Johannesburg - JSE-listed cement maker PPC said on Tuesday it had started structuring its new broad-based black economic empowerment (B-BBEE) agreement after it had concluded subscription agreements of another B-BBEE deal, from which the firm received R1 billion.
The deal has adversely affected the company’s empowerment credentials.
In 2008, the company announced that it had sold 15 percent of its equity to community service groups (CSGs) and a strategic black partner (SBP) in a deal worth R2.7 billion.
It had said new PPC shares to be issued to the SBP would be funded by a credit sale, while funding with regards to CSGs and SBPs - which amounted to R1.5 billion - was underwritten by Standard Bank.
The 15 percent stake was structured to benefit, among others, PPC’s employees, an education trust, two CSGs and a construction industry trust. In total they had 8.15 percent of the shares. The remaining 7 percent went to SBPs, women’s empowerment group Nozala, black owned-and managed Peu, empowerment investment firm iLima Portland consortium and broad-based group Capital Edge.
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Siobhan McCarthy, spokeswoman for PPC, said on Tuesday that the conclusion of the first subscription agreements did not mean the company had immediately regressed on its current empowerment status.
“In December 2016 PPC was certified a level 4 contributor in terms of the amended generic codes. The company’s rating as a level 4 contributor is valid until December 2017,” said McCarthy.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said the introduction of the new B-BBEE codes meant that companies had to relook at their empowerment deals.
“The issue of the changing of the codes meant most companies, especially in the mining sector, would not be compliant. This means companies must structure new deals to comply,” Nyanga said.
The company said as part of the compulsory subscription agreements, SBPs and CSGs had subscribed for 15 million shares. The firm simultaneously bought back and cancelled 48.6 million shares at 10 cents per share.
The company said it would use the R1 billion to reduce its debt and fund capital expenditure, with its primary focus its Slurry Kiln 9 Project.
The company’s Slurry project, situated in the North West, will see the introduction of a new clinker production line at a cost of R1.5 billion to R1.7 billion, to boost overall output to 5 500 tons per day by next year.
PPC said on Tuesday that, despite the transaction having negatively impacted its empowerment credentials, it would announce its new B-BBEE deal in the first half of the year.