Displaying items by tag: South Africa
South Africa: Canada’s Fairfax Financial Holdings has made an offer of US$154m to buy a stake in PPC on condition that the cement producer agrees to a merger with AfriSam. Fairfax will also invest a further US$309m to pay off AfriSam debts to aid the deal, according to the Cape Times newspaper. The proposed merger ratio is based on 58% PPC and 42% AfriSam.
PPC said to its shareholders that it had received two other offers from trade buyers about a ‘pan-African combination’ with PPC. It added that although it had yet to ‘fully consider’ the Fairfax proposal, the offer was ‘fundamentally’ undervalued.
A change of course or an ‘action replay’ in South Africa?
30 August 2017There have been sounds of discontent coming out of South Africa this week, as AfriSam and PPC continue to (apparently) fail to come to an agreement on the terms of their long-discussed proposed merger. The pair have formally been in discussion since February 2017 but the situation now looks precarious. AfriSam has cancelled the heads of terms that had stood since that month. PPC has now hit back by giving AfriSam until this Friday (1 September 2017) to come up with a new and ‘sufficiently interesting’ deal for it and its shareholders. AfriSam’s acting Chief Executive Rob Wessels said, "AfriSam remains firm that a transaction between AfriSam and PPC will greatly benefit the stakeholders of both companies.” However, PPC’s chairperson Peter Nelson said that his shareholders were ‘frightened about the prospect’ of the merger.
If you think all of this to-and-fro sounds a bit familiar, that’s because it should. AfriSam and PPC have been courting not just since February 2017, but since December 2014. At that time, following the surprise resignation of CEO Ketso Gordhan, discussions lasted until the end of March 2015 before fizzling out. PPC’s (then) new CEO Daryll Castle confirmed that neither party could agree on terms. The two parties were also able to save some face by pointing out that the merged entity would have had around 60% of all South African cement capacity. While this is a pretty big potential stumbling block, it would been pretty obvious before discussions started and is by no means insurmountable. One gets the feeling that, given more enthusiastic partners, the discussions might have found a way forward.
At the time PPC and AfriSam played their cards close to their chests and we can’t be sure quite why the discussions really broke down. However, regardless of what happened last time, there do appear to be a lot of parallels with the current situation.
Firstly, PPC is, once again, in a state of transition. CEO Darryll Castle announced in July 2017 that he would be leaving to ‘pursue other interests,’ although neither an exact departure date nor destination was provided. Johan Claassen, the current managing director of PPC, has been appointed to the role, but only on an interim basis, presumably in anticipation for the expected merger. Other positions in the group’s executive team were reshuffled in the past couple of weeks and there was also the resignation of Tito Mboweni, a non-executive director, rumoured to be over a difference of opinion regarding the merger. On top of this, AfriSam’s CEO Wessels is also on a short-term contract. Could all of these pre-merger moves now be in vain?
Secondly, PPC continues to suffer from a combination of a poor domestic construction market and increasing competition and from imports coming in from rampantly over-productive markets across the Indian Ocean. Arguably both of these effects are now worse than they were in 2015, although PPC did recently say that the second quarter of 2017 had been a lot better across South Africa than the first. However, PPC saw its full-year earnings collapse by 93% year-on-year in the first quarter of 2017, after it was awarded ‘junk’ status in May 2016 by credit-rating agencies. Is it this result alone that has gotten AfriSam thinking? Despite this, PPC remains the larger of the two parties. It certainly wants to be seen to be calling the shots with its 1 September ultimatum.
However, the two producers now share less than 50% of the integrated cement capacity in South Africa, not 60% as in 2015. According to the Global Cement Directory 2017 they share around 7.8Mt/yr of integrated capacity against 8Mt/yr in the hands of others. This is due to the commissioning of the monster 3.5Mt/yr Anganang clinker plant and associated Delmas grinding plant by Sephaku Cement (Dangote Cement) and the full commissioning of Mamba Cement, part of Jidong Development. Could this smaller combined market share make it easier for PPC and AfriSam to identify those assets that can be sold to appease the competition authorities? Could this yet save the discussions?
Whatever happens after Friday, it is apparent that some form of consolidation is essential for PPC (and the wider southern African market) if the industry is to ‘right-size’ for the future. The region is awash with cement. News from PPC Zimbabwe this week even hinted that the effects of imports are now so strong in that country that it is considering shutting down clinker production at its Colleen Bawn plant, which has operated for more than 70 years. This effect is in play all the way down the coast from the Horn of Africa to Capetown and has been discussed previously with reference to Kenya, Tanzania and Mozambique.
Even if it doesn’t get the ‘right answer’ from AfriSam this week, PPC may still stand to gain from the merger, even if it’s only in the short term. In March 2015 its shares jumped up 5% on the news that the merger talks had collapsed. Given its recent performance, another 5% boost would probably not be turned down.
PPC / AfriSam merger talks in the balance
29 August 2017South Africa: Negotiations between PPC and AfriSam, two of South Africa's biggest cement producers, about a potential merger have reached a make-or-break stage, according to local press, after AfriSam cancelled the heads of terms it had entered into with PPC back in February 2017.
Despite the cancellation of the heads of terms, AfriSam acting chief executive Rob Wessels said the company remained committed to pursuing a transaction and intended to submit a new proposal regarding a possible merger to PPC.
"AfriSam remains firm that a transaction between AfriSam and PPC will greatly benefit the stakeholders of both companies. For this reason, we continue discussions with PPC and will explore other alternatives available to us,” said Wessels. "It remains our belief that a transaction between the two companies offers the local cement industry an opportunity to develop a champion with the required scale, operational efficiency and balance sheet to enable further investment opportunities in South Africa and the rest of the continent."
However, PPC chairperson Peter Nelson said they had been involved in the negotiations for six months and there came a time when it was necessary to halt them. Nelson added that the negotiations would only continue beyond 1 September 2017 if the new proposal tabled by AfriSam was ‘of sufficient interest and attraction and fair to shareholders and warranted extending’ the negotiations. "We can't carry on forever,” said Nelson. “A lot of shareholders are frightened about the prospect.”
PPC reports changes to executive team
23 August 2017South Africa: PPC has appointed Njombo Lekula as the managing director of its Sothern Africa Cement division. The appointment is part of a number of changes to the cement producer’s executive team that have been announced in an operational update for its first financial quarter that ended on 30 June 2017. Mokate Ramafoko has also been appointed as the managing director of the Rest of Africa Cement division and Matodzi Mukwevho has been appointed as the group executive finance and business support officer in support of the chief finance officer.
Previously, Lekula was the managing director for PPC Zimbabwe following his appointment in 2013. An engineer by profession he studied chemical engineering and holds a Masters in Business Administration from the University of Stellenbosch Business School.
Ramafoko holds over 23 years of experience in the cement in the cement manufacturing, quality assurance and cement process optimisation industries. He has held various leadership positions in PPC, including working for Cimerwa in Rwanda, as well positions with Holcim South Africa. He holds a Master’s degree in Business Administration, a BSc and BSc (Hons) Metallurgy.
Mukwevho has held various positions including that of chief finance officer (CFO) at Sasol International Energy responsible for South Africa, Nigeria, Qatar, India and Uzbekistan. He also held the position of CFO at Sasol Polymers in South Africa, Iran, Malaysia, China, Hong Kong and UAE. Matodzi holds a Master’s of Business Administration and is a chartered accountant.
South Africa: PPC estimates that cement demand improved in South Africa during the first half of 2017 following a poor first quarter to the calendar year. It has also predicted that production capacity utilisation rates for the industry as a whole are growing and that they could reach full capacity in 2020. On an adjusted like-for-like basis its cement sales volumes grew by 0.5% year-on-year in the most recent quarter due to good performance in its Coastal and Inland areas. However, imports have continued to decline, by 27%. Outside of South Africa the company has overseen growth particularly in Rwanda, and, in Zimbabwe, the Democratic Republic of Congo and in Ethiopia as well. The company made the announcement as part of an operational update for its first financial quarter that ended on 30 June 2017.
”Our focus is firmly on delivering improved profitability and liquidity in the shorter term while our longer term strategy remains unchanged. More specifically, we will focus our management effort on the new operations in the DRC and Ethiopia, ensuring that they deliver to expectations, while further optimising efficiency in our other businesses,” said interim chief executive officer (CEO) Johan Claassen.
Germany: Schmersal Group has entered into a sales partnership with ScanMin Africa to extend its range of system solutions for the bulk goods industry. Schmersal will add spectral analysis and measurement systems for bulk goods on conveyor belts to its range of integrated system products. ScanMin Africa will distribute safety products made by Schmersal.
“We can now offer extended system solutions that contribute to our customer’s ability to produce more productively and profitably in bulk goods conveying and also the downstream processes,” said Udo Sekin, Business Development Manager Heavy Industry within the Schmersal Group.
Germany’s Schmersal Group develops and produces a range of about 25,000 different switchgear and control devices. South Africa’s ScanMin Africa specialises in the manufacture and distribution of on line process analysers.
Castle to step down as PPC’s CEO
24 July 2017South Africa: PPC has announced that its CEO Darryll Castle will be stepping down to pursue other interests. In a statement PPC said that Castle will remain ‘available’ to the group for six months to ensure a smooth handover. Johan Claassen, the current managing director of PPC, has been appointed as the interim CEO.
PPC reported a 93% fall in full-year earnings in June 2017 due to a liquidity crisis precipitated by the cut in its credit rating to junk status.
Meanwhile, the resignation of Tito Mboweni, one of PPC’s independent non-executive directors has fuelled speculation in the South African press about the ongoing merger discussions between PPC and Afrisam. Some believe that there may be ‘irreconcilable disagreement’ between Mboweni and the wider board about the strategic direction of PPC with respect to Afrisam.
South Africa: PPC has ‘substantially agreed’ the structure and how it intends to implement a new broad-based black economic empowerment (BBBEE) transaction. However, it is waiting for the release of the new mining charter before proceeding, according to the Star newspaper. PPC chief executive Darryll Castle has said that the cement producer’s proposed merger with Afrisam is ‘going on in the background’ and that it would have to assess the impact of the Afrisam transaction on the company's new BBBEE transaction.
South Africa: PPC has blamed its poor performance in its financial year to 31 March 2017 on a poor credit rating from S&P Global Ratings. Its chief executive officer Darryll Castle complained about a liquidity crisis caused by the downgrading of PPC’s credit ratings to junk status by S&P Global Ratings in May 2016. He also attributed the result to falling cement prices in South Africa and poor weather in early 2017.
The cement producer’s earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 13% year-on-year to US$160m for its financial year that ended on 31 March 2017 from US$184m in the same period in 2016. Despite this its sales revenue rose by 5% to US$745m from US$711m and its cement sales volumes rose by 1.6% to 5.54Mt from 5.45Mt.
PPC reported that its 1Mt/yr production line at PPC Slurry is on schedule for commissioning in the first half of 2018. Its 1.4Mt/yr plant in Ethiopia started selling cement in May 2017 and sales are expected to rise as the plant ramps up production.
PPC reports 93% dive in earnings
07 June 2017South Africa: PPC has reported a 93% decline in full-year earnings due to a liquidity crisis precipitated by the cut in its credit rating to junk status during the first quarter of 2017. PPC, which is still negotiating a possible merger with rival Afrisam, said that headline earnings per share fell to just US$0.005 from US$0.083 in the comparable period of 2016.