Janice Kew, Neo Khanyile and Chris Spillane

CEMENT maker PPC is under new leadership, in talks about a possible merger and facing tougher competition at home and on the continent. That’s made it the country’s worst performing stock this year.

The shares are down 37 percent so far this year, closing at R17.44 on the JSE yesterday, and trading almost 47 percent lower than when former chief executive Ketso Gordhan’s resignation was announced on September 22.

The former chief executive, who is also a shareholder, left following a dispute with fellow executives over his attempt to fire chief financial officer Tryphosa Ramano, who remains at the company.

“It’s reasonable to say that there was a lot of uncertainty,” Roy Mutooni, an analyst at Renaissance Capital, who has a buy recommendation on the stock, said. “Why would you want to come in now? Nothing really has been resolved.”

With support from some investors, Gordhan spent almost three months pushing to be reinstated before Darryll Castle, a former head of Trafigura Mining, was appointed chief executive on December 17.

Castle faces the challenge of assuring investors that the company’s plans to have 40 percent of sales outside South Africa by 2017 are on track.

About 27 percent of PPC’s revenue was generated outside its home market in the year ending September 30.

PPC did not immediately respond to requests for comment. Gordhan declined to comment on the story.

PPC

received an offer in December to merge with AfriSam Group, the country’s second biggest cement maker. A tie-up is supported by the Public Investment Corporation, Africa’s biggest money manager responsible for most local government worker pension funds and an investor in both companies.

The merger still requires competition authority approval.

“A merger with AfriSam would bring about industry consolidation, which would be positive for cement prices,” Victor Seanie, an investment analyst at Kagiso Asset Management, said. “However, the price at which the merger is concluded will have a significant bearing on the value created for PPC shareholders

.”

PPC is expanding in other African countries to make up for lacklustre growth in its domestic market, where sales are falling and new entrants such as Sephaku Holdings have taken market share, according to both Mutooni and Seanie.

“Sephaku’s entry has driven cement prices down,” Seanie said. “Furthermore, energy and distribution costs have risen.”

In sub-Saharan Africa, PPC is competing with aggressive growth plans by Lagos-based Dangote Cement, Lafarge’s African unit and Germany’s HeidelbergCement.

PPC is building factories in countries including Ethiopia and Rwanda, but said on Monday that a shortage of funds was holding back further expansion. – Bloomberg