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Johannesburg - PPC said first-half earnings plunged 66 percent and finance costs soared after South Africa’s largest cement maker was forced to arrange a R2 billion ($141 million) liquidity and guarantee facility before selling shares in a rights offering.
So-called headline earnings per share were 14c in the six months through September, compared with 41c in the six months through March, the Johannesburg-based company said in a statement on Wednesday. Sales gained 15 percent to R5.2 billion, while earnings before interest, taxes, depreciation and amortisation were unchanged at R1.15 billion.
PPC’s earnings decline caps a tumultuous six months in which the company secured the R2 billion facility and raised R4 billion in a rights issue after S&P Global Ratings cut its credit rating to junk, triggering early redemptions by bondholders and raising liquidity concerns. The company’s debt had more than doubled over three years as it poured money into new African projects while battling competition, slowing economic growth and falling prices in its home market.
“The successful completion of the rights issue allowed us to significantly reduce debt levels and strengthen our balance sheet against the cyclical nature of our business,” Chief Executive Officer Darryll Castle said in the statement. “As the domestic cement market remains highly competitive, the immediate focus is on managing cost performance,” the company said.
PPC and closely-held rival AfriSam Group have revived merger talks almost two years after previous discussions were abandoned, people familiar with the discussions said this week. The continent’s largest fund manager and AfriSam’s controlling shareholder, the Public Investment Corporation, is likely to support the combination, said the people, who asked not to be identified because the deliberations are private.
While cement sales volumes in the six-month period increased 13 percent, earnings were also hurt by weaker selling prices and the devaluation of local currencies relative to the US dollar in countries where the producer operates. The company opened a plant in Rwanda in August 2015, commissioned a new facility in Zimbabwe this month and is nearing completion on operations under development in the Democratic Republic of Congo and Ethiopia.
PPC is comparing the half year with the six-months through March after changing its financial year end to March from September.
BLOOMBERG