THE BOTTOM LINE
Hard graft pays off as PPC digs itself out of a R4bn hole
Share price has doubled since it hit a 15-year low in August 2017
PPC, South Africa’s biggest cement maker, has come a long way since it had to go cap in hand to shareholders for a R4-billion bailout in 2016 to pay debt, with Standard & Poor’s (S&P) now upgrading the group’s credit rating to zaA-, two notches above sub-investment grade.
In the past four years, PPC invested more than $750-million in its portfolio, which spans Zimbabwe, Botswana, Ethiopia, Rwanda and the Democratic Republic of Congo (DRC).
The ensuing boardroom battles claimed the scalps of two CEOs – Ketso Gordhan and Darryll Castle – and chairmen Bheki Sibiya and Peter Nelson.S&P says PPC’s balance sheet has strengthened over the past two years as it paid off debt, and its capital structure and liquidity management “remains prudent”. This will help the group mitigate the tough environment in SA, where the construction sector remains depressed.Johan Claassen, who took over in an acting capacity in mid-2017 following Castle’s surprise departure and was made permanent in February, and chairman Jabu Moleketi, appointed in March, have done well to stabilise the ship. The share price has doubled since it hit a 15-year low in August 2017.
Yet much work remains, especially in the DRC, where PPC owns 69% of PPC Barnet DRC. The million-tonne-a-year plant, which cost $300-million and was commissioned in July 2017, and is operating at a loss.
Even so, analysts polled by Bloomberg seem confident, with five rating PPC a buy and one a hold.