Johannesburg - South Africa's biggest cement maker PPC scrapped its dividend on Tuesday for the first time in a over a century, seeking to conserve capital to repay debt.
Chief executive Darryll Castle said PPC, which paid its first dividend when it was founded in 1908, abandoned the payout for the six months ended March because it was in the midst of raising cash from shareholders.
“We felt under the conditions it didn't make sense to be asking investors on the one hand to be putting money into the company and us potentially giving it back to them via a dividend,” he said.
PPC shares, down nearly 40 percent this year, fell 1 percent to R9.60 and are hovering around levels last seen in 2003.
PPC, which has pushed deeper into the rest of Africa as profit has slumped in its domestic market, is grappling to service dollar-denominated debt after the rand lost more than a third of its value over the past year.
Following a downgrade by credit ratings agency S&P to “junk” status, PPC said it would increase the scale and speed of a planned capital-raising to cut debt.
The firm, which listed on the Johannesburg Stock Exchange in 1910, plans to raise R3- to R4-billion, Castle said.
PPC is due to pay back R1.75 billion plus interest in the coming months after its long-term debt was changed to short-term due to the downgrade to junk status.
The company posted a 11.7 percent decline in headline earnings per share for the six months ended March to 53 cents on weaker trading conditions in most of its markets, higher finance costs and depreciation.
Headline EPS, which strips out certain one-off items, is the main profit measure in South Africa.
PPC, like South African builders, is struggling to grow revenue, partly due to a slow roll-out by the government of a planned 870-billion-rand infrastructure investment package over the next three years.
The company is building factories in Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of Congo in a bid to generate 40 percent of sales outside its home market by 2017.
Castle said PPC's African expansion was intact, but it planned in future to “stagger projects” so that only one came into production per year rather than several simultaneously.
“In the current environment we don't have to go at our Africa expansion as quickly as we have in the past,” he said.
REUTERS