Johannesburg - Listed cement and lime producer PPC plans to acquire 3Q Mahuma Concrete, the largest independently owned ready-mix concrete supplier in southern Africa, for a maximum of R183 million.
Darryll Castle, the chief executive of PPC, said yesterday that it intended to conclude an asset for shares agreement with 3Q Mahuma to further progress PPC’s ready-mix channel management strategy.
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3Q Mahuma has branches in Limpopo, North West, Northern Cape, Mpumalanga and Mozambique. The acquisition would complement PPC’s Pronto Readymix business that only had a footprint in Gauteng, Castle told a Merrill Lynch conference at Sun City.
Castle said the final purchase consideration was based on the fulfilment of certain performance conditions at the date of the transaction.
The planned acquisition is in line with the new vision announced by PPC in November for the company to become a world-class supplier of materials and solutions into the basic services sector and establish a vertically integrated materials business.
The company said at the time this business unit would house PPC’s ready-mix, aggregates and related building materials businesses to offer clients end-to-end solutions and a bolt-on acquisition was earmarked for early this year.
Castle stressed in November that 70 percent to 80 percent of PPC’s focus would remain on its core product of cement, but over time it would get earnings and revenue that was not currently core to its business.
Castle said yesterday that the PPC’s vision was to become “a major player in Africa and then globally”.
In an operating update, Castle said group cement sales volumes were down 1 percent for the first five months of PPC’s 2016 financial year.
He said there was 2 percent volume growth recorded in the South African cement business, which was supported by strong volume growth in the coastal regions. However, Castle said there was a 3 percent volume decline in the key international businesses.
Declines
Castle added that there was significant pressure on selling prices in most regions, with declines of 5 percent recorded in the South African cement business.
Overall margins were under pressure, despite good cost control, exchange rate gains and contributions from the group’s profit improvement programme, he said.
Castle said the continued pressure in the steel and alloys industry had weighed on the performance of the lime division, while the South African aggregates and ready-mix division had seen an improvement in performance.
Disposal
He said finance costs were up “markedly” due to the commissioning of the Cimerwa plant in Rwanda, but PPC was concluding the disposal of some non-core assets that would lead to inflows of more than R100 million by the end of this month.
Castle said cement imports were down 62 percent year on year in the fourth quarter of last year and had declined by 38 percent to 820 000 tons last year.
PPC’s expansion into Africa resulted in the commissioning of a new plant in Rwanda in August, with further plants scheduled to be commissioned in the Democratic Republic of Congo and Zimbabwe by the end of this year and in Ethiopia in the second quarter of next year.
PPC is also building a new 1 million-ton-a-year kiln for between R1.5 billion and R1.7bn at Slurry, which is expected to be commissioned in 2018.
Shares in PPC slumped 4.1 percent on the JSE yesterday to close at R13.81.
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