Displaying items by tag: PPC
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.
Habesha Cement inaugurates Holeta plant
21 April 2017Ethiopia: Prime Minister Hailemariam Dessalegn has inaugurated Habesha Cement’s 1.4Mt/yr plant at Holeta in Oromia. The US$140m unit was built by Chinese contractor Northern Heavy Industry, according to the Ethiopian Herald newspaper. Dessalegn said that the new plant is part of the national plan to surpass local cement production of 27Mt/yr by the end of the Second Growth and Transformation Plan (GTP II) that will end in 2020. The plant is now expected to create 600 jobs in its operational phase.
The subsidiary of PPC is the third international project the South African cement producer has completed over the last year. On 17 April 2017 PPC Barnet in the Democratic Republic of the Congo (DRC) despatched its first truckload of saleable cement from the plant near Kimpese in the Kongo Central. The 1Mt/yr cement plant was commissioned in February 2017.
"With the completion of the plants in the DRC and Ethiopia we have achieved two significant milestones in our quest to become a major player in the cement industry across Africa" said Njombo Lekula, Managing Director, International operations, PPC. “Both plants have been built using the latest technologies, in line with international standards.”
Cement imports to Rwanda drop by nearly half in 2016
27 March 2017Rwanda: The Ministry of Trade, Industry and East African Affairs has said that the value of cement imports dropped by nearly half to US$42m in 2016 from US$80m in 2015. The development comes as the government looks for ways to strengthen capacity for local production to meet growing housing demand and reduce expenses on imports, according to the New Times newspaper. Local producer Cimerwa, a subsidiary of South Africa’s PPC, is currently building a new 0.6Mt/yr cement plant in Bugarama, Rusizi, that will be ready for production in mid-2018. It has also called for imports of cement to the country to be restricted.
South Africa: AfriSam is preparing to replace its chief executive officer (CEO) to aid its merger discussions with PPC. Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, is set to replace current Stephan Olivier on a short-term contract, according to sources quoted by Boomberg. The personnel manoeuvring would also potentially place PPC’s current CEO Darryll Castle in a strong position to become the merged company’s new leader. PPC and AfriSam announced that they had resumed merger talks in February 2017 after a previous attempt stalled in 2015.
PPC Zimbabwe boss blasts cement imports from Zambia
20 March 2017Zimbabwe: PPC Zimbabwe’s managing director Kelibone Masiyane has said that duty on cement imports has done little to discourage the market. The government introduced a 25% duty on every 100t of imported cement in 2016, according to the NewsDay newspaper. He singled out imports from Zambia as well as those from South Africa, Mozambique and Botswana.
“In addition to liquidity challenges, we continued to face pressure from cheap imports. Government has tried to assist by introducing duty on imported cement, but the reality on the ground is that imports continue to pour in, particularly from Zambia,” said Masiyane. Despite this he added that PPC Zimbabwe was confident that the local economy would pick up in 2017 supported by infrastructure projects.
The Cement and Concrete Institute of Zimbabwe lobbied the Ministry of Industry and Commerce to ban imported cement in 2016. In a paper it suggested including a protection tariff to equate the landed price of imported cement to the cost of the local product, granting of import licences to local producers, cancelling or reviewing all issued permits that are circulating in the country and lowering duty on raw materials.
Zimbabwe: President Robert Mugabe has opened PPC’s US$85m cement grinding plant at Msasa in Harare. China’s Sinoma built the 0.7Mt/yr unit that includes a palletiser and cover-wrapping machine, according to the Xinhua News Agency. The plant, PPC’s third production site in the country, was commissioned in late 2016.
Updates from PPC
15 March 2017South Africa: PPC has said that adverse weather negatively affected cement and concrete sales in South Africa in January and February 2017. Rainfall in excess of 200mm was experienced in many parts of South Africa over the two months.
The company also said that it has reduced its net debt further to US$334m as at 31 December 2016 due to the conclusion of a component of its first empowerment transaction. PPC concluded a Strategic Black Partners and Community Service Groups components of its 2008 broad-based black economic empowerment transaction, resulting in a cash inflow of US$77m in December 2016. It said that the improved balance sheet would mitigate the adverse impact of the cyclical nature of its business and that business continued to generate superior cash earnings despite capital expenditure requirements.
Elsewhere, it has been estimated that PPC would be liable for an estimated US$7m in carbon taxes, should South Africa’s proposed carbon tax bill be enacted. However, Darryl Castle, the chief executive of PPC, said the company was looking at a number of initiatives to reduce the forecast amount, including the replacement of coal with carbon-neutral energy sources and further reduction of the clinker factor.
Castle added that the carbon tax regime did not apply to imports into South Africa and had not been meaningfully implemented elsewhere. He noted that a similar scheme was scrapped in Australia because of the impact on the industry. "PPC is ready for the implementation of the carbon tax regime in January 2018. However, we will continue to engage the government on this matter," he said in a presentation at the Merrill Lynch investor conference in Sun City.
PPC and AfriSam merger talks back on
15 February 2017The merger between South Africa’s larger cement producers, PPC and AfriSam, is back on this week. PPC issued a statement advising its shareholders that the board of directors of both companies were about to enter formal talks to thrash out a potential deal. Issues such as the merger ratio, black economic empowerment and local competition concerns are all on the agenda.
The resumption of merger talks follows the cancellation of the previous round in mid-2015. No reason for the breakdown was publicly released but possible factors may have included the fallout at PPC from the resignation of its chief executive officer (CEO) Ketso Gordhan and competition concerns. Given the investigations by the South African Competition Commission from around 2008 to 2012 these may have been very real concerns. At this time the two companies held about a 60% share of the country’s cement production capacity.
Events have changed since then with the opening and ramp-up of Sephaku Cement’s cement plant at Aganang and its grinding plant at Delmas since late 2014. Today, PPC and AfriSam control just under 50% of the cement production capacity in South Africa and PPC’s current CEO Daryll Castle remains in post since early 2014. What a difference a year or so can make.
PPC moved its financial year end from September to March in 2016 making it hard to compare like with like. However, its revenue appears to have grown by 10% year-on-year to US$396m for the six months to 30 September 2016. Its earnings before interest, taxation, depreciation and amortisation (EBITDA), a measure of operating performance, fell by 7.5% to US$80m at the same time. Since then PPC notified markets with a trading statement saying that its sales volumes in South Africa had risen by 4% in the nine months to the end of December 2016 but that its prices had fallen by 4%. It also noted that its local cement sales volumes declined marginally when compared to the same quarter in the previous year, with the exception of the Western Cape region.
PPC also has various projects underway in sub-Saharan Africa, including plant builds in Democratic Republic of Congo (DRC) and Ethiopia. Of note to any potential merger with AfriSam are its plans to build a new 3000t/day production line at its Slurry plant in Lichtenburg. The project was reported 54% complete in early February 2017 with first clinker production scheduled for the first half of 2018. CBMI Construction, a subsidiary of China’s Sinoma, is the main contractor for the upgrade project. Once complete the new line will add about 1Mt/yr to the plant’s cement production capacity. One implication of this project is that it will push PPC and AfriSam’s market share over 50% that may have consequences with the local competition body.
For its part AfriSam appears to be suffering financial problems according to local press. The Public Investment Corporation (PIC), a government investment body, revealed in late 2016 that it had invested over US$100m in the cement producer since 2008. The PIC holds a controlling share of AfriSam with a 66% stake in the group. Other than this, solid facts about the state of AfriSam’s business are thin on the ground. However, competition in South Africa’s cement sector has certainly increased in recent years both within and without, from the import market.
As this column has said a few times merger and acquisitions seem to be the way to go for cement producers in weak markets. However, as annual results from Cementir and HeidelbergCement show this week, the initial boost from new asset and business purchases may not be so rosy when viewed in a pro-forma basis or when taking into account new units’ past performance. A lot here rides on these companies being able to take advantage of synergy effects and to make crucial savings. The big example of this in the global cement sector is LafargeHolcim. It will announce its financial results for 2016 on 2 March 2017. It also operates a cement plant in South Africa and the results may have implications for the PPC and AfriSam merger.
In other news, the European Union parliament has voted today, on 15 February 2017, to amend its Emissions Trading Scheme (ETS) in line with a proposal made by the European Commission. This is unlikely to impress the environmental lobby or users of secondary cementitious materials in cement production, amongst other parties. More on this topic next week.