PPC makes big headway with restructuring of capital and financing
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PPC MADE significant progress with its capital restructuring and refinancing project in the year to March 31, after reducing debt by more than half to R2.62 billion from R5.8bn at the same time a year before.
PPC’s share price was up 5.76 percent to R3.12 yesterday morning. It later closed 9.83 percent higher at R3.24.
The R3.17bn difference included an agreement with Democratic Republic of the Congo-based PPC Barnet’s lenders that removes a R2.5bn debt liability by terminating their right to recourse to PPC.
Sale agreements were concluded for non-core businesses PPC Lime and Botswana Aggregates, which were expected to generate more than R500 million once finalised.
Cash available from operations improved to R1bn from R273m. Cash generation benefited from higher earnings before interest, tax, depreciation and amortisation (Ebitda), a reduction of working capital absorption and lower finance costs paid.
“We think the company is in much better shape than it was 18 months ago,” said chief executive Roland van Wijnen.
Operations were underpinned by resilient demand for cement, which, according to Van Wijnen, was a trend that had continued into the new financial year, with sales in April, May and June much in line with the same period in 2019.
He said the strategic repositioning of PPC would continue in the new financial year, including the completion of the financial and capital restructuring, working on how to grow its market in South Africa, how to address trends in the market, such the use of low carbon building materials.
This includes lowering emissions at its plants and reducing the dependence on Eskom for energy, and keeping an eye out for international opportunities, possibly in East Africa, which did not involve the group having to commit resources from its South African balance sheet.
Due to the changes, PPC Barnet, PPC Lime and Botswana Aggregates were reported as discontinuing operations in the year to March 31.
At the continuing operations, and following the stringent Covid19 restrictions implemented in the first quarter, revenue grew 3 percent R8.9bn.
Cost of sales reduced by 1 percent to R6.9bn, benefiting from lower depreciation expenses and efficiency gains, which offset input cost inflation.
Administration and other operating expenditure declined 14 percent to R1bn, reflecting successful efforts to improve cost competitiveness. Group Ebitda increased 16 percent to R1.6bn, and operating profit rose 75 percent to R1bn.
Finance costs dropped by 19 percent to R283m. Overall profitability was negatively impacted by non-cash items, including fair value adjustments, foreign exchange movements and hyper-inflationary accounting, resulting in headline earnings of R77m or 3 cents per share.
The pre-tax negative effect of these material non-cash items was R337m.
Chief financial officer Brenda Berlin said enhancing cash generation and preservation, as well as improving cost competitiveness, were objectives that were successfully achieved during the period.
Cement South Africa and Botswana experienced a 6 percent increase in cement volumes, driven by sales in the retail sector, with robust demand experienced from the rural and informal markets.
Fourth-quarter sales trends suggested that coastal demand had since stabilised.
Despite challenging economic conditions, PPC Zimbabwe cement volumes increased by 10 percent, supported by infrastructure projects.