Johannesburg - PPC chief executive Darryl Castle has urged investors in the listed cement and lime producer to hold their nerve, stressing PPC was a very strong operational company with good cash-generative ability.
His message followed PPC yesterday reporting that it was finalising R2 billion in bridging finance from a consortium of local financial institutions, which would be effective until the proceeds of a proposed capital raise of between R3bn and R4bn was received.
The capital raised would largely be used to repay debt funders for a guarantee extended to PPC bondholders, an existing term facility that redeemed a PPC bond in March this year and the redemption of black economic empowerment (BEE) debt that matures in December.
It also followed PPC’s auditors Deloitte & Touche stating it was unable “to draw a conclusion on PPC’s ability to continue as a going concern” because management plans on both the bridging finance facility and capital raise were not sufficiently advanced.
PPC’s share price declined 7.22 percent yesterday to close trade at R9.00.
Overshadowed
Sibonginkosi Nyanga, an analyst at Momentum SP Reid, said operationally it appeared that PPC was doing all right but everything was overshadowed by the going concern comment by its auditors.
PPC’s current liabilities of R6.1bn exceed current assets of R2.8bn due to the reclassification of the R1.75bn noteholders liabilities from long term to short term and the maturing BEE debt.
Castle said the recent decline in PPC’s share price had created “a great opportunity for shareholders” and fundamentally what the company was experiencing was a balance-sheet issue.
If investors looked through the balance-sheet issues, the core operations of PPC were doing extremely well, its cost improvements had maintained its margin in a tough environment and had put the company in good position for growth in the future.
“It’s not a company that is making losses. We identified the need to raise capital in the latter half of 2015 and were far advanced with an orderly capital raise process which was interrupted by the sudden and severe ratings action taken by S&P two weeks ago.
“The ratings downgrade meant that we needed to accelerate the capital raise and increase the quantum to ensure that we can pay down the required debt and strengthen the balance sheet.”
Castle said the R2bn bridging finance facility was ”reasonably imminent” but needed to be in place by June 23 and the rights issue would be completed in September.
Weaker trading conditions and higher finance costs and depreciation resulted in PPC yesterday reporting a 12 percent decline in headline earnings a share to 53c in the six months to March from 60c in the previous corresponding period. Group revenue dropped by 1 percent to R4.5bn from R4.54bn despite the recently commissioned plant in Rwanda generating R200m towards group revenue.
Earnings before interest, tax, depreciation and amortisation increased by 2 percent to R1.1bn. Profit for the period grew by 25 percent to R351m from R281m.
No dividend was declared.
BUSINESS REPORT