I think it's a balancing act, right? It's not one or the other. We have to embrace our decarbonization commitments that we've put down and like I said, it's very much linked to what we want to achieve operationally. When we did that exercise, we actually didn't do it from an operational standpoint. We actually looked at initiative that's going to drive our CO2 footprint down. It does not necessarily mean making a green product. It's the process in which we make that product. That's where our biggest influence and biggest impact can be from. I mean, green products can exist. For example, LC3 can be viewed as a green product. That's part of the mix, but again, later on.
In the short term, AFRs, renewables is what's going to enable us in the processing of making cement more environmentally friendly.
Can I just add to it, Rowan? Ask the question to the person who has just built his house whether the product we're having is a bad product. I think we're having a good product, period, and we've had it for the last 130 years. It's a product that we need as a society to build our infrastructure, and I think we're all benefiting from it. We acknowledge at the same time that the production of cement contributes to global warming. There's no denying about that. When we set out our decarbonization targets, we're actually in a very good space. In the sense that all the projects that you've seen here, as you alluded to, but I can confirm all the projects that we're talking about are NPV positive value accretive.
We're not yet in the dilemma that you're sketching, whether we have to say, well, is our strategy to decarbonize at the expense of being cost competitive in the market? You know, right now, these two things go hand in hand. Until 2030, that remains like that. In that time, we do expect that governments or regulators, and to some extent as well, the providers of capital, like the investors we have here in the room, as our funders, are starting to demand that, you know, we are leading in decarbonizing concrete. I'm saying on purpose concrete here because from what we know today, you cannot decarbonize cement. As Delon explained, a lot of it comes out of the limestone burning, and that problem hasn't been solved. The only solution to that would be carbon capture and utilization.
Whereas if you look into the business of Dave, in concrete, you can go one step further. We're actually exploring that as well. Looking into absorbing CO2. On the short term, it's not a question about cost competitive or. You know, we can actually do both. In the midterm, our expectation is that the regulator and the general environment would come to a point that it's not any more a choice that we have as a company, that it would actually be guided by the regulatory framework around us.
Rowan, go over the facts, please. Rowan.
Is there anything else?
Sorry. I mean, you mentioned that the ZAR 700-odd million Azaran and Macabex projects are NPV positive. Maybe can you just quantify, I mean, the extent of return? I mean, Mokati mentioned a one-year payback on some of the projects. I imagine that's the exception. Or yeah, I mean, just a little bit of color.
Paybacks, I think they vary from project to project. I think some projects definitely within a one-year payback period, but I think some of the more higher CapEx items, like the LC3, is probably looking, you know, between a three- to five-year payback. There's some of those assumptions that we still need to validate because we're still in the feasibility stage. I mentioned about assessing the raw materials, but we do not foresee that not being within our guidance for NPVs and paybacks as well.
700 million range, you achieve, I think, a 70 kilo per ton carbon saving. I mean, is there any linear relationship? I mean, the next 140 kilos per ton you're wanting to extract by. I mean, is it ZAR 1.4 billion?
Yeah.
Is that too simplistic?
It's also a question of timing. For example, the LC3 project, which is a big portion of that ZAR 700 million, really comes into play beyond FY 2025 into FY 2026. That's where you start seeing the acceleration in the drop in the CO2 as well, combined with other projects. It's more about the timing of these projects. A similar case with, let's say, the scenario in Rwanda. We're gonna start now, but as we ramp up production, it will actually start to come through more in the outer years other than now.
Does that second batch of projects, I mean, is the anticipation? Look, I know you say there's still a lot of assumptions that need
Yeah.
To be clarified, but I mean, is the anticipation that those are also NPV positive?
They would have to be.
Okay.
Yes.
Okay. Can you provide a little bit of color just, I mean, you talk of low carbon revenue streams?
Yes.
Is that, for example, I mean, is that still a cementitious product? Is it something alternative? Is it
This is specifically referring to items like the use of tires, where we would be able to generate some revenue for processing it, and that would be seen as a low carbon revenue stream. The use of refuse-derived fuels, which again, okay, in a European context, you get quite a substantial revenue from it. Obviously, we've got a few runs to put on the board in terms of that, but that could be a low carbon revenue stream, definitely in the longer term. In the short term, we may not get it like that, but we have to start 'cause we have to actually create that market for it. That requires putting your runs on the board, paying some school fees early on, but you have to get that logistics chain going.
Okay. I think we're done.
Online? Okay.
All right. We're supposed to take a break, but since we're running a bit ahead of time, maybe you should just do the financials and then just wrap up. All right.
Afternoon, everyone. I truly have a graveyard shift here, but, let's see if we can make it exciting. Right. What I'm gonna cover today. Sorry, just gonna move. It's quite difficult to see, actually. I have Mokati's problem. Let's move this. Okay. I'm gonna talk through the optimal capital structure. No, that's fine. Thanks. It's our time for you. The disciplined capital allocation, which I think is important for any company to have. Our continued focus on cash generation and by implication, de-gearing. Our focus on improving returns and, hopefully important to all in the room, our intention to resume dividend payments.
So, Roland at the begining of the presentation, I alluded to a very simple optimal capital structure slide at the beginning of the presentation. I think this is... Can't you hear me better? Very simple optimal capital structure slide, and I think this is as simple as it gets. I think simplicity in my life is always good. We all understand it's clear, as opposed to having various metrics that move around. Very simply put, our optimal capital structure for PPC Group is gross debt-to-EBITDA of 1.3 times. That has come down tremendously from what it used to be. There's no science in that number, as you all know. It's conservative enough to withstand bumps in the road, but certainly does allow for dividends. Maybe just to give you some color to that.
If we split the group into three buckets, and I think it's important to do that, we have what we call the SA Obligor Group, which is SA and Botswana. We have Zimbabwe, and we have Rwanda. Those are our three buckets. We're ignoring DRC for obvious reasons. You would have seen in the operating update this morning, South Africa was the SA Obligor Group or South Africa and Botswana was already at that 1.3 by the end of February. What that means, theoretically, is as we de-gear, either through generating cash to reduce our debt or growing our EBITDA, that creates headroom for dividends. What it means for Rwanda, which by the way, is also at that number of 1.3 at the moment, is as it repays its debt, it also opens up potential for dividends.
It was by Roland that we all obviously have that deferred tax problem in Rwanda. We don't wanna risk losing that by declaring dividends too early. Interestingly enough, in Zim, as has been mentioned frequently, is debt-free. Again, it opens up the potential to gear up in Zim. I'm not saying in one fell swoop to 1.3, but you know, it can gear up, and that cash can be used for CapEx and/or dividends. The gearing, I must add, will have to be, you know, in Zim and with no recourse to South Africa. We've made that very clear with all the international operations. All clear. On the capital allocation framework, it's a bit of a boring slide, but it's useful to go through.
It's PPC's way of describing its CapEx and the prioritization of it through the batting order of CapEx, if you like. First up is compliance capital. I'm not gonna say as we go through the descriptions, you can read that. That's obviously always the priority. We need to be compliant in terms of various regulations, our OP fixed asset policies, et cetera. Then maintenance capital, you've heard quite a bit about that today. Important to maintain our kit. It was mentioned a number of times, we can switch on very quickly with no further CapEx to meet demand. Important to maintain our kit, not only to do that, but also to operate effectively and reach those OEEs that the guys aspire to.
Then comes what I call, I mean, we've split it into optimization and expansion, but both of those, and it is in that order of priority, both of those need to have two things. They need to be funded from facilities, and importantly, it's got to meet our WACC. These things must be value accretive. There's no point spending money on optimization nor expansion if we're not getting a return for our shareholders out of that. Moving on just to some CapEx, high-level CapEx guidance. Now, a lot of this shouldn't be strange to you because it's been talked about both by Njombo and Mokati quite extensively. Right at the top of the slide, you can see what we refer to now is annual CapEx to sustain. Those are the first two buckets on the previous slide, right?
The run rate for South Africa and Botswana, we think, will be around ZAR 300 million-ZAR 350 million per annum. I'm just talking through to 2025. Okay? Sort of a stable run rate at that level. Zimbabwe starts a little high at $6-9 million, and then it drops again to a sustainable level of circa $3-5 million per annum. Those are in dollars. The reason it's high in FY 2023, and Mokati referred to it in his chat to you, is to make sure that we get that asset properly maintained and fixed, so it doesn't have to have these long stops that it's currently incurred. Okay? That's really maintenance. One-off maintenance to get the issues fixed.
Similarly, Rwanda is sort of a $5 million-$7 million in 2023 and working down to a sustainable of sub-$2 million per annum. Again, Mokati talked to that. That is the cooler that needs to be put in place, if you recall. Coming on to the optimization/expansion CapEx. You would have heard now quite a number of times about the LC3 project. That's the one over there in South Africa. It's mainly a little bit of extra money just to sort of defend our market position. By and large, that's the LC3 project in South Africa. You can see, Delon mentioned it.
2023 and 2024, the main benefits will start coming through in 2025, both in terms of cost and reduced carbon footprint. Zim, the $2 million-$5 million is the fly ash project. You've also heard about that quite extensively. I'm not gonna repeat it. It too has its very own LC3 project. Both of these are regarded as value-enhancing, carbon-reducing projects. All of that so far. Right. Then in Rwanda, we talk about the Warbal project, and I think Delon alluded to that in terms of spend. We actually are starting it quite actively in 2023. This is just the expected cash flows associated. We negotiated some extended payments, which is good. I think that's a snapshot of our CapEx in line with that allocation framework. Right.
It doesn't mean we don't continue to basically focus on cash generation. We're not gonna stop doing that. It's important that we gear this thing. These are three areas, and obviously there are many, many areas across the group. These are three particular ones that are maybe more in my hands to some extent. I mean, we obviously all work as a team. Strong focus on working capital. We need to get our working capital down to good levels, not tie up huge amounts of money in a lazy balance sheet. It will not stop being a key focus to get that optimal. The effective tax rate at PPC has historically been quite problematic.
A lot of it is optical illusion in the sense that it's not silly non-cash things that just go through, but there have been inefficiencies to some extent in the cash rate. Lots of initiatives underway during the course of the year. We'll continue to get that rate at or below 28% legally. Obviously the financing cost is an area of focus. We did reduce it significantly, in my view, in December with the new long-form agreements with the banks. So that's embedded this financial year. Obviously, we're not just gonna sit on our hands. We need to manage that carefully, especially with the volatility in interest rates that we see coming. That will also be a continued focus area, all with a view to enhancing cash generation.
When I joined PPC, I was a little bit embarrassed because I didn't know what PPC was, but I now do. It's simply a definition for PPC economic value creation. All right. Or as most of you will say, know it as EVA. But it's one that very bespoke to PPC, and it's not very complicated, save for one thing. What we do and what we aspire to do, basically generate for our shareholders amongst others, is that we need to be cash value accretive over and above the returns generated. What we do is we take our cash generated, we add back financing costs and we deduct finance income. That's the base.
We then compare that to what is our invested capital, and that's basically our PPE as at, and our average working capital over the period that we're looking at. We apply our weighted average capital to that number, and the sum must be positive. What we do, why I said it was a little conservative, is in the invested capital, and I haven't seen too many other companies do this. To the extent that there's been historical impairments taken, we add them back. We don't ignore historical impairments and saying, "Oh, well, that's money down the drain. No one ever invests it." We add it back. We are conservative in that regard. It's not a complicated calculation. It's done for every business unit. Each business unit owns their own PPC.
At group level, we do a group EVA. If you pick up our accounts appendix at the end of the year, you can tie every number in this pack to the appendix. You can actually see what we're earning for you. Okay. It's nice to be able to do that. It's not some black box calculation. That's our aspiration as well. Very focused on that. We're all incentivized by it. You'll be happy to know, I think this is my last slide. We have every intention of returning to dividends. I touched on it in my capital allocation slide. You now understand the context for it and which bucket can generate dividends.
We expect to be able to do so using the technical formulas that I described to you at the beginning of the presentation in 2023, certainly from the SA Obligor Group. It would be remiss of me not to give the caveats. Okay? Obviously, subject to, we don't know those things. All things being equal, management's aspiration is to do it. The board's aspiration is to do it. We know shareholders' aspiration is for us to do it, and we can, but just subject to those caveats. All righty. I think that is me. Unless there's a surprise slide. No.
Rowan Goeller from Chronux Research. Is there a link between your maintenance CapEx and the OEE going forward, so in getting the OEE back up to 85-odd% from current levels?
I would think so, but I'm gonna give the technical guys that hospital pass.
I mean, the question is, have you effectively kept up with maintenance CapEx so that as you move your plants back up to high utilization rates, you're not gonna suddenly see maintenance CapEx jumping up because actually you've neglected certain maintenance CapEx issues over the past couple of years because of financial stress?
Mokati and Njombo Lekula, do you wanna take that? Or I mean, it's really not my area to answer eloquently.
I can take that.
Thank you.
You want to take it?
No, it's fine.
Since I've got it. That's correct, Rowan. If you look at some of the CapEx that we're spending now, some of it are coming actually from, you know, as I said, design issues from the beginning. Like the cooler in Rwanda, which is really a once-off. Once we've done the cooler, we've done a similar project in Zimbabwe in 2010. We've never had any issues with that cooler since 2010. And from a maintenance point of view, you'll start seeing, you know, obviously a decline in your maintenance cost, but also an increase on your OEE because now you reduce the downtime. I mean, in Rwanda, we've done an exercise. We lose close to 660 hours a year, you know, because of a cooler. So that actually gives you production, one-month clinker production.
You can imagine, you know, it's really a lot of money. That's one of the reasons why we wanna do that. You know, in South Africa, Jumbo can also comment about some of the maintenance costs in South Africa. I think where you're seeing peaks is mainly on the international side. Zimbabwe is mainly to fully utilize this window of opportunity of a 45-day kiln stop. Because, you know, it doesn't happen often that you have a 45-day stop on a kiln. We want to make sure that we have an issue with 1.5 meters of the kiln shell on that kiln at Colleen Bawn. We've had a lot of downtime this year.
I think we probably lost two weeks because of the issues we have with the condition of the shell on the discharge. This shell was replaced actually when we did the cooler project in 2010, and it shows that going forward, we need to give the shell section at least nine years before we, you know, so as we proactively change it. Portion of the cost goes into obviously replacing that shell section. And also we're doing some of the major work around the kiln that, you know, you hardly do it, you know, on a three-yearly basis. These are long-term projects that you'll normally do on a kiln system, and that costs money.
You know, for example, we're doing a whole lot of work on the preheater of the kiln, including replacement of the refractories. That is normally done, you know, when the plant is new and then you'll do patchwork over time. But because we have 45 days, we had a lot of patchwork that was done before. It's an opportunity to actually press reset and make sure that by the time you press your button on that plant, it will run for another very long period before you spend money. So it's a once-off peak. And that's why Brenda said it normalizes very quickly. The same applies for South Africa. I think it's a. Yeah, South Africa have normalized over time. This is what we're doing at the moment.
Brenda, Sheldon Willis here from Ashburton. You touched on the opportunity to potentially regear Zim on a non-recourse basis, potentially get the capital out. I mean, are there funders out there with that sort of appetite available, or is that kind of more or less longer-term aspiration, or is it something that you can actually execute on maybe in the shorter to medium term?
Look, I think we can execute on it, but I'm going to ask Chrissy as she has a far more intimate knowledge. Chrissy, would you like to add on to my
Yeah. To answer your question, I think we strongly believe that there's appetite still in Zim. I say this because of the fact that we've had a very good relationship with the various stakeholders, lenders in Zim. The debt that we've just finished paying late last year was TDB. Yes, with the support of the government. Yes, I think in our relationship with TDB, not only in Zimbabwe, I think we have got a very strong, I would say, chances of getting back or getting some funding for the upcoming projects. We are actually already seeing some appetite when we engage with them, and particularly also because of some of the improvements that we are seeing. Despite that, yes, still volatile in terms of the exchange control issues.
I think the sentiments that we are seeing in terms of projects, government trying to encourage various players to invest in Zim. I think the funders also get interested in that market. We are of the view that they can come through for the projects that we have in the future to fund, and also because of the potential that the cement industry has in Zim. I think the funders would be interested to participate and to grow with that market. I think that's what I would say for now.
Thanks.
Is the intention, though, to fund projects or is the intention to get capital out, perhaps say on a once-off basis and then to be here long term?
It's a bit of both. Well, I think it's both. Let me be clear. Absolutely, Zim has got to be self-funding. Now, yeah, self-funding doesn't mean necessarily generating enough cash. It can be borrowing in country. Okay? There is that, and that could be a way of doing it. To the extent it was self-funding, there's no reason why you still can't go and borrow. You know, you'll be investing that money into the ground in Zimbabwe, and you'll just generate more free cash to repatriate as dividends. That's sort of how it works. It'll be a combination, as Chrissy was saying, project finance, which would have to be tied to the CapEx or just general appetite from the banks in Zimbabwe. You know, they do have dollars.
They do have the appetite to make money, as all banks do. Zim has got zero debt. It's not high risk of them being in Zim and owing Zim. I think both are doable. Please don't. Roland will probably give me a flick on the ear for this, but please don't think we're gonna go and borrow 1.3 times Zim's EBITDA on day one. Okay. That's just too much, and I think it would be naughty, and it's just not sensible. Okay.
Brenda, this is for you from the webcast. It's from Monwabisi Ntuli. He doesn't tell where he's from, but he says that, "What is the status of the JSE investigation? Will this require further restatements of previous financials?
We just need to be very. The short answer is it's ongoing. Just to remind everybody that JSE investigation, and I'm just gonna talk about PPC 'cause that's who we representing, you know, talking to you about. PPC, they have been very satisfied with PPC's response. They put that in writing. There is, again, to remind you, there was no malintent in the mistakes PPC made at that stage, and they've accepted that. They've also accepted and acknowledged the significant progress that we've made in fixing the internal controls. There was no restatement in 2021, again, as you all know, and I'm not aware of anything that risks a mistake, a restatement in 2022.
Nothing more from the webcast.
All right. Thank you very much, guys.
All right. The last section, and I hope this has been informative for you. You know, we of course like to talk about our business. We like to talk about how we understand the market, how we deal with our customers, and how we, you know, manage and maintain our operations. Just to bring it back to a slide that I showed to you this morning. What we want to transmit to you is something that we share internally all the time. Run this company as if it is your own. Not on the short term, but on the long run. You know, do the right things today for a good return tomorrow and the years thereafter. We've been doing that for 130 years, so we would like to keep on doing that for another 130 years.
That also means that we're currently in a phase where we prioritize margin improvements over top-line growth. If top-line growth comes, especially out of projects in South Africa or the removal from imports, we'll take it, and we're ready for it. In our planning of expanding margins, you have heard throughout today that we have specific initiatives in place to mitigate cost increases that we're facing. We've made a deliberate choice that we focus on our South African and Zimbabwean assets and that we manage how we deal with our East and Central African assets that require the capital to grow further as those markets are growing.
You can expect in the course of the year or maybe a little bit longer, we're not in a hurry, that we find solutions to position our businesses in that part of the world properly on a sustainable path going forward. Capital allocation is something that we spend a lot of time on. I said it to you in the morning. Brenda showed to you the framework that we go through. Each and every project is being scrutinized from business unit heads to the MDs in their management teams, up to the ExCo. When we accelerate our decarbonization strategy, there is one important element that I would just like to highlight, as it might not have come across so clearly.
When I started in October 2019, and I started to understand the South African business and the landscape, I was told that by a certain time before 2030, we would have groundbreaking for a new cement plant in Riebeek, and that we have all the environmental permits in place, and that it is a matter of time because of the life of mine that we have in De Hoek, as well as the age of the plant that we currently have in Riebeek. Where we stand today with the feasibility to be confirmed, but assuming the feasibility of the LC3 project in the Western Cape, we will rule out any large investment in a new cement plant in Riebeek for the time that goes beyond the permit. I need to apologize to all the people who've been involved in getting that permit.
You know, if we ever need it again, we need to ask for it again, and we need to go through the same process. At least for now, we feel very comfortable that the LC3 project will kick out a major capital item into the 2030s and beyond. I have publicly stated, and I repeat, that for me, the dream for South Africa is that there is never the need anymore for a new clinker plant. Not because there is a lack of cement demand, but because the time it will take until 2030 and beyond to utilize existing capacity will, at the same time, be utilized to make new building technologies available from which we will benefit as we are on the forefront of that will create a world, in Rowan's word, of better building products, even better than the ones we have today.
I think that is a very important element. The sustainability drive is value accretive and will reposition our expansion plans quite far out into the future. This is how the house comes together. I'd just like to touch, not upon what you see in the middle because we've spoken about what is in the middle quite a lot. That block that you have there on the bottom, enabled by Jabali, our people, our strength. We run a program together with almost 3,000 people in the group. It started before COVID, actually. In the place where some of you will visit tomorrow, in De Hoek.
We came together as an executive team and said, "How can we make sure that our people are truly recognized and feel that we invest in them, and run this business with the mindset of the owner of the business?" That is where the concept of Jabali came from. Jabali is a Swahili word that stands for many things. One of the things it stands for is the strength. Strong as a rock, which we would like to believe that PPC is strong as a rock and our people are strong as a rock. Jabali also stands for a person that can guide, call it an elderly in a tribe. We stand for leading the cement industry in the countries where we operate. It is something that comes out of the position that we have, and it comes with a lot of responsibilities as well.
It comes with the responsibility of taking the floor when you go and interact with the government, be it at a local level in the Western Cape, be it at a national level, or be it in Harare, or be it in Bulawayo, or be it in Kigali. You know, we stand for the principles that have brought us here after 130 years. A sustainable business that looks after financial sustainability, environmental sustainability and social sustainability. With Jabali, you might see or you probably will see some of the elements tomorrow, when you're in the plant. We are entrenching people to think along the lines of: Where is this business going? What is the role you are playing in this journey map? You saw some of them during the day.
How do you specifically contribute and what are the indicators that you are being measured on? How much does it cost the business if we have to stop a kiln for two or three days? We're trying to make all these translations so that people throughout the business understand the implications of their actions. That then goes further into rewarding and penalizing good or bad behavior and growing people. Continuous improvement. To come back on what Rowan asked before, whether the maintenance is directly linked to the OEE, the short answer is yes. There's an important other element in getting the OEE to 85%, and that is to make sure that all our people in the operations have the ability to contribute. I think that is where we as an industry and as leadership of PPC need also to take ourselves to the task.
When the going got rough, one of the things that you start to reduce is the investment in people and their training and their development, and we are currently paying the bill for that. One of the reasons that our OEE has been dropping lately is not that so much that we underspent in our plants. It is more that we haven't sufficiently trained up our people in order to run those plants at the best of the capabilities. If you go to De Hoek tomorrow and you see that we are feeding tires into the kiln. Now, if you are sitting in an operator room and you're running the kiln, you want to have a stable flow. Nice coal, liquor, you know, stable, right? Easy. Now if you plunge in a tire in the flame, you can see what that does.
You know, it gives sudden spikes in energy. If your operator is not properly trained how to deal with that, he will probably stuff up the plant and the plant stops or it slows down, and that costs money, and that then immediately destroys the value that you have from replacing the coal. We need to invest in our people, and that is what we're aiming for through the Jabali framework that we have implemented. I think it was Marieke that asked the question, "So what is next on the horizon?" There's a lot of question marks next on the horizon. What we know for sure is low carbon cement, and we have the action plans in place for that. It's a matter of delivering on that. What we also have started to look at is alternative building technology, alternative materials.
We have probably one of the best labs in South Africa, if not the best lab in South Africa when it comes to cement and concrete knowledge. It is actually, from what I hear from our customers, the top lab in the country. That is where we would like to do more and more tests with alternative materials such as fly ash that was spoken about or slag activated fly ash, chemicals, to see how we can implement new construction materials that will, over time, replace the building blocks that we use today, the bricks, the cement and the concrete as we know it today. Other areas that we are looking at is waste to energy. Waste to energy is a natural business for a cement business.
Sounds a little bit strange, but a cement kiln is ideally from a technology position, the heat profile that it has is an incinerator. It's a waste incinerator. If you look in China, you have certain plants around the mega cities in China, that during the time when there is too much pollution, they're starting to shut down industries. Those plants keep on running because their clinker is a by-product. They don't run the plant anymore for clinker or for cement. They run the plant because of the vital role it has in burning the waste that comes out of the cities. That is a whole different way of looking at how can you make that then a profitable business where you take various waste streams and run them through your kilns and your cement becomes a by-product. Right?
That is where the idea of waste to energy comes from, an area to be investigated. If we look further out, you look at, you know, non-cementitious building materials. Could there be something completely that takes us almost by surprise? I think the reason that we want to look at it is that you don't want to end up like the Kodaks of this world, that one day wake up and realize that something that you overlooked because you thought it would never happen, has actually cannibalized your core business. That's another reason why in our investment portfolio and capital allocation going forward until 2030, at least, you do not see capital investments in new clinker facilities.
I'm not saying clinker facilities become stranded assets if you invest in them today, but I would keep in the back of my mind, if you invest today for something that is gonna stand there 50-100 years, is whether you think twice whether you make that investment or not. The plant you might visit tomorrow in De Hoek will celebrate its 100 years existence, this particular year. That is sort of the mindset that cement people have when they start investing. What we wanted to transmit to you today is the compelling case that PPC has to offer. Focus on performance, focus on the returns. You've heard that throughout the day. Strong positions in markets that we understand.
We understand what drives the behaviors of our customers and what keeps them loyal to us, and how can we further extract value out of the markets where we're in. Very well-positioned in our core markets for any upside that will come over time, be it from infrastructure or be it from the removal of the imports. No choice has to be made between CO2 or carbon reduction and benefits. All the projects that you have heard about until 2030 are value accretive. The capital structure has been fixed, so we've come out of a phase where we can now comfortably say we are below 1.3 in our gross debt to EBITDA.
I must dare admit that Brenda won the argument because I was first more towards the 1.5, and finally the finance people winced, and now we're a bit more conservative, and we stay onto 1.3. I think we're very comfortable managing within that space going forward. While you sometimes might have frowned about the depth in which we have taken you when we talk through our markets, our cost drivers, and the actions that we have in place, it was meant to also demonstrate to you that, you know, what you see here around you is not only a quite diverse team and a focused team, it's actually a team that does know very well how to run a cement business in the various countries where we operate on the continent.
With that, ladies and gentlemen, I'd like to close the presentation side and open the floor for some last questions that you may want to ask, and then we wrap it up for the day.
Rohan Charlie again from Ashburton. I mean, can you maybe just talk us through your possible permutations for your rest-of-Africa portfolio, particularly Rwanda and Ethiopia, etc. Are you looking to maybe introduce a partner of some sort? Just how you see yourself extracting reasonable value for those assets given where they are in their life cycle at the moment and market conditions. Maybe just a few ways as to how that can play out over the next kind of two years. As you mentioned, I think 12-18 months is a likely timeframe for that.
Yeah. Various ways. You know, CIMERWA on the short term, you know, is in a very good space. If we look at CIMERWA on the longer time, it would fit better in a regionally consolidated play. You could expect some investments in Kenya, most likely. Kenya is still quite heavily import dependent, so there are some greenfield opportunities in Kenya. The moment those plants are built, they will have an overcapacity in the market, so they will start to look for outlets, Rwanda being one of them. Eastern part of the DRC, similar things are happening. You also see some activity on the ground, and people are thinking of putting up clinker plants. Five years from now, fast-forward this, it might well be if you do nothing around CIMERWA, that CIMERWA becomes very attacked from various sides.
One of the reasons that we're looking at, you know, is there a strategic partner out there that is looking at building a regional portfolio, is to place CIMERWA in that regional portfolio. Our other international assets are obviously the DRC, where, you know, after the restructuring, the value that sits in that business for its owners is extremely long-term. You're not talking about an immediate value extraction, but it could very well be of value for someone who's building up a position in the DRC because it's a good plant. We have good local partners. We have good relationships with the government. Ethiopia is a different case. Ethiopia does need about $15 million in capital to actually get the plant to a good performing level. We have been looked at to inject that $15 million.
We have very clearly said we're not gonna inject that money. Whereas if there is, again, a strategic player who wants to put in fresh capital, we would be diluted. We're currently at 36%. That would go down. And we would then, over time, depending on the partner, actually leave the management of the facilities in Eastern Central Africa to the partner. Permutations are somebody would come in and we keep a minority stake in these entities indirectly because they're all sitting in one holding company. To the most extreme case where somebody says, "Look, you know, we don't want this partnership. We actually want 100% of these assets that you're holding in that holding company, and we buy the whole holding company out." Depends a bit on what the desire is of any strategic parties.
It's, you know, we're very early on in a process. We still need to engage with the various parties that we have in the countries itself. That's why I'm saying sort of a 12-18 months kind of outlook.
Is the EBITDA in the market ripe for partners of this kind?
Yes. To be confirmed. You know, we're not in a hurry either. You know, we're. We would be looking at something that is fair valued. I hand it back to the MC of the day. Good night, Mr. Kwame Antwi.
More like good morning.
Good morning.
More like good morning.
We don't have any questions on the webcast. Thank you very much, everyone. Thank you for joining us. We hope that you've had a good understanding of PPC a little bit more than when you came here today. If you have any more questions, please reach out and we'll assist. For those of you who are joining us on the webcast.
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