PPC Zimbabwe (PPC) is mulling an increase in cement prices to hedge against rising inflation, The Financial Gazette has learnt.
In the wake of runaway United States dollar (USD) parallel market rates and the central bank's inability to meet the cement maker's foreign currency requirements, the company is also proposing that foreign clients make payments directly into the company's nostro accounts.
"The company will be supplying cement to a number of externally funded projects in the future. We are appealing for such projects to be paid for in foreign currency," the firm said in a presentation to Deputy Industry minister Raj Modi.
According to a document in our possession, the firm is looking at reviewing its prices upwards in light of prevailing economic conditions.
The greenback was this week trading at a premium of $2,30 to RTGS in the streets of Harare.
Cement prices are currently hovering around $13 per 50kg in formal shops and an average of $30 on the parallel market.
"PPC has not been exempted from the pricing pressures prevailing in the country. The company procures a significant portion of its inputs from foreign suppliers. This presents significant concerns with regards to business continuity as a result of the inability to settle foreign obligations.
"PPC has maintained its pricing … But the company is facing high pressure in the current operating environment to review its product pricing upwards…," the listed-cement maker said.
PPC has foreign currency requirements of $1 million per month for the procurement of bags and other critical spares, according to the presentation.
Further to this, to mitigate the cement shortage on the market, the company requires an additional $2,5 million a month to import clinker.
"Ecobank is in the process of finalising an LC for $2,75 million for the first consignment of clinker, which is expected to be dispatched during the week ending 12 October 2018," the company said.
Certain consumables that used to be purchased from South Africa are now being acquired using local third parties due to scarcity of foreign currency, PPC said.
"Regardless of adverse factors locally, PPC has continued to pursue its export market strategies, albeit at a loss. The export revenue generated has been insufficient to meet the firm's forex requirements," it said.
This comes as PPC's parent company recently forecast firming demand in its 70 percent-owned local unit on the back of improved disposable incomes driven by growth in the agricultural sector, despite the high operating costs.
Already, PPC has proposed that government implement a 10 percent logistics reduction and a subsidised power tariff in a bid to reduce high operating costs.
Kelibone Masiyane, PPC's managing director, recently urged government to ensure competitive fuel prices that match those in the region
According to the PPC boss, Zimbabwe imports packaging material, which is also levied 30 percent duty while Zambia and South Africa produce packaging locally.