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PPC might not proceed with its proposed rights issue

Group achieves strong financial performance rebound post Covid-19 lockdown.
Cement sales picked up in the second quarter after a more than 35% decline in Q1. Image: Moneyweb

JSE-listed cement and lime producer PPC will only proceed “as a last resort” with its proposed rights issue to raise between R750 million and R1.25 billion to strengthen the group’s financial position.

This follows the group reporting a strong rebound in its financial performance in the six months to end-September.

The group stressed in October that it will only embark on a rights issue once it has resolved and restructured the unsustainable $150 million debt of its DRC subsidiary.

PPC’s interim results statement on Sens
PPC to tackle $150m DRC debt, then embark on planned rights issue (Oct, 2020)

PPC CEO Roland van Wijnen said the group’s focus now is purely on the DRC and resolving that part of the equation. He expressed confidence in resolving this issue.

PPC has signed revised facility agreements with two of its primary lenders in South Africa and agreed terms with the third lender. It has also signed a formal standstill agreement with the DRC lenders and is actively engaging them with the aim of agreeing on the basis for a detailed restructuring plan.

“Any potential rights issue in South Africa is dependent on the outcome in the DRC,” said Van Wijnen.

“We will solve that first and then we will have an eye back on the degearing commitments that we have made to the South African banks … step by step.”


“We have made certain degearing commitments. We need to see where we stand in cash generation going forward. There is a lot of uncertainty, including a Covid-19 second wave.

“I don’t want to rush ahead too much but clearly our focus is on cash generation, cost competitiveness and then we will see what it means for the financial situation of the South African business,” he said.

However, Van Wijnen agreed that a rights issue may not now be necessary because of PPC’s improved earnings before interest, tax, depreciation and amortisation (Ebitda) and good cash generation in the six months to end-September, plus the lower capital investment requirements going forward and disposal of PPC Lime and minority stakes in its African operations.


PPC on Tuesday reported a 15% improvement in Ebitda to R996 million in the six months to September, compared with the prior period while operating profit grew by 77% to R610 million and cash flow generated by operations by 95% to R981 million.

In addition, capital expenditure reduced by 26% to R166 million in the six-month reporting period and group net debt declined by 16.6% to R4.5 billion at end-September from R5.4 billion at end-March 2020.

International gross debt with recourse to South Africa dropped by 7.4% to R2.5 billion from R2.7 billion at end-March.

Group revenue improved marginally to R5 billion from R4.9 billion.

Headline earnings per share declined by 40.6% to 19 cents from the restated 32 cents in September 2019.

Read: PPC half-year earnings fall 40.6%

Van Wijnen said PPC has benefitted from a strong recovery in cement sales in all its markets post the easing of the lockdown restrictions and this has resulted in an improved financial performance for the group.

PPC South Africa & Botswana MD Njombo Lekula said that following a more than 35% decline in first quarter cement sales, they experienced a strong rebound of 20% to 25% in the second quarter.

“Pleasingly, this sales momentum has continued into October and November with increased infrastructure spend beginning to come through. Our sector is key to driving economic growth and employment and requires accelerated infrastructure spend and a level playing field to stimulate a sustained recovery,” he said.

The reference to a “level playing field” relates to cement industry complaints about non-compliant cement imports into South Africa.


Shares in PPC rose by 15.89% on Tuesday to close at R1.24.

Peregrine Capital executive chair David Fraser said PPC has achieved “a really good set of results all things considered”.

Fraser said one of the key positive features of the results is that for the first time in many years PPC managed to get blocked US dollar funds out of Zimbabwe.

He said PPC’s bankers should be significantly more comfortable than they have been and PPC’s South African debt is currently very manageable.

“I think they are on quite a nice trajectory now,” said Fraser.

“Capacity utilisation [is] up, pricing seems to be better and they seem to be generating good free cash flow, which is fantastic.

“Under a period of Covid-19 they still generated very good cash flow. I’m very excited to see what they do in the second six months of the year,” he said.

Further debt reduction

Van Wijnen confirmed that the group is planning to further reduce its debt in multiple ways, including the sale of its lime business and divesting from a few smaller items, such as some properties the group does not use.

“The lime sale is the biggest ticket item. On the international side, there are various scenarios that we are considering. It’s probably too early to go into the details, as we are discussing all these options with the lenders,” he said.

Van Wijnen said PPC has been in contact with between five and 10 parties in regard to the disposal of the lime business, which is a non-strategic asset for a cement asset.

He said PPC is about to send out the information memorandum for the sale of this business and would like to receive some indicative pricing in January 2021 and have a binding commitment from a buyer by March.

Van Wijnen declined to comment on how much capital PPC hopes to raise from this sale.

Listen: PPC CEO Roland van Wijnen discusses the group’s cement sales and interim results

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