Displaying items by tag: South Africa

South Africa: PPC has revealed details of a US$176m black economic empowerment (BEE) transaction. The transaction, together with the BEE shareholding from the two previous transactions, will result in an effective 30% BEE shareholding in PPC South Africa Holdings, making the company compliant with the Mining Charter, according to the Pretoria Times newspaper. Called PPC Phakama, meaning ‘rise up’ in Zulu, the transaction will result in PPC's equity shareholding in PPC South Africa being reduced from 100% to 74.6%.

Sibonginkosi Nyanga, an analyst at Momentum Securities, said that the cement producer was required by the Mining Charter to implement the transaction. It requires companies to have at least a 26% BEE shareholding. Non-compliance could have had the potential put PPC’s mining rights at risk.

South Africa: Peter Nelson has resigned as the chairman of PPC. He has been replaced by Jabu Moleketi. The changeover follows the demand in late February 2018 by Prudential Investment Managers, a large shareholder of PPC, that Nelson leave the role. Sydney Mhlarhi and Dawn Earp have also resigned as non-executive directors of the cement producer.

Moleketi is the Non-Executive Chairman of Brait as well as the Development Bank of Southern Africa (DBSA), Vodacom and Harith General Partners. He was the Deputy Minister of Finance (South Africa) from 2004 to 2008 and MEC of Financial and Economic Affairs in the Gauteng Provincial Government from 1994 to 2004. During his tenure as the Deputy Minister of Finance, he was the chairperson of the Public Investment Corporation. Moleketi holds a Masters in Financial Economics from the University of London and an Advanced Management Programme from Harvard.

Other personnel changes include the appointment of Noluvuyo Mkhondo and Antony Ball to the board as non-executive directors of PPC.

Mkhondo is an investment banking and corporate finance professional, having spent time at Goldman Sachs International and Anglo American in the UK where she was responsible for mergers and acquisition execution, investment evaluation and strategic long term financial planning. During her time at Goldman Sachs and Anglo American, she executed cross-border transactions in Consumer / Retail, Healthcare, Real Estate and Metals and Mining across the UK, Africa and the Americas. Mkhondo is a Chartered Accountant by profession, having begun her career in the Audit and Advisory Financial Institutions services Team at Deloitte in Johannesburg. In addition, she has an MBA from London Business School where she was a Mo Ibrahim Scholar.

Ball is the co-founder of Value Capital Partners (VCP). Prior to that, his notable business accomplishment was the founding in 1990 and building of Brait, a South African private equity business. Ball is a qualified Chartered Accountant.

Denmark: FLSmidth has completed its acquisition of Sandvik Mining Systems following the transfer of assets in South Africa. The process was mostly completed in November 2017 with the exception of assets in South Africa, which was delayed due to merger control clearance. The acquisition includes continuous surface mining and minerals handling technologies and competences that strengthen the company's core minerals business.

"With the completion of the South African assets we have added references, local expertise and improved ability to deliver complete solutions to our Sub-Saharan customers. We welcome our new colleagues and customers to FLSmidth," said Manfred Schaffer, Group Executive Vice President, Minerals Division of FLSmidth.

As part of the transfer, FLSmidth will either assume existing orders or provide project management services on behalf of Sandvik on selected on-going projects and supply parts and services for the installed equipment.

South Africa: Prudential Investment Managers, one of the largest shareholders of PPC, has demanded the resignation of the chairman Peter Nelson. The shareholder sent a formal request to the cement producer because it wants the company to improve its operations, according to sources quoted by Bloomberg. In response PPC issued a statement admitting that it was talking to major shareholders over board positions. However, it defended the record of Nelson, saying that he had, “successfully led the company through a period of significant headwinds.”

PPC added that it has received nominations for Jabu Moleketi as successor to the chairman, and Anthony Ball and Noluvuyo Mkhondo to non-executive directorships.

Nelson was appointed as chairman of PPC in October 2016, shortly before it revived merger talks with AfriSam. Later in 2017 Canada’s Fairfax Financial Holdings made a bid for PPC on condition that it merge with AfriSam. Negotiations with LafargeHolcim, CRH and Dangote Cement but these were all abandoned.

South Africa: PPC has announced that its interim chief executive Johan Claassen as chief executive and executive director of the group, effective 15 February 2018. He had been appointed as interim chief executive in July 2017 following the sudden resignation of Darryl Castle.

PPC chairperson Peter Nelson said that, since his appointment as interim chief executive, Claassen had overseen a number of important milestones. He said Claassen had also demonstrated that he had the right skills to lead effectively. PPC also confirmed Njombo Lekula as managing director of the group’s South African cement activities and Mokate Ramafoko as managing director for the rest of Africa’s cement activities.

South Africa: PPC estimates that local cement demand fell by 3 – 4% in 2017 due to a lack of large infrastructure projects. In an operating update for the nine months to 31 December 2017 it reported that its cement sales volumes fell by 1 – 2% year-on-year, although it had increased its prices. It increased its exports by 23%. The cement producer also reported that its Slurry Kiln 9 project was 90% complete, with commissioning scheduled for the second quarter of 2018.

Elsewhere in Africa, PPC’s sales volumes rose by 20 – 30% in Rwanda due to a rise in bulk cement sales and higher exports. In Zimbabwe sales volumes grew by 30 – 40% supported by retail sales.

Democratic Republic of Congo: South Africa’s PPC has agreed with its lenders to reschedule debts from the construction of a cement plant in Democratic Republic of Congo (DRC). The cement producer said that the total capital requirements for the DRC plant will now be limited to interest payments from January 2018 until January 2020, according to Reuters. The debt renegotiation has included an extension of the repayment period by an additional two years and a change to the interest rate.

PPC Barnet DRC is 69% owned by PPC, 21% owned by Barnet Group and the remaining 10% is owned by the International Finance Corporation (IFC). The plant is 60% debt funded by the IFC and Eastern and Southern African Trade and Development Bank.

There are two significant cement producers around the world up for sale at the moment. Last week we dealt with India’s Binani Cement, which has so far attracted 15 separate bids from a number of international and domestic players. Now, we turn our attention to South Africa, where PPC remains the target of approaches by LafargeHolcim and CRH.

This week PPC rejected a partial offer from Canada’s Fairfax Holdings, which it considered neither fair nor reasonable. Like a mutual friend at a party that insists two people ‘really are perfect for each other,’ Fairfax had stipulated in its terms that PPC should merge with AfriSam to create a South African super-producer. It does not appear that this idea went down well and that particular combination now seems further away than ever.

When the news broke that it had rejected Fairfax, we thought that PPC’s stance seemed a little ‘too cool.’ However, looking just at the oversized and import-addled South African market does not give the full picture of what’s happening for PPC at the moment. It has significant and growing activities in the rest of Africa too.

Later this week PPC released its results for the first half of its 2018 fiscal year. Suddenly, its handling of the Fairfax offer made more sense. Over the six months to 30 September 2017, PPC nearly tripled its profit to US$21.1m. Crucially, sales from outside South Africa grew far more rapidly than those at home. While domestic earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 4%, EBITDA from elsewhere increased by 25%. These results bode well for a potential bidding war that now favours PPC.

Even from this greatly enhanced position, PPC was not finished with its announcements for the week. Today it revealed that it plans to build a new ‘mega-factory’ in the Western Cape. Johan Claassen, the interim chief executive of PPC, said there would probably be a formal announcement about new capacity in the Western Cape in 2018. He said that PPC had decided to conduct a feasibility study into a possible replacement for its Riebeeck plant. An Environmental Impact Assessment (EIA) is in progress and the plant is reported to be ‘semi-brownfield.’ Claassen said that the new facility would use around 25% of the current Riebeeck equipment and cost US$200/t of installed capacity.

The news of its results and announcement of the new plant represent a good PR move by PPC given the difficulties faced by the wider South African market. The new information will certainly give cause for CRH and LafargeHolcim to think again about the values of their offers, should PPC also be of the view that these also undervalue the company.

Lots to mull over in LafargeHolcim’s third quarter results this week. Not least that the new guy is now in charge. Former Sika boss Jan Jenisch took over officially in September 2017. In his first financial statement, he said that the results did not represent the company’s ‘full potential.’ He then said that he had hit the reboot button to reset the group’s expectations to reflect the current market.

The group’s forecast for cement demand globally remains at an increase by 1 – 3% on average for 2017. This is no change from LafargeHolcim’s forecast in mid-2017. What has changed though is the anticipated growth in operating earnings in 2017 revised down to 5 – 7% year-on-year from 10% or higher. Expected measures of earnings per share and leverage have also been reduced. Underpinning this is a change to some of the volume and pricing assumptions for 2018. The group also said it was conducting a business review, including country strategies and a focus on simplification, cost discipline and performance management.

As any IT manager will tell you, when you have a problem with a computer you reboot the machine in the first instance as an easy fix. Jenisch’s version of this strategy will hopefully buy him some time to try and take charge of the company.

Previous chief executive officer (CEO) Eric Olsen was doing similar things since the formation of LafargeHolcim in 2015 to downsize the company into profitability whilst coping with too much cement production capacity worldwide. However, the on going Syria legal investigation forced the company to publicly accept some level of wrongdoing and it cost Olsen his job despite him having zero involvement or even knowledge of the affair. Meanwhile, rumours of continued boardroom clashes between major shareholders that have existed since even before the formation of the company resurfaced with the announcement in mid-October 2017 that chief financial officer (CFO) Ron Wirahadiraksa was leaving after less than two years in the role. As this column noted in May 2017 Jenisch might be exactly the right man for this particular job given his battles at Sika with that company’s controlling family’s wish to sell its stake and majority voting rights to Saint-Gobain.

Moving on, the group’s cement market outlook makes for sobering reading with growth above 2% only expected for Latin America and Asia Pacific regions in 2017. Even North America, the great white hope of cement industry growth in recent years, only has a forecast of 0 - 2%. Actual cement sales volumes in this region fell by 1.6% to 5.9Mt on a like-for-like basis so far in 2017 due to hurricanes and other bad weather events, with ‘cautious’ private and public investment giving an effect too. Incidentally, the Portland Cement Association (PCA) downgraded its assessment of US growth this week too in its latest forecast. Worse still the Middle East Africa region is expected to drop by 2 – 4% due to poor economies in various local markets, notably in Algeria and Egypt. All of this pretty much fits the like-for-like growth of cement sales of 1.8% to 156Mt in the first nine months of 2017 that LafargeHolcim has reported. The surprise though is that Latin America is growing despite on-going problems in Brazil.

This then leaves the surprise message on the same day as the third quarter results release that LafargeHolcim is in talks with the board of South Africa’s PPC. Buying a major African cement producer like PPC doesn’t quite sit with the image of a company whittling itself down into profitability. Instead, it gives the impression that LafargeHolcim wants to dominate the African market ahead of the anticipated demographic cement consumption wave. PPC for its part, after flirtations with other bidders such as Dangote Cement, may simply be trying to raise its price in a bidding war.

Boardroom battles, sluggish global cement consumption, the Syrian legal probe, potential expansion plans in Sub-Saharan Africa and efficiency drives. And these are just the issues we know about! Jan Jenisch has a lot on his plate whatever happens next. Let’s just hope that when the reboot process finishes he doesn’t find himself looking at the construction company version of the ‘blue screen of death.’

South Africa: Lafarge South Africa has appointed Rossen Papazov as its country chief executive officer (CEO). Papazov will join the company with effect from 1 October 2017, according to Business Report. He has been the country head for Holcim in Azerbaijan for the last four years. Prior to this he originally joined Holcim in 2000 as its Business Development Manager for Bulgaria. He has also held roles in Belgium and Romania.