Wrap Text
Reviewed Provisional Results for the six month period ended 31 March 2016
PPC Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC
JSE ISIN: ZAE 00017049
ZSE code: PPC
www.ppc.co.za
REVIEWED PROVISIONAL RESULTS
For the six month period ended 31 March 2016
Highlights
• GROUP REVENUE OF R4,5 BILLION – DOWN 1%
• EBITDA UP BY 2% TO R1,1 BILLION
• PROFIT IMPROVEMENT PROGRAMME REALISES AN ADDITIONAL R178 MILLION
• PROFIT FOR THE PERIOD UP 25% TO R351 MILLION
• EARNINGS PER SHARE UP 35% TO 70 CENTS INCLUDING SALE OF NON-CORE ASSETS
• RECENTLY COMMISSIONED PLANT IN RWANDA GENERATES 124 000 TONS IN CEMENT SALES VOLUMES
• CAPITAL RAISING PLANS PROGRESSING
Darryll Castle, CEO, said:
“PPC’s group revenue and cement sales both decreased marginally by 1% on weaker performances in most operating regions. Our newly
commissioned plant in Rwanda contributed to group revenue after achieving cement sales volumes of 124 000 tons at the expected
margin. The Profit Improvement Programme, which generated R212 million by September 2015, contributed an additional R178 million
in sustainable profit improvement in this period; thereby contributing R390 million in less than 12 months. This programme, as well
as the sale of some non-core assets, contributed to earnings per share rising a pleasing 35% to 70 cents. Our projects in the DRC,
Zimbabwe and Ethiopia are all at advanced stages and will be commissioned in the next 12 months; ensuring we offer shareholders a
diversified portfolio of businesses in different geographies. The company is also advancing its plans to raise betweeen R3 billion
to R4 billion to overcome its near-term liquidity constraints.”
COMMENTARY
In the last quarter of 2015, the Board approved the change of financial year end from 30 September to 31 March.
PPC group performance
PPC’s total cement sales volumes for the six-month reporting period were 1% below last year. Group revenue also declined 1% to
R4 501 million (2015: R4 541 million). In South Africa, cement volumes were up by 1% although lower selling prices reduced
revenue. Revenues from our recently commissioned plant in Rwanda increased by almost 150% but could not offset declines in our
other African markets, Zimbabwe and Botswana. While revenue in our lime business declined 12%, our aggregates and readymix
operations contributed positively to group revenue.
Cost of sales at R3 261 million was only 2% higher than last year (2015: R3 206 million), with cost increases particularly well
managed in the South African and Botswana cement businesses as well as the lime division. Cost of sales in the South African
cement business was down 3%, on a per ton basis, for the period.
The continued focus on cost management reduced administration and other operating expenditure by 12% to R489 million (2015:
R554 million). The Profit Improvement Programme, which aimed to deliver R400 million by 2017, generated R178 million for the
period after providing R212 million by September 2015. The total of R390 million comprised mainly operational efficiencies and
overhead reductions.
Group EBITDA is up 2% to R1 144 million (2015: R1 123 million), with an EBITDA margin of 25.4% (2015: 24,7%) primarily due to
improved efficiencies and cost savings as part of the PPC group’s Profit Improvement Programme.
Finance costs were R350 million, up 26% over last year’s R277 million mainly due to interest expensed post the commissioning
of the Rwanda operation which amounted to R88 million.
Cash generated from operations of R813 million was significantly lower than the prior period (2015: R1 140 million) impacted by
changes in working capital mainly inventories and reduction in trade and other payables. Similarly, the group cash-conversion
ratio at 0,7x was below the 1,0x, achieved in the previous period.
Taxation of R156 million (2015: R163 million) translating to an effective tax rate of 30.8% (2015: 36.4%) mainly due to the
inclusion of capital profit made on the disposal of non-core assets and favourable prior year tax reassessments.
Capital investments in property, plant and equipment and intangible assets were R1 188 million (2015: R1 008 million), with
R970 million used for the Slurry kiln 9 project in South Africa and expansions in the DRC and Zimbabwe. Group debt increased
to R9 171 million (2015: R6 772 million) due to project finance drawdowns, leading to the group debt to EBITDA ratio rising
to 3.8x on an annualised basis. When non-recourse project finance debt is excluded, this ratio drops to 2.7x, well within the
financial covenant range.
Despite rising finance costs, net profit attributable to PPC shareholders rose 35% to R369 million (2015: R274 million), supported
by the sale of non-core assets. In line with this, earnings per share were 35% higher at 70 cents (2015: 52 cents) albeit the
headline earnings per share fell 12% to 53 cents (2015: 60 cents) due to weaker trading conditions as well as higher finance costs
and depreciation.
As stated in September 2015, the company’s dividend policy takes into consideration the growth phase, trading conditions as well
as the need to strengthen its capital structure and as such no dividend is declared.
CEMENT
Group cement revenue declined 1% to R3 700 million (2015: R3 752 million) while EBITDA was down 2% to R972 million (2015:
R988 million). Consequently, the EBITDA margin remained flat at 26,3%.
South Africa
Cement sales volumes improved marginally, as a result of strong volume growth in the coastal regions benefiting from reduced
imports and increased supply to local infrastructure projects. Lower sales volumes in Gauteng and other inland provinces reflect
increased competitor activity. However, the Limpopo area was hardest hit, with double-digit volume declines. The North West
region, although also under pressure, showed some resilience with positive volumes. In Gauteng, the construction and industrial
segments produced a relatively better performance than the highly contested retail space. Average selling prices declined 4% for
the period.
Variable delivered cost of sales per ton increased 2% while fixed costs of production decreased by 11%. Cost savings were
realised from refractories, maintenance, depreciation and power.
Zimbabwe
Our Zimbabwe operations, including exports, recorded overall volume declines of 22% while local selling prices in US dollars
declined 3%. Contribution to group revenue decreased 4% due to exchange rate effects, EBITDA margins contracted by 4%. Domestic
cement demand dropped significantly in the review period after several years of growth. This reflected a poor agricultural season,
tighter market liquidity, increased local competition and lower disposable incomes. Supported by weakening regional currencies
against the US dollar and increased regional capacity, imports from neighbouring countries have grown despite a number of barriers
to entry.
Botswana
The increase in cement capacity and competitiveness in the southern African region has affected pricing and volume in all segments.
Consequently, volumes declined 15% while EBITDA margins dropped 8% in the reporting period.
Rwanda
Our 600 000 tpa plant was commissioned in the second half of 2015 at a cost of US$165 million. Ramp-up has been satisfactory to
date and most of the plant’s provisional acceptance certificates were issued by 31 March 2016. Since commissioning, the plant has
sold 124 000 tons of cement; this gradual ramp-up will continue and the plant should reach planned capacity over the next two
years. Plant performance for the review period was satisfactory. Further business improvements are expected once current initiatives
are implemented.
MATERIALS BUSINESS
As part of PPC’s strategy to be a world-class provider of materials and solutions, we revised our business structure to consolidate
PPC Aggregates, Pronto Readymix, Ulula Ash and PPC Lime into a materials business. This business will report into the South African
operations through a management committee.
The lime business generated revenue of R383 million which was 12% lower (2015: R436 million) on the back of continued pressure in
the steel industry. In line with this, burnt product sales volumes declined by 19%. EBITDA of R96 million was 23% higher (2015:
R78 million) due to the non-recurrence of a provision for bad debt passed in 2015 and good cost containment.
Aggregates and readymix revenues were 9% higher at R503 million (2015: R463 million) due to improved sales volumes in South African
aggregates and Pronto Readymix. As a result, EBITDA rose 33% to R76 million (2015: R57 million). Major projects supplied include
Mall of Africa, the N14 and Cedar road construction projects as well as the Steyn City development.
PROJECTS UPDATE
Democratic Republic of the Congo
Construction of the US$280 million, 1mtpa plant was 83% complete by March 2016. Contingency utilisation is high in relation to the
construction programme, which could result in a 4-6% increase in the capital estimate. Construction is slightly ahead of schedule,
and cold commissioning, using generator power, is under way. Power, supplied by Société Nationale d’Electricité (SNEL), is likely
to be later than scheduled, however hot commissioning remains on track for end calendar 2016 with first cement sales expected early
in calendar 2017. Management has identified potential start-up funding requirements to which PPC might have to contribute between
US$20 million and US$50 million which will be reimbursed from future operating profits. These payments may arise because of delayed
VAT repayments (VAT exemption was only received in January 2016), settling of bank facilities relating to cement trading losses
incurred ahead of commissioning and pre-funding of future debt repayments.
Zimbabwe
Construction of the US$85 million mill in Harare was around 70% complete at 31 March 2016. Operational readiness activities are
under way with staffing, skills transfer, material and equipment plans being implemented against a ramp-up plan. Plant commissioning
is expected towards the end of calendar 2016.
Ethiopia
The US$170 million to US$180 million, 1,4mtpa plant remains scheduled to be commissioned in the second quarter of calendar 2017. The
additional funds will be sourced from equity and debt funding. Both PPC and South Africa’s Industrial Development Corporation
followed their rights in the first capital raising, with PPC investing a further US$5 million in March 2016. PPC’s shareholding has
risen to 35% as some shareholders did not follow their rights. The capital-raising programme is forecast to be concluded by the end
of the third calendar quarter of 2016. Plant construction is progressing well, with overall project progress at 71%. The main plant
power agreement is in place with the Ethiopian power authorities and the contract for supply and construction of a 14km 132KV
transmission line has been awarded.
Slurry
Work on the new R1.5 billion to R1.7 billion, 1mtpa clinker production line (SK9) at PPC Slurry is on schedule. A number of leading
technology features has been incorporated into the SK9 plant design to optimise production, reduce heat and electrical energy
consumption, and increase plant availability. While issuing work permits to the EPC contractor’s workforce has been delayed, as an
interim plan to avoid delaying implementation, the contractor has partnered with local contractors to begin the main earthworks. The
project is on schedule for commissioning and ramp-up in calendar 2018.
BOARD CHANGES
Mr Bheki Sibiya, who had served as chairman of the Board since November 2008, did not offer himself for re-election and accordingly
retired from the Board at the end of the company’s annual general meeting (“AGM”) held on 25 January 2016. As a consequence of his
retirement, his alternate, Ms Zibusiso Kganyago, also retired at the AGM after serving since October 2007. Mr Peter Malungani, a
non-executive director since February 2009, elected not to stand for re-election at the AGM and accordingly retired from the Board.
The Board would like to thank the aforementioned retired directors for their dedicated service and valuable contribution during their
respective tenures. Their input and involvement often extended beyond the ordinary call of duty and at great personal expense, for
which the Board is most grateful. Special thanks must go to Bheki Sibiya. While PPC achieved a number of key milestones under his
stewardship, most notably he ensured Board continuity and the preservation of corporate expertise during a challenging phase in the
company’s recent history.
The Board has appointed Mr Peter Nelson as an interim chairman, until such time as a new chairman is appointed. The Board believe
that the qualifications and experience of Mr Nelson will enable him to guide the Board and the company until such time as the
selection process has been completed.
Ms Salukazi Dakile-Hlongwane was elected a non-executive director of the Board with effect from 26 January 2016. The Board welcomes
her and is looking forward to her input and contribution.
STRATEGY
In the short to medium term PPC’s focus is on consolidating current expansion projects and operational efficiency initiatives
introduced in the past 18 months, stabilising the company and ensuring it is able to deliver on its strategic priorities.
The group has made changes to its operating structure to ensure that it has the appropriate business model to deliver on its
long-term growth strategy. Two key changes include the establishment of the materials business division, noted earlier, and a new
commercial function. The materials business division is focused on expanding PPC’s product range and service offering in aggregates,
readymix, fly ash, lime and related businesses. Progress to date includes the imminent acquisition of 3Q Mahuma Concrete, the largest
independently owned readymix concrete supplier in southern Africa. The new commercial function is intended to create and entrench an
increased commercial perspective to facilitate PPC’s aim to become a world-class provider of materials and solutions. A dedicated
project management office now operates from this division to ensure the company realises its aspirations.
The Board approved a corporate restructure to streamline and optimise the South African and foreign operations, effective 1 April 2016.
As a consequence, the legal structures and management accountability are fully aligned and Project Omega is now substantially complete.
PPC’s 2008 broad-based black economic empowerment transaction (B-BBEE 1) matures in December 2016, however discussions to accelerate
the unwind of B-BBEE 1 continues. Under the revised Department of Trade and Industry’s broad-based black economic empowerment
codes of good practice, PPC was rerated from a level 2 contributor to level 8 in December 2015. We had anticipated this outcome and
management plans to improve our B-BBEE score to level 4 over the next three years. This rating will enable our customers to claim
back 100% of their spending with our group for their own preferential procurement points. To reach level 4, the company will focus on
improving the score in the categories of management control, skills development, and enterprise and supplier development.
GOING CONCERN AND CAPITAL RAISE
On 30 May 2016, S&P Global Ratings (S&P) released a report downgrading the company’s long- and short-term South African national scale
corporate credit ratings to zaBB-/zaB from zaA/zaA-2 respectively. At the time of the downgrade the company was at an advanced stage
with the finalisation of a capital raise.
Due to its long-term rating falling below investment grade, the company was obliged to offer early redemption to noteholders in terms
of the Domestic Medium Term Note Programme Memorandum. As a result the notes, with an outstanding principal value of R1.75 billion plus
interest, have been reclassified from long-term to short-term borrowings. The early settlement, which has negatively impacted the group’s
short-term liquidity, highlights a material uncertainty regarding the group’s viability as a going concern.
Due to the pressures on the liquidity position of the company, it is in the final stages of concluding agreements with local financial
institutions for a bridging guarantee facility of R2 billion to settle the outstanding note obligations and provide the company with
the appropriate funding requirements until the conclusion of the proposed capital raise.
Shareholders are referred to an announcement released on the Stock Exchange News Service of the JSE Limited (“SENS”) on 31 May 2016
wherein, inter alia, the Company outlined its funding strategy which included the intention to raise between R3 billion and R4 billion
gross proceeds through a proposed rights issue. The company has mandated a syndicate of banks comprising The Standard Bank of South
Africa, Nedbank Limited, Absa Bank Limited and Rand Merchant Bank, a division of Firstrand Bank Limited. Finalisation of the capital
raise is still subject to an agreement on terms, approval of shareholders to proceed, followed by the exercising of their rights.
Once the capital raise is in place and the terms fulfilled, the Company believes that it will have an appropriate capital structure.
Further details of the going concern assumption and risks thereto are included in note 1 to this announcement.
Solvency and liquidity
The group is currently solvent with a total equity of R3,6 billion. However, on liquidity, current liabilities of R6,1 billion exceed
current assets of R2,8 billion due to the reclassification of the R1,75 billion noteholders liabilities from long-term to short-term
as well as the maturing of the B-BBEE1 debt in December 2016.
Cash flow
The decrease in cash flows from operations to R813 million (2015: R1 140 million) is in part due to a decrease in trade and other
payables and an increase in inventory due to operational requirements. The group maintained its strict cash flow management policy
and was able to meet its working capital obligations, however the forecast cash flow has been negatively affected by the accelerated
payment of R1,75 billion to noteholders. Cash flow management remains critical in this challenging period.
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue to exercise caution when dealing in PPC securities until a further announcement in this regard
is made.
On behalf of the Board
PG Nelson DJ Castle MMT Ramano
Interim Chairman Chief executive officer Chief financial officer
13 June 2016
Condensed provisional consolidated statement of comprehensive income
Six Six Twelve
months ended months ended months ended
31 March 31 March 30 Sept
2016 2015 2015
Notes Reviewed Unaudited % Audited
Rm Rm change Rm
Revenue 4 501 4 541 (1) 9 227
Cost of sales 3 261 3 206 2 6 437
Gross profit 1 240 1 335 (7) 2 790
Administration and other operating expenditure 489 554 (12) 1 130
Operating profit before item listed below: 751 781 (4) 1 660
Empowerment transactions IFRS 2 charges(a) 18 25 (28) 43
Operating profit 733 756 (3) 1 617
Finance costs (including fair value adjustments
on financial instruments) 2 350 277 26 496
Investment income 12 11 9 28
Profit before equity accounted earnings and
exceptional items 395 490 (19) 1 149
Earnings from equity accounted investments - (3) (16)
Impairments 3 (5) (44) (81)
Other exceptional adjustments 3 117 1 -
Profit before taxation 507 444 14 1 052
Taxation 4 156 163 (4) 391
Profit for the period 351 281 25 661
Attributable to:
Shareholders of PPC Ltd 369 274 35 698
Non-controlling interests (18) 7 (37)
Other comprehensive income, net of taxation
Items that will be reclassified to
profit or loss 177 246 (28) 775
Cash flow hedges 10 - 38
Taxation on cash flow hedges (3) - (11)
Translation of foreign operations(b) 237 246 752
Reclassification of profit on sale of available-for-sale
financial asset to profit and loss (82) - -
Taxation impact on reclassification of profit on sale of
available-for-sale financial asset to profit and loss 15 - -
Revaluation of available-for-sale financial asset - - (7)
Taxation impact on the revaluation of available-for-sale
financial asset - - 3
Total comprehensive income 528 527 1 436
Attributable to:
Shareholders of PPC Ltd 520 483 1 340
Non-controlling interests 8 44 96
EARNINGS PER SHARE (CENTS) 5
Basic 70 52 35 133
Diluted 69 51 35 131
(a) Comprise BBBEE, Zimbabwe indigenisation and DRC IFRS 2 charges.
(b) In March 2015 translation of foreign operations only included the portion owing to shareholders of PPC Ltd and has been adjusted to
include the portion owing to non-controlling interests. This was previously shown directly in the consolidated statement of changes
in equity.
PPC Ltd changed its financial year-end from September to March. This is the first reporting cycle of the company using the March year-end.
Condensed provisional consolidated statement of financial position
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Notes Rm Rm Rm
ASSETS
Non-current assets 13 579 9 802 12 202
Property, plant and equipment 6 11 716 8 009 10 648
Goodwill 7 255 249 254
Other intangible assets 8 766 774 772
Equity accounted investments 9 200 219 125
Other non-current assets 10 590 536 355
Deferred taxation assets 52 15 48
Non-current assets held for sale 11 42 - 76
Current assets 2 768 2 480 2 979
Inventories 1 121 944 1 029
Trade and other receivables 12 1 187 1 072 1 232
Cash and cash equivalents 460 464 718
Total assets 16 389 12 282 15 257
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 13 (1 113) (1 141) (1 165)
Other reserves 1 558 941 1 402
Retained profit 2 583 2 123 2 406
Equity attributable to shareholders of PPC Ltd 3 028 1 923 2 643
Non-controlling interests 535 757 521
Total equity 3 563 2 680 3 164
Non-current liabilities 6 729 6 628 8 813
Provisions 408 388 400
Deferred taxation liabilities 1 178 980 1 059
Long-term borrowings 14 4 614 5 216 6 711
Other non-current liabilities 15 529 44 643
Current liabilities 6 097 2 974 3 280
Short-term borrowings 14 4 557 1 556 1 510
Trade and other payables and short-term provisions 16 1 540 1 418 1 770
Total equity and liabilities 16 389 12 282 15 257
Net asset book value per share (cents) 573 365 503
Condensed provisional consolidated statement of cash flows
Six months ended Six months ended Twelve months ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Notes Rm Rm Rm
Cash flow from operating activities
Operating cash flows 1 137 1 171 2 416
Working capital movements (324) (31) 300
Cash generated from operations 813 1 140 2 716
Finance costs paid (292) (252) (408)
Investment income received 8 11 28
Taxation paid (195) (252) (489)
Cash available from operations 334 647 1 847
Dividends paid (185) (423) (559)
Net cash inflow from operating activities 149 224 1 288
Acquisition of additional shares in equity accounted
investment 9 (75) - -
Acquisition of additional shares in subsidiary 15 - - (108)
Proceeds on sale of equity accounted investment and
available-for-sale financial asset 153 - -
Investments in property, plant and equipment and
intangible assets 17 (1 188) (1 008) (2 892)
Movement in other non-current assets (181) - -
Other investing movements 8 9 5
Net cash outflow from investing activities (1 283) (999) (2 995)
Net borrowings raised before note repayment 1 499 632 1 796
Purchase of shares in terms of the FSP share
incentive scheme 13 - - (24)
Repayment of note (650) - -
Net cash inflow from financing activities 849 632 1 772
Net movement in cash and cash equivalents (285) (143) 65
Cash and cash equivalents at beginning of the period 718 563 563
Exchange rate movements on opening cash and
cash equivalents 27 44 90
Cash and cash equivalents at end of the period 460 464 718
Cash earnings per share (cents)(a) 63 123 351
Cash conversion ratio(b) 0,7 1,0 1,1
(a) Cash earnings per share is calculated using cash available from operations divided by the total weighted average number of
shares in issue for the period.
(b)Cash conversion ratio is calculated using cash generated from operations divided by EBITDA.
Condensed provisional consolidated statement of changes in equity
Other reserves
Equity
Foreign Available- Equity attributable
currency for-sale compen- to share- Non-
Stated translation financial Hedging sation Retained holders controlling Total
capital reserve asset reserve reserve profit of PPC Ltd interests equity
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at September 2014 (audited) (1 173) 416 84 - 233 2 255 1 815 603 2 418
Dividends declared - - - - - (411) (411) (12) (423)
IFRS 2 charges - - - - 36 - 36 - 36
Recognition of non-controlling
interest in subsidiary - - - - - - - 122 122
Total comprehensive income - 209 - - - 274 483 44 527
Transfer to retained profit - - - - (5) 5 - - -
Vesting of shares
held by BBBEE 1 entities 9 - - - (9) - - - -
Vesting of FSP share
incentive scheme awards 23 - - - (23) - - - -
Balance at March 2015 (unaudited) (1 141) 625 84 - 232 2 123 1 923 757 2 680
Dividends declared - - - - - (129) (129) (7) (136)
IFRS 2 charges - - - - 23 - 23 - 23
Non-controlling interest recognised
following investment - - - - - - - 134 134
in subsidiary
Put option recognised on
non-controlling shareholder
investment in subsidiary(a) - - - - - - - (422) (422)
Shares purchased in terms of FSP
incentive scheme treated
as treasury shares (24) - - - - - (24) - (24)
Total comprehensive income/(loss) - 409 (3) 27 - 424 857 52 909
Transactions with non-controlling
shareholders recognised
directly in equity - - - - - (7) (7) 7 -
Transfer to retained profit - - - - 5 (5) - - -
Balance at September 2015 (audited) (1 165) 1 034 81 27 260 2 406 2 643 521 3 164
Dividends declared - - - - - (185) (185) - (185)
IFRS 2 charges - - - - 31 - 31 - 31
Increase in stated capital from
issuance of shares 26 - - - - - 26 - 26
Total comprehensive income/(loss) - 211 (67) 7 - 369 520 8 528
Transactions with non-controlling
shareholders recognised
directly in equity - - - - - (7) (7) 6 (1)
Vesting of FSP share incentive
scheme awards 26 - - - (26) - - - -
Balance at March 2016 (reviewed) (1 113) 1 245 14 34 265 2 583 3 028 535 3 563
(a)For details on the put options refer note 15 and 16.
Segmental information
The group discloses its operating segments according to the business units which are regularly reviewed by the group executive committee and comprise cement,
lime, aggregates and readymix and other. There has been no change in reporting segments during the period under review but lime and aggregates and readymix
are shown under the materials business.
Revenue is split between South Africa and the rest of Africa based on where the underlying products are anticipated to be consumed or used by the customer.
No individual customer comprises more than 10% of group revenue.
Group Cement(a)
31 March 31 March 30 Sept 31 March 31 March 30 Sept
2016 2015 2015 2016 2015 2015
Reviewed Unaudited Audited Reviewed Unaudited Audited
Rm Rm Rm Rm Rm Rm
Revenue
South Africa 3 219 3 363 6 795 2 386 2 516 4 999
Rest of Africa 1 367 1 288 2 624 1 314 1 236 2 507
4 586 4 651 9 419 3 700 3 752 7 506
Inter-segment revenue (85) (110) (192)
Total revenue 4 501 4 541 9 227
Operating profit before
items listed below 764 789 1 660 645 706 1 422
Empowerment transactions
IFRS 2 charges 18 25 43 18 25 43
Restructuring costs 13 8 - 13 8 -
Operating profit 733 756 1 617 614 673 1 379
South Africa 522 520 1 120 404 434 881
Rest of Africa 211 236 497 210 239 498
Fair value (loss)/gains
on financial instruments (20) (1) 22 (20) 4 34
Finance costs 330 276 518 282 219 382
Investment income 12 11 28 8 6 19
Profit before earnings
from equity accounted
investments and
exceptional items 395 490 1 149 320 464 1 050
Earnings from equity
accounted investments - (3) (16) - (3) (16)
Impairments and other
exceptional adjustments 112 (43) (81) 113 (22) (59)
Profit before taxation 507 444 1 052 433 439 975
Taxation 156 163 391 129 140 325
Profit for the period 351 281 661 304 299 650
Depreciation and
amortisation 393 342 702 340 290 594
EBITDA 1 144 1 123 2 362 972 988 2 016
South Africa 793 821 1 706 624 685 1 364
Rest of Africa 351 302 656 348 303 652
EBITDA margin (%) 25,4 24,7 25,6 26,3 26,3 26,9
Assets
Non-current assets 13 579 9 802 12 202 12 613 8 870 11 251
South Africa 5 205 5 178 5 141 4 280 4 278 4 231
Rest of Africa 8 374 4 624 7 061 8 333 4 592 7 020
Current assets 2 768 2 480 2 979 2 343 2 055 2 536
Non-current assets held
for sale 42 - 76 42 - 76
Total assets 16 389 12 282 15 257 14 998 10 925 13 863
South Africa 6 753 6 919 6 687 5 441 5 634 5 376
Rest of Africa 9 636 5 363 8 570 9 557 5 291 8 487
Investments in property,
plant and equipment and
intangible assets 1 188 995 2 856 1 125 957 2 741
Capital commitments
(refer note 18) 3 283 6 145 4 643 3 219 6 120 4 588
Liabilities
Non-current liabilities 6 729 6 628 8 813 6 536 5 303 7 492
Current liabilities 6 097 2 974 3 280 5 038 2 684 2 921
Total liabilities 12 826 9 602 12 093 11 574 7 987 10 413
South Africa 8 148 7 669 8 343 6 921 6 075 6 692
Rest of Africa 4 678 1 933 3 750 4 653 1 912 3 721
Segmental information continued
Materials business
Lime Aggregates and readymix(b) Other(c)
31 March 31 March 30 Sept 31 March 31 March 30 Sept 31 March 31 March 30 Sept
2016 2015 2015 2016 2015 2015 2016 2015 2015
Reviewed Unaudited Audited Reviewed Unaudited Audited Reviewed Unaudited Audited
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue
South Africa 378 430 853 455 417 943 - - -
Rest of Africa 5 6 18 48 46 99 - - -
383 436 871 503 463 1 042 - - -
Operating profit before
items listed below 75 56 133 44 27 105 - - -
Empowerment transactions
IFRS 2 charges - - - - - - - - -
Restructuring costs - - - - - - - - -
Operating profit 75 56 133 44 27 105 - - -
South Africa 75 56 133 43 30 106 - - -
Rest of Africa - - - 1 (3) (1) - - -
Fair value (loss)/gains on
financial instruments - - - - (5) (12) - - -
Finance costs 2 2 4 4 3 29 42 52 103
Investment income 1 2 1 3 3 8 - - -
Profit before earnings
from equity accounted
investments and
exceptional items 74 56 130 43 22 72 (42) (52) (103)
Earnings from equity
accounted investments - - - - - - - - -
Impairments and other
exceptional adjustments - - - (1) (22) (22) - 1 -
Profit before taxation 74 56 130 42 - 50 (42) (51) (103)
Taxation 21 16 35 6 7 31 - - -
Profit for the period 53 40 95 36 (7) 19 (42) (51) (103)
Depreciation and
amortisation 21 22 45 32 30 63 - - -
EBITDA 96 78 178 76 57 168 - - -
South Africa 96 78 178 73 58 164 - - -
Rest of Africa - - - 3 (1) 4 - - -
EBITDA margin (%) 25,0 17,9 20,4 15,1 12,3 16,1 - - -
Assets
Non-current assets 325 300 310 641 632 641 - - -
South Africa 325 300 310 600 600 600 - - -
Rest of Africa - - - 41 32 41 - - -
Current assets 187 189 185 237 236 254 1 - 4
Non-current assets held
for sale - - - - - - - - -
Total assets 512 489 495 878 868 895 1 - 4
South Africa 512 489 495 799 796 812 1 - 4
Rest of Africa - - - 79 72 83 - - -
Investments in property,
plant and equipment 37 11 45 26 27 70 - - -
Capital commitments
(refer note 18) 5 55 28 59 20 27 - - -
Liabilities
Non-current liabilities 103 95 94 90 92 89 - 1 138 1 138
Current liabilities 90 78 105 125 120 162 844 92 92
Total liabilities 193 173 199 215 212 251 844 1 230 1 230
South Africa 193 173 199 190 191 222 844 1 230 1 230
Rest of Africa - - - 25 21 29 - - -
(a)Includes head office activities.
(b)Aggregates and readymix have been aggregated in line with industry practices.
(c)Comprises BBBEE trusts and trust funding SPVs.
Notes to the condensed provisional consolidated results
1 Basis of preparation
The condensed provisional consolidated financial statements have been prepared in accordance with the framework concepts, recognition and measurement
criteria of International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board in issue
and effective for the group at 31 March 2016 and the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and financial
reporting pronouncements as issued by the Financial Reporting Standards Council. The results are presented in accordance with minimum requirements of
IAS 34 Interim Financial Reporting and comply with the Listings Requirements of the JSE Limited for provisional reports and the requirements of the
Companies Act of South Africa applicable to condensed consolidated financial statements.
These condensed provisional consolidated financial statements have been prepared under the supervision of MMT Ramano CA(SA), chief financial officer,
and were approved by the board of directors on 13 June 2016.
The accounting policies and methods of computation used are in terms of IFRS and consistent with those used in the preparation of the consolidated
annual financial statements for the twelve months ended 30 September 2015, the group’s previous financial year-end. There were no revised accounting
standards and interpretations adopted during the period under review.
Going concern
In 2010, PPC embarked upon an expansion strategy to extract value from high-growth economies by expanding its footprint into the rest of Africa. The
Rwanda expansion project was successfully commissioned in 2015 and during the next twelve months the group will commission its expansion projects in
Zimbabwe, the DRC and Ethiopia. The result of these expansions will see an increase in gross production capacity of approximately three million tons
per annum giving the group a strong foundation for further growth. Given the long lead time required to develop greenfield operations, the group has
drawn down on pre-arranged project finance debt without an immediate concomitant increase in earnings and resultant cash flow.
During the same period of our expansion growth on the continent, external factors beyond the group’s control have seen a slowing global economy,
significant decline in oil and commodity prices which culminated in downward pressures on selling prices in the regions in which the group operates.
In addition, South Africa, which is the major contributor to earnings, has seen intensified competition in terms of new entrants and also imports into
the country despite the economic slowdown, resulting in overcapacity in the South African market. The board and executive management had reviewed the
group’s business and capital structure and developed appropriate business plans in order to be able to deal effectively with the effects of a
continuation of the current low price environment and slowing economic growth.
Key elements of the business plans were the reduction of costs and improvements in efficiencies, in part through right-sizing of the various
operations and the profit improvement programme (PIP) implemented in 2015, the curtailment of discretionary capital expenditure while preserving the
ability of the business to increase production and compete efficiently when cement prices and economies improve. The board had in principle approved
that the group undertakes a capital raise in order to strengthen its capital structure and was well advanced at the date of the S&P Global ratings
review.
The unexpected event-driven review by S&P resulted in a downgrade in our credit rating thereby triggering the acceleration of the outstanding notes
amounting to R1.75 billion. The group is in the process of securing bridging funding guarantees from a consortium of local financial institutions
which will be effective until the proceeds of the capital raise are received.
Based on the group’s expectation that the conditions of the planned capital raise will be met, in addition to the group’s current trading position and
forecasts and facilities and guarantees in place, the directors believe that the group will be able to comply with its financial covenants and be able
to meet its obligations as they fall due, and accordingly have formed a judgement that it is appropriate to prepare these condensed provisional
consolidated financial statements on a going-concern basis. These condensed provisional consolidated financial statements therefore do not include any
adjustments that would result if the going-concern assumption was not used as the basis for the underlying preparation of these condensed provisional
consolidated financial statements.
Auditors conclusion
These condensed provisional consolidated financial statements for the period ended 31 March 2016 have been reviewed by Deloitte & Touche, who expressed
a disclaimer conclusion thereon.
The auditors' basis for their discalimer opinion is noted as follows:
"We make reference to note 1 in the condensed consolidated financial statements under the heading Going Concern and note 14 Borrowings, on disclosures
relating to the Domestic Medium Term Notes (DMTN).
Subsequent to year end, Standard and Poor’s released its report in which the credit rating of PPC LTD was lowered to below investment grade. As a
result of this downgrade, the Domestic Medium Term Notes (DMTN) to the value of R1,75 billion became due and payable in the short-term as per Clause 11
of the DMTN Program Memorandum, thus creating a liquidity challenge.
As a result, management has entered into negotiations with its current consortium of local financial institutions to provide a guarantee to the DMTN
noteholders to ensure that the company will be able to meet any obligations once they become due as a result of Clause 11 of the Program Memorandum.
In addition, the board of directors have announced their intention to execute a capital raise which will ensure the group has sufficient funding to
settle the obligations arising from the guarantee and to ensure that the business has adequate funding for its continuing business.
The group’s ability to address its liquidity and funding obligations is contingent on:
· the successful conclusion of the negotiations referred to in the preceding paragraph; and
· the ability to raise the capital funding.
On conclusion of our review work, there were conditions yet to be fulfilled in order to secure the guarantee to the DMTN noteholders. Furthermore,
management is still working to fulfil the conditions for the capital raise. Accordingly, at the date of this report, management’s plans on both the
bridging facility and the capital raise were not sufficiently advanced to allow us to draw a review conclusion on PPC LTD’s ability to continue as
a going concern."
A copy of the auditors' report on the condensed provisional consolidated financial statements is available for inspection at the company's
registered office.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
2 Finance costs (including fair value adjustments on financial instruments)
Bank and other short-term borrowings 49 22 48
Notes 98 95 189
Long-term loans 229 121 313
376 238 550
Capitalised to plant and equipment and intangibles (119) (39) (196)
Finance costs before BBBEE transaction and time 257 199 354
value of money adjustments
BBBEE transaction 41 53 116
Dividends on redeemable preference shares 19 22 42
Long-term borrowings 22 31 74
Time value of money adjustments on rehabilitation 32 24 48
and decommissioning provisions and put option liabilities
Finance costs 330 276 518
Fair value loss/(gains) on financial instruments 20 1 (22)
350 277 496
South Africa 239 273 474
Rest of Africa 111 4 22
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
3 Impairments and other exceptional adjustments
Impairment of goodwill - (22) (22)
Reversal of impairment/(impairment) of financial asset - 1 (1)
Impairment of loans advanced (1) - (1)
Impairment of property, plant and equipment (4) (22) (57)
Profit on disposal of equity accounted investment 117 - -
and available-for-sale financial asset
112 (43) (81)
Impairment of goodwill
In 2015, the recoverable amount of Pronto was calculated to be lower than its carrying amount, resulting in an impairment of R22 million. Pronto is
included under aggregates and readymix in the segmental analysis.
Impairment of property, plant and equipment
Following reviews of property, plant and equipment for the period ended March 2016, other minor impairments of R4 million were processed, while in
the prior reporting period the following impairments occurred:
- Post the group’s decision to no longer pursue the Algeria expansion project, it was deemed appropriate that the costs capitalised of R15 million
be impaired in March 2015.
- An impairment of R7 million relating to the old plant at CIMERWA that would not be used post-commissioning of the new plant was recorded in
March 2015, while a further R7 million was impaired during the second half of the 2015 financial year.
- Also in the second half of the 2015 financial year, R27 million relating to a limestone quarry in Zimbabwe was impaired due to uncertainty of
future prospects.
- Other minor impairments to property, plant and equipment of R1 million in September 2015 were processed.
Profit on disposal of equity accounted investment and available-for-sale financial asset
Profit on disposal of equity accounted investment and financial asset relates to the sale of Afripack and Ciments de Bourbon, R34 million and
R83 million respectively. Refer to notes 10 and 11.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
% % %
4 Taxation
Taxation rate reconciliation
A reconciliation of the standard South African normal taxation rate is shown below:
Profit before taxation (excluding earnings from equity accounted investments) 30,8 36,4 36,6
Prior year taxation impact 2,8 6,1 2,7
Profit before taxation, excluding prior year taxation adjustments 33,6 42,5 39,3
Adjustment due to the inclusion of dividend income - - 0,3
Effective rate of taxation 33,6 42,5 39,6
Income taxation effect of: (5,6) (14,5) (11,6)
Disallowable charges, permanent differences and exceptional items (1,6) (6,4) (8,9)
Empowerment transactions and IFRS 2 charges not taxation deductible (1,0) (2,1) (1,1)
Finance costs on BBBEE transaction not taxation deductible (1,8) (4,0) (2,1)
Foreign taxation rate differential 0,5 - 1,6
Capital gains differential on sale of non-core assets 2,4 - -
Withholding taxation (4,1) (2,0) (1,1)
South African normal taxation rate 28,0 28,0 28,0
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Cents Cents Cents
5 Earnings and headline earnings
Earnings per share
Basic 70 52 133
Diluted 69 51 131
Basic (normalised)(a) 56 61 148
Diluted (normalised)(a) 55 60 147
Headline earnings per share
Basic 53 60 145
Diluted 52 59 143
Basic (normalised)(a) 56 61 149
Diluted (normalised)(a) 55 60 147
Determination of headline earnings per share
Earnings per share 70 52 133
Adjusted for:
Other exceptional adjustments and impairments (21) 8 15
Taxation on other exceptional adjustments and impairments 4 - (3)
Headline earnings per share 53 60 145
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
5 Earnings and headline earnings continued
Headline earnings
Net profit 351 281 661
Other exceptional items and impairments (112) 44 81
Taxation on other exceptional items and impairments 24 (2) (15)
Headline earnings 263 323 727
Attributable to:
Shareholders of PPC Ltd 281 316 759
Non-controlling interests (18) 7 (32)
Normalised earnings
Net profit 351 281 661
Normalisation adjustments(a) (76) 46 82
Normalised net profit 275 327 743
Attributable to:
Shareholders of PPC Ltd 293 320 775
Non-controlling interests (18) 7 (32)
(a) Normalised earnings adjusts the reported earnings for the effects of empowerment transaction IFRS 2 charges, restructuring costs,
impairments and other exceptional adjustments net of taxation and prior year taxation adjustments.
The difference between earnings and diluted earnings per share relates to shares held under the forfeitable share incentive scheme that
have not vested, together with the dilution impact of the group’s various empowerment transactions.
For the weighted average number of shares used in the calculation, refer note 13.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
6 Property, plant and equipment
Net carrying value at beginning of the period 10 648 7 223 7 223
Additions 1 122 996 3 269
Depreciation (348) (293) (612)
Other movements 2 (2) (22)
Impairments (refer note 3) (4) (22) (57)
Reallocation to other intangible assets (refer note 8) - (115) (115)
Transfer to non-current assets held for sale (refer note 11) - - (40)
Translation differences 296 222 1 002
Balance at end of the period 11 716 8 009 10 648
Comprising:
Freehold and leasehold land, buildings and mineral rights 800 585 778
Factory decommissioning and quarry rehabilitation assets 79 65 87
Plant, vehicles, furniture and equipment 10 836 7 357 9 780
Capitalised leased plant 1 2 3
11 716 8 009 10 648
Change in accounting estimate
In the current period the useful life of certain assets was reviewed, as assets were being used for longer than their estimated useful life.
The remaining life of reserves was aligned with the useful life of the relevant assets and buildings and structural assets assumed a useful
life of 30 years from 1 October 2015. The change in accounting estimate was applied prospectively and resulted in an annual decrease in
depreciation for the current period of R37 million with deferred taxation of approximately R10 million.
Assets pledged as security
Property, plant and equipment with a net carrying value of R6 853 million (March 2015: R3 951 million; September 2015: R4 355 million) are
encumbered and used as security for borrowings in the DRC, Rwanda and Zimbabwe (refer note 14).
7 Goodwill
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
Balance at beginning of the period 254 268 268
Impairments (refer note 3) - (22) (22)
Translation differences 1 3 8
Balance at end of the period 255 249 254
Goodwill, net of impairments, is allocated to the following cash generating units:
CIMERWA Limited 50 44 49
Safika Cement Holdings Pty Limited 78 78 78
Pronto Holdings Pty Limited 127 127 127
255 249 254
During the current reporting period no impairments were deemed necessary as the respective recoverable amounts were considered to be higher
than the carrying values, while in the prior reporting periods, the recoverable amount of Pronto of R758 million was calculated to be lower
than its carrying amount and resulted in an impairment of R22 million.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
8 Other intangible assets
Balance at beginning of the period 772 681 681
Additions 12 14 36
Amortisation (45) (49) (90)
Transfers and other movements(a) - 115 118
Translation differences 27 13 27
Balance at end of the period 766 774 772
Comprising:
Right of use of mineral assets 214 169 191
ERP development and other software 140 137 143
Brand and trademarks 339 345 332
Customer relationships - contractual and non-contractual 73 123 106
766 774 772
(a) The split between property, plant and equipment (PPE) and intangible assets on the contribution made by a then non-current shareholder
into PPC Barnet DRC Holdings was finalised in 2015 and R115 million was transferred from PPE and represents the value of the mineral
reserves and mining rights.
The group does not have any indefinite life intangible assets, other than goodwill.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
9 Equity accounted investments
Investments at cost 201 133 126
Loans advanced - 45 -
Share of retained profit (1) 41 (1)
Balance at end of the period 200 219 125
Comprising:
Afripack Limited - 94 -
Habesha Cement Share Company 196 121 121
Other minor equity accounted investments 4 4 4
200 219 125
During the period an additional investment of R75 million was made in Habesha as PPC took-up its share of a rights offer made by the
company. As not all shareholders followed their rights, PPC’s shareholding subsequently increased to 35% from the 32% recorded at both
March and September 2015.
During the second half of the 2015 financial year, the board approved the sale of the investment in Afripack, resulting in R36 million
being classified to non-current assets held for sale (refer note 11). During the current reporting period the sale became effective and
the group disposed its full shareholding in Afripack.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
10 Other non-current assets
Advance payments for plant and equipment(a) 142 325 148
Derivative asset 2 - -
Investment in government bonds(b) 8 - 7
Loans advanced - - 1
Unlisted collective investment(c) 119 116 117
Unlisted investment at fair value(d) - 95 82
VAT receivable(e) 319 - -
590 536 355
(a) In terms of the construction agreements with the suppliers of the new cement plants in Rwanda, DRC and Zimbabwe, a portion of the full
contract price is required to be paid in advance of the plant construction. The advance payments are secured by advance payment bonds,
and will be recycled to property, plant and equipment as the plants are constructed.
(b) Represent government of Zimbabwe treasury bills carried at fair value. The treasury bills were issued in September 2015 in exchange for
funds previously expropriated by the government in 2007. The treasury bills have a face value of R10 million, repayable in three equal
annual instalments from June 2017 to June 2019. A discount rate of 12% was applied in determining the fair value on initial recognition.
Interest is paid biannually at a total rate of 5% per annum.
(c) Comprises an investment by the PPC Environmental Trust in local unit trusts. These investments are held to fund PPC’s South African
environmental obligations.
(d) PPC Ltd disposed its 6,75% (March 2015: 6,75%, September 2015: 6,75%) shareholding in Ciments du Bourbon, incorporated in Reunion,
during the current reporting period, with the resulting gain of R83 million recorded in other exceptional items (refer note 3). Ciments
du Bourbon was included under the cement segment in the segmental analysis.
(e) The group has incurred VAT during the construction of the plant in the DRC and the amount receivable has been classified as non-current
in the current reporting period in contrast to the prior reporting period where the full amount was classified as current.
The change follows communication from the local revenue authorities around the delay in refund of VAT receivables.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
11 Non-current assets held for sale
Equity accounted investment (refer note 9) (a) - - 36
Property, plant and equipment (refer note 6) (b) 42 - 40
42 - 76
(a) During the current reporting period, the company finalised the sale of its 25% stake in Afripack for R70 million. The resultant profit
of R34 million has been included in other exceptional items. In 2015, the carrying amount immediately before classification as held for
sale was R36 million which was lower than its fair value less costs to sell of R70 million (which represented the estimated selling
price per the sales agreement less estimated transaction costs). Afripack was included under the cement segment in the segmental
analysis.
(b) In September 2015, the PPC Zimbabwe board approved the disposal of houses at its Colleen Bawn and Bulawayo factories which was
anticipated to be finalised in 12 months. The disposal is planned to be finalised by June 2016. No impairment loss was recognised on
the initial reclassification as management concluded that the fair value (estimated based on market prices of similar properties) less
costs to sell was higher than the carrying amount. The conclusion by management that no impairment loss should be recognised is still
appropriate during the current reporting period. PPC Zimbabwe is included under the cement segment in the segmental analysis.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
12 Trade and other receivables
Trade receivables 982 1 013 931
Impairment of trade receivables (77) (54) (70)
Net trade receivables 905 959 861
Loan relating to non-current asset held for sale - Afripack (refer notes 9, 11) - - 46
Mark to market cash flow hedge 48 - 38
Mark to market fair value hedge 28 - 13
Other financial receivables 111 65 50
Trade and other financial receivables 1 092 1 024 1 008
Prepayments 65 48 75
Taxation prepaid 30 - 8
VAT receivable on plant and equipment imported into the DRC (refer note 10) - - 141
1 187 1 072 1 232
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Shares (000) Shares (000) Shares (000)
13 Stated capital
Number of shares and weighted average number of shares
Number of shares
Total shares in issue at beginning of the period 605 380 605 380 605 380
Shares issued to non-controlling shareholders in Safika on exercise of put-option(a) 1 801 - -
Total shares in issue at end of the period before adjustments for shares treated
as treasury shares 607 181 605 380 605 380
Adjustments for shares treated as treasury shares:
Shares held by consolidated participants of the second BBBEE transaction(b) (37 382) (37 382) (37 382)
Shares held by consolidated BBBEE trusts and trust funding SPVs(c) (34 477) (34 477) (34 477)
Shares held by consolidated Porthold Trust (Private) Limited(d) (1 285) (1 285) (1 285)
Shares purchased in terms of the FSP share incentive scheme(e) (5 563) (5 328) (6 343)
Total shares in issue at end of the period (net of shares treated as treasury shares) 528 474 526 908 525 893
Weighted average number of shares, used for:
Earnings and headline earnings per share 526 076 527 189 526 022
Dilutive earnings and headline earnings per share 534 037 532 236 532 236
Cash earnings per share 527 877 527 189 526 022
Shares are weighted for the period in which they are entitled to participate in the profits of the group.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
13 Stated capital continued
Balance at beginning of the period (1 165) (1 173) (1 173)
Shares purchased in terms of the FSP share incentive scheme - - (24)
Vesting of shares held by BBBEE 1 entities (c) - 9 9
Vesting of shares held in terms of the FSP share incentive scheme (e) 26 23 23
Shares issued to non-controlling shareholders in Safika on exercise of put-option (a) 26 - -
Balance at end of the period (1 113) (1 141) (1 165)
(a) At the AGM held on 25 January 2016, shareholders approved the early settlement of the remaining put option held by management of Safika
Cement Holdings Pty Ltd for R44 million, to be settled via cash of R18 million and the issue of new PPC shares of R26 million. This
resulted in PPC acquiring a further 9,59% in Safika. The shares were issued on 31 March 2016.
(b) Shares issued in terms of the second BBBEE transaction which was facilitated by means of a notional vendor funding (NVF) mechanism, with
the transaction period concluding on 30 September 2019. These shares participate in 20% of the dividends declared by PPC during the NVF
period. With the exception of the Bafati Investment Trust, entities participating in this transaction are consolidated into the PPC
group in terms of IFRS 10 Consolidated Financial Statements, during the transaction term.
(c) In terms of IFRS 10, certain of the BBBEE trusts and trust funding SPVs from PPC’s first BBBEE transaction are consolidated, and as a
result, shares owned by these entities are carried as treasury shares on consolidation. During the period, no shares (March 2015: 287 361
shares; September 2015: 287 361 shares) vested to beneficiaries.
(d) Shares owned by a Zimbabwean employee trust company treated as treasury shares.
(e) In terms of the forfeitable share incentive scheme, 5 563 488 (March 2015: 5 328 219; September 2015: 6 342 640) shares are held in
total for participants of this long-term incentive scheme. The shares are treated as treasury shares during the various vesting periods
of the awards. During the period, 779 152 (March 2015: 537 632; September 2015: 728 200) shares vested and are therefore no longer treated
as treasury shares.
14 Borrowings
Six Six Twelve
months months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Terms Security Interest rate Rm Rm Rm
Notes(a) Various, refer below Unsecured Various, refer below 1 747 2 398 2 398
Long-term loan Interest is payable biannually Unsecured Fixed 10.86% 1 417 1 520 1 520
with a bullet capital repayment
in December 2016
Long-term loan(b) Interest is payable quarterly Unsecured Variable rates at 400 555 - -
with a bullet capital repayment basis points above JIBAR
in September 2017
Long-term loan Interest is payable monthly with Unsecured Variable rates at 125 basis 900 - -
a bullet capital repayable points above JIBAR
18 months after notice period
Project funding 3 372 952 2 357
US dollar-denominated US dollar denominated, repayable Secured by CIMERWA’s Variable at 725 basis points 806 560 641
in monthly instalments over a property, plant and equipment above six-month US dollar
10-year period, starting March 2016 (refer note 6) LIBOR
Rwandan franc-denominated Rwanda franc denominated, repayable Secured by CIMERWA’s Fixed rate of 16% 474 255 357
in monthly instalments over a property, plant and equipment
10-year period, starting March 2016 (refer note 6)
US dollar-denominated US dollar-denominated, interest Secured by PPC Zimbabwe’s Six-month US dollar 550 137 421
payable biannually. First capital property, plant and equipment LIBOR plus 700 basis
repayment in December 2016; thereafter (refer note 6) points
biannual repayments in equal
instalments over five years
US dollar-denominated US dollar-denominated, capital and Secured by PPC Barnet DRC’s Six-month US dollar LIBOR 1 542 - 938
interest payable bi-annually starting property, plant and equipment plus 725 basis points
July 2017 ending January 2025 (refer note 6)
7 991 4 870 6 725
Long-term borrowings
before BBBEE
transaction
BBBEE transaction 844 1 138 1 227
Preference shares Dividends are payable biannually, Secured by guarantee Variable rates at 81.4% 33 31 64
with annual redemptions ending from PPC Ltd of prime and fixed rates
December 2016 of 9,24% to 9,37%
Preference shares Dividends are payable biannually Secured by PPC shares Variable rates at 86.9% 16 17 72
with capital redeemable from held by the SPVs of prime
surplus funds. Compulsory annual
redemptions until December
2016
Preference shares Capital and dividends repayable Secured by guarantee Variable rates at 78% 393 396 395
by December 2016, with capital from PPC Ltd of prime
capped at R400 million
Long-term borrowings Capital and interest repayable by Secured by guarantee Variable rates at 285 402 694 696
December 2016, with capital from PPC Ltd basis points above
capped at R700 million JIBAR
Long-term borrowings 8 835 6 008 7 502
Less: Short-term portion (4 221) (792) (791)
of long-term borrowings
4 614 5 216 6 711
Add: Short-term borrowings 4 557 1 556 1 510
and short-term portion of
long-termborrowings
Total borrowings 9 171 6 772 8 221
Maturity analysis of long-term
liabilities obligations:
One year 4 221 792 791
Two years 1 777 2 925 2 877
Three years 394 142 303
Four years 393 892 1 056
Five and more years 2 050 1 257 2 475
8 835 6 008 7 502
(a) Comprise three unsecured notes at 31 March 2016, issued under the company’s R6 billion domestic medium-term note programme (DMTN), and are recognised net of
capitalised transaction costs:
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Note number, term and interest rate Rm Rm Rm
Issue date
PPC 001: three years; three-month March 2013 - 650 650
JIBAR plus 1,26%
PPC 002: five years; three-month December 2013 750 750 750
JIBAR plus 1,5%
PPC 003: five years; three-month July 2014 750 750 750
JIBAR plus 1,48%
PPC 004: seven years; 9,86% July 2014 250 250 250
1 750 2 400 2 400
Less: Transaction costs capitalised (3) (2) (2)
1 747 2 398 2 398
Less: Short-term portion (1 747) (650) (650)
- 1 748 1 748
On 30 May 2016, S&P Global Ratings (S&P) released a report on PPC which reflected a decline in ratings from zaA/zaA-2 to zaBB-/zaB
long and short-term South Africa national scale. Due to the long-term rating falling below zaBBB-, the company was obliged to offer
an early redemption to noteholders in terms of the DMTN. The notes have therefore been reclassified from long-term to
short-term borrowings.
PPC is in the process of securing adequate bridging guarantee funding for the potential redemption from a consortium of local
financial institutions subject to certain terms and conditions, which management are satisfied will be met.
The bridging guarantee facility will bear interest at JIBAR plus 10% and repayment is due from the proceeds of a successful rights
issue, or 1 November 2016 if earlier.
(b) During the period the company secured funding of R2 billion for an 18-month period. The funding was partly used to settle the first
bond repayment while the balance of the facility will be used to repay the remaining portion of the BBBEE liability due in December
2016 after which the company will receive proceeds from the compulsory subscription by the strategic black partners and community
service groups in terms of the company’s first BBBEE transaction. Transaction costs of R35 million were capitalised against the
facility and will be amortised over the period of the funding.
The group is in compliance with its debt covenants for the March 2016 reporting period or has received waivers in respect thereof.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
15 Other non-current liabilities
Cash-settled share-based payment liability 3 11 5
Liability to non-controlling shareholders in wholly owned subsidiary(a) 17 - 17
Put option liabilities 415 151 464
Retentions held for plant and equipment(b) 97 - 204
532 162 690
Less: Short-term portion of other non-current liabilities (3) (118) (47)
529 44 643
(a) Relates to interest payable on the initial equity contributions into the DRC group of companies by a non-controlling shareholder. The
accruing of interest ceased in September 2015 and the amount payable will be repaid once the external funding has been settled.
(b) Retentions held for the construction of the cement plants. These retentions will be paid over to the contractors once the plant
achieves guaranteed performance targets.
Put option liabilities
PPC Barnet DRC
The International Finance Corporation (IFC) was issued a put option in 2015 in terms of which PPC is required to purchase all or part
of the class C shares held by the IFC in PPC Barnet DRC Holdings. The put option may be exercised after six years from when the IFC
subscribed for the shares but only for a five-year period. The put option value is based on the company’s forecast EBITDA applying a
forward multiple less net debt. Forecasted EBITDA is based on financial forecasts approved by management, with pricing and margins
similar to those currently being achieved by the business unit while selling prices and costs are forecast to increase at local inflation
projections and extrapolated using local GDP growth rates ranging between 5% and 9% taking cognisance of the plant production ramp-up and
adjusted for the impact of competitor activity. The forward multiple was determined using comparison of publically available information
of other cement businesses operating in the similar territories. The present value of the put option was calculated at R415 million
(March 2015: Rnil ; September 2015: R422 million).
Safika Cement
With the purchase of the initial 69,3% equity stake in Safika Cement, PPC granted non-controlling shareholders individual put options, with
different exercise dates, for the sale of their remaining shares in the company to PPC. One of the put options, representing 21,1% shareholding
in Safika Cement, was exercised during the 2015 financial year for R108 million. The other put option, representing 9.59% shareholding in Safika
Cement, was anticipated to be exercised on the fifth anniversary of the transaction, but in September 2015 this was classified as current as it
was the intention to early settle the remaining put option. In January 2016, shareholders approved the early settlement of the remaining put
option through the combination of a fresh share issue and cash payment. At March 2016, the put option liability (refer to note 16) was Rnil
(September 2015: R42 million). The put option liability was calculated using the company’s forecast EBITDA applying an earnings multiple
dependent on the level of EBITDA achieved less net debt.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Rm Rm Rm
16 Trade and other payables and short-term provisions
Cash-settled share-based payment liability (short-term portion) (refer note 15) 3 10 5
Capital expenditure payables 229 58 147
Derivative financial instruments 1 2 1
Other financial payables 89 297 113
Put option liability (refer note 15) - 108 42
Retentions held for plant and equipment 67 136 116
Trade payables and accruals 994 525 924
Trade and other financial payables 1 383 1 136 1 348
Payroll accruals 139 157 310
Taxation payable 18 125 112
1 540 1 418 1 770
17 Investment in property, plant and equipment and intangible assets
Cement 1 125 984 2 777
Lime 37 11 45
Aggregates and readymix 26 13 70
Investment in property, plant and equipment and intangible assets 1 188 1 008 2 892
South Africa 474 233 933
Rest of Africa 714 775 1 959
18 Commitments
Contracted capital commitments 2 289 3 781 3 594
Approved capital commitments 994 2 364 1 049
Capital commitments 3 283 6 145 4 643
Operating lease commitments 124 148 171
Equity commitment(a) - 158 -
3 407 6 451 4 814
Capital commitments
South Africa 1 649 2 088 2 409
Rest of Africa 1 634 4 057 2 234
3 283 6 145 4 643
Capital commitments are anticipated to be incurred:
- within one year 2 731 2 861 2 758
- between one and two years 543 2 592 1 518
- greater than two years 9 692 367
3 283 6 145 4 643
(a) During November 2014, PPC advised of the conclusion of discussions to acquire the Industrial Development Corporation’s (IDC) 20%
stake in Ethiopian based Habesha Cement Share Company for a purchase consideration of US$13 million. During the second half of
the 2015 financial year the company did not exercise its rights to purchase the IDC’s stake but rather support the upcoming rights
issue of Habesha (refer note 9).
Project funding has been secured for the DRC and Zimbabwe projects, amounting to
US$168 million and US$75 million respectively. In addition, the IFC subscribed for equity in the DRC project and now holds 10% equity
in the project. The one million tons per annum plant in the DRC is expected to be commissionedduring PPC's financial year, while the
700 000 tons per annum mill in Zimbabwe is also on track to be commissioned at the end of the 2016 calendar year. The one million tons
per annum kiln expansion at Slurry is planned to be commissioned during the 2018 financial year. A portion of the planned capital raise
will also be used to fund the expansion projects.
The transaction to acquire a 100% shareholding in 3Q Mahuma Concrete Pty Limited is nearing completion with the transaction close out
expected to be finalised by the end of June 2016. The estimated purchase consideration of R140 million will be settled via the issue of
new PPC shares.
19 Fair values of financial assets and liabilities
The financial assets and liabilities carried at fair value are classified into three categories as reflected below:
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Reviewed Unaudited Audited
Note Level * Rm Rm Rm
Financial assets
Available-for-sale
Unlisted investments at fair value(a) 10 2 - 95 82
Loans and receivables
Investment in government bonds 10 2 8 - 7
Loans advanced 10 2 - - 1
Loans relating to non-current assets held for sale 12 2 - - 46
Mark to market fair values 10/12 1 78 - 51
Amounts owing by equity accounted investment 9 2 - 45 -
Trade and other financial receivables 12 2 1 001 1 024 911
Cash and cash equivalents 1 460 464 718
At fair value through profit and loss
Unlisted collective investments at fair value (held for trading) 10 1 119 116 117
Non-current assets held for sale 11 2 42 - 110
Total financial assets 1 708 1 744 2 043
Level 1 657 580 886
Level 2 1 051 1 069 1 157
Level 3 - 95 -
Financial liabilities
At amortised cost
Long-term borrowings 14 2 4 614 5 388 6 727
Short-term borrowings 14 1/2 4 556 1 556 1 510
Trade and other financial payables 16 2 1 476 1 016 1 504
At fair value through profit and loss
Cash-settled share-based payment liability 15 2 3 11 5
Put option liabilities 15 3 415 151 464
Derivatives
Derivative instruments-current (cash flow hedge) 16 2 1 2 1
Total financial liabilities 11 065 8 124 10 211
Level 1 2 083 1 556 1 510
Level 2 8 567 6 417 8 237
Level 3 415 151 464
Methods and assumptions used by the group in determining fair values:
* Level 1 - financial assets and liabilities that are valued accordingly to unadjusted market prices for similar assets and liabilities.
Market prices in this instance are readily available and the price represents regularly occurring transactions which have been
concluded on an arm’s-length transaction.
* Level 2 - financial assets and liabilities are valued using observable inputs, other than the market prices noted in the level 1
methodology, and make reference to pricing of similar assets and liabilities in an active market or by utilising observable prices
and market-related data.
* Level 3 - financial assets and liabilities that are valued using unobservable data, and requires management judgement in determining
the fair value. Refer note 15 for quantitative information and significant assumptions on the unobservable inputs used to determine
fair value liabilities.
The estimated fair value of financial instruments is determined, at discrete points in time, by reference to the mid price in an active
market wherever possible. Where no such active market exists for the particular asset or liability, the group uses valuation techniques
to arrive at fair value, including the use of prices obtained in recent arm’s-length transactions, discounted cash flow analysis and other
valuation techniques commonly used by market participants.
The fair value of the unlisted investment has been valued based on the purchase agreement following the decision to dispose of the
investment. Further details are disclosed in note 10.
The fair value of loans receivable and payable is based on the market rates of the loan and the recoverability.
The fair value of cash and cash equivalents, trade and other financial receivables and trade and other financial payables approximate
their respective carrying amounts of these financial instruments because of the short period to maturity.
Put option liabilities have been calculated using EBITDA forecasts prepared by management and discounted to present value. Further
details are disclosed in note 15.
The fair value of derivative financial instruments relating to cash-settled share appreciation rights is determined with reference to
valuation performed by third-party financial institutions at reporting date, using an actuarial binomial pricing model.
Level 3 sensitivity analysis
Financial instrument Main Carrying
Valuation assump- value Decrease Increase
technique tions Rm Rm Rm
Put option liabilities Earnings EBITDA
multiple and net
debt 415 74 74
If the key unobservable inputs to the valuation model, being estimated EBITDA and net debt, were 1% higher/lower while all other variables
were held constant, carrying amount of the put option liabilities would decrease/increase by R74 million.
The sensitivities are only based on the DRC put option as any movement on the remainder of the Safika put options are not deemed material.
Movements in level 3 financial instruments
Financial assets Rm Rm Rm
Balance at beginning of the period - 95 95
Remeasurements - - (13)
Transfer to level 2 - - (82)
Balance at end of the period - 95 -
Financial liabilities
Balance at beginning of the period 464 145 145
Exercised during the period (42) - (108)
Put options issued - - 422
Remeasurements (16) - (14)
Time value of money adjustments 9 6 19
Balance at end of the period 415 151 464
20 Events after the reporting date
Post-period-end S&P downgraded PPC’s credit rating resulting in the long-term notes becoming payable in the short term and the notes have
been reclassified accordingly (refer note 14). With the acceleration of the repayment of the notes, the liquidity of the group has been
impacted. The group is in the final stages of securing bridging guarantee funding (refer note 14) which will assist with short-term
liquidity requirements. In order to strengthen the capital structure of the group, a capital rights issue has been announced whereby the
group anticipates to raise between R3 billion and R4 billion. This note should be read in conjunction with note 1 under the section
going concern.
Administration
PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC
JSE ISIN: ZAE 00017049
ZSE code: PPC
Directors
Executive: DJ Castle (chief executive officer), MMT Ramano (chief financial officer)
Non-executive: PG Nelson (interim chairman), S Dakile-Hlongwane, N Goldin, TJ Leaf-Wright, T Mboweni, SK Mhlarhi, B Modise, T Moyo*,
CH Naude, TDA Ross,
*Zimbabwean
Registered office
148 Katherine Street, Sandton, South Africa
(PO Box 787416, Sandton 2146, South Africa)
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Ground Floor, 70 Marshall Street, Marshalltown, South Africa
(PO Box 2209, Harare, Zimbabwe)
Transfer secretaries Zimbabwe
Corpserve (Private) Limited
4th Floor, Intermarket Centre,
Corner 1st Street/Kwame Nkrumah Avenue,
Harare Zimbabwe
(PO Box 2208, Harare, Zimbabwe)
Company secretary
JHDLR Snyman
148 Katherine Street, Sandton, South Africa
PO Box 787416, Sandton, 2146, South Africa
Sponsor
Merrill Lynch South Africa (Pty) Ltd
138 West Street, Sandton, South Africa
(PO Box 651987, Benmore 2010, South Africa)
Disclaimer
This document including, without limitation, those statements concerning
the demand outlook, PPC’s expansion projects and its capital resources and
expenditure, contain certain forward-looking views. By their nature,
forward looking statements involve risk and uncertainty and although PPC
believes that the expectations reflected in such forward looking statements
are reasonable, no assurance can be given that such expectations will prove
to have been correct. Accordingly, results could differ materially from
those set out in the forward looking statements as a result of, among other
factors, changes in economic and market conditions, success of business and
operating initiatives, changes in the regulatory environment and other
government action and business and operational risk management. While PPC
takes reasonable care to ensure the accuracy of the information presented,
PPC accepts no responsibility for any consequential, indirect, special or
incidental damages, whether foreseeable or unforeseeable, based on claims
arising out of misrepresentation or negligence arising in connection with
a forward looking statement. This document is not intended to contain any
profit forecasts or profit estimates.
Date: 14/06/2016 07:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.