PPC share price surges on restructuring and growth in cement sales
CAPE TOWN - CEMENT and building materials group PPC’s shares shot up 18.23 percent on the JSE yesterday to R2.40 after it announced that it had made good progress in de-risking its balance sheet and improving its investment prospects.
The group said that the removal of a potential $175 million (R2.61 billion) liability in PPC Barnett in Democratic Republic of Congo, and improved cement sales, cost reductions, better working capital management and cash preservation over 11 months to end-February 2021, meant that lenders had agreed to postpone by six months a R750m capital raise planned for yesterday.
It said the need for the capital raise would also be reviewed should the South African business continue to de-gear as it had already done, the group said in an operational update.
Chief executive Roland van Wijnen said “We have made significant progress towards a sustainable capital structure, including de-risking the balance sheet through the removal of its contingent obligations in relation to PPC Barnet.” PPC entered into a settlement agreement with PPC Barnet’s lenders, terminating their right to recourse to PPC Group. The agreement would become effective once PPC paid a final deficiency settlement amount of $16.5m which it expected to do early this month. PPC also agreed terms to restructure the $175m debt in PPC Barnet whereby it would be converted into a combination of re-instatement of senior debt, and a pay-as-you-can preference share.
Double-digit period-on-period growth in cement sales was experienced from July 2020 to February 2021, despite new Covid-19 restrictions in certain markets.
South African debt fell to R1.64bn at the end of February from R1.92bn in March last year, and free cash flow was 90 to 95 percent higher than the previous comparable period.
Group earnings before interest, tax, depreciation and amortisation increased by 25 to 30 percent period-on-period for the 11 months ended February 2021.