PPC rejigs debt amid takeover talks

Extending maturities on R1.6bn in debt owed to lenders by June 2018 has created about R1bn in financial headroom, acting CEO Johan Claassen said in an interview. In the Congo, where PPC received a debt repayment holiday, and Ethiopia, plants will begin operating in the second half of the next financial year, boosting earnings.

“Five months ago we felt like jumping off a cliff, but today we can go on holiday with a bit of a smile,” said Claassen by phone on Thursday from Johannesburg. “We have managed to take a step back to address our debt maturity profile and liquidity, and to get our African operations back to the original business plans that we envisaged.”

PPC is being circled by a number of buyers including local rival AfriSam with Canadian insurer Fairfax Financial Holdings, Switzerland’s LafargeHolcim, and Dublin-based CRH. Having returned to profit in the six months through September, PPC is on a firmer footing as talks with its multiple suitors progress.

• READ: African construction boom lures cement giants to circle PPC

It rejected a formal R5.75-a-share offer from Fairfax on Wednesday, granting it an extension to December 12 to place a higher offer.

Fiscal first-half profit excluding one time items totalled R335m compared with a loss of R157m a year earlier. PPC’s immediate focus is to improve profitability and available cash, and then look at options to create value for shareholders, said Claassen.

“Even though there might be a need for consolidation in the cement market in the future, from these results I’m pleased the core business is showing resilience” Tinashe Kambadza, an equity analyst at Afrifocus Securities in Johannesburg, said by phone. “PPC is cutting costs, has reduced debt, and the growth in rest of Africa is above our estimates.”

PPC plans to strengthen its DRC unit via a possible equity partnership or deal with China’s Sinoma International Engineering.

The shares rose 0.6% at R6.64 as of 9:08 in Johannesburg, extending their rally this year to 20%.

“In the short-term we probably do not need to do a deal,” said Claassen. “However, we cannot just walk away from it. The South African market needs some consolidation and we need to be the right size to compete.”