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Audited Abridged Financial Statements and Audit Opinion for the six months 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 000170049
ZSE code: PPC
www.ppc.co.za
AUDITED ABRIDGED FINANCIAL STATEMENTS AND AUDIT OPINION
for the six months ended 31 March 2016
Abridged financial statements
Shareholders of PPC (Shareholders) are advised that the Company has finalised its audited annual financial statements for the
year ended 31 March 2016. With the exception of the unmodified audit opinion and revision of certain of the notes to the annual
financial statements regarding going concern and events after reporting date (see notes 1 and 20 below), the abridged
financial statements contain no further changes to the reviewed provisional financial results for the year ended 31 March 2016
published on the Stock Exchange News Services (SENS) on the 14 June 2016. A full copy of the audited annual financial
statements is available for viewing and downloading at www.ppc.co.za or at http://ppc.investoreports.com/ir2016/.
Audit report
The abridged financial statements for the year ended 31 March 2016 have been audited by Deloitte & Touche. The annual
financial statements, from which the abridged financial statements were derived, were also audited by Deloitte & Touche.
The auditors have concluded that the annual financial statements present fairly, in all material respects, the financial
position of PPC as at 31 March 2016, and its financial performance and cash flows for the year then ended in accordance
with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. The auditors
expressed unmodified audit opinions, however, these reports contain an emphasis of matter drawing attention to the disclosure
made by the Company on the going concern assumption (see note 1 below). Copies of the aforementioned audit reports are available
for inspection at the Company’s registered office, together with the financial statements identified in the respective audit
opinions.
The auditors' report does not necessarily report on all of the information contained in this announcement. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the auditors' engagement, they should obtain
a copy of that report together with the accompanying financial information from the Company’s registered office.
Events after the reporting date
Shareholders are directed to the events after the reporting date contained in note 20 below under Notes to the Condensed
Consolidated Financial Statements. This note outlines the events that have occurred post March 2016; notably the finalisation
of the liquidity and guarantee facility agreement which allowed the Company to repay noteholders, the conclusion of the
acquisition of 3Q Mahuma Concrete (Pty) Limited and the successful completion of an underwrite agreement for the Company’s
R4 billion rights issue, as previously communicated to Shareholders. The proceeds of the rights issue will provide the
Company with the necessary funding to continue as a going concern for the foreseeable future.
Integrated report
The Company is currently finalising its integrated report which will be posted to Shareholders, together with the notice of annual
general meeting (Notice), on or about 30 September 2016. An announcement will be published on SENS as soon as the integrated
report containing the aforementioned Notice, is distributed to Shareholders.
On behalf of the board
PG Nelson
Interim chairman
DJ Castle
Chief executive officer
MMT Ramano
Chief financial officer
Sandton
24 August 2016
Abridged consolidated statement of comprehensive income
Six Six Twelve
months ended months ended months ended
31 March 31 March 30 Sept
2016 2015 2015
Notes Audited 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)
Profit on disposal of non-core assets 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.
Abridged consolidated statement of financial position
31 March 31 March 30 Sept
2016 2015 2015
Audited 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
Abridged consolidated statement of cash flows
Six months ended Six months ended Twelve months ended
31 March 31 March 30 Sept
2016 2015 2015
Audited 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.
Abridged 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
Issuance of shares to fund an
additional investment in
Safika Cement 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 (audited) (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
Audited Unaudited Audited Audited 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
Audited Unaudited Audited Audited Unaudited Audited Audited 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 abridged consolidated financial statements
1 Basis of preparation
The abridged 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
abridged consolidated financial statements.
These abridged 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 24 August 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 determining the appropriate basis of preparation of the financial statements, the directors are required to
consider whether the group can continue in operational existence for the foreseeable future.
The financial performance of the group is dependent upon the wider economic environment in which it operates.
Factors exist which are outside the control of the group which can have a significant impact on the business,
specifically, volatility in the rand / US dollar exchange rate, energy prices and prices of commodity prices,
which impact on the business’s input costs. Despite the operational and cost containment achievements of the group
over the last 12 months, the weaker cement price environment due to competitive pressures has put the group’s cash
flows and profitability under pressure. The directors have determined that the group needs to take further decisive
measures to improve its ability to operate in the current competitive pricing environment and enable it to benefit
from any recovery in cement prices in the medium to long term.
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 12 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 tonnes 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 cashflow.
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 commodity prices which culminated in downward
pressures on selling prices in the regions in which the group operates. In addition, South Africa which is
major contributor to earnings, has seen intensified competition in terms of new entrants and also imports
into the country despite the economic slowdown. That has resulted in overcapacity in the South African
market. The board and executive management have reviewed the group’s business and capital structure and
developed a business plan in order to be able to deal effectively with the effects of a continuation of the
current low selling price environment and limited economic growth. Key elements of the business plan are the
reduction of costs and improvements in efficiencies, through the Profit Improvement Program (PIP) implemented
in 2015; from which R390 million of savings have been achieved; 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. In prior years, the group had also completed the right-sizing of the
various operations throughout the group.
As at 29 March 2016, the board had initiated a review of the group’s capital structure and potential rights
issue. This capital raise investigation was at an advanced stage at the date of the S&P Global ratings
review.
Post our current reporting date S&P Global Ratings conducted an event driven ratings review which was
unexpected given that their annual review was supposed to be in June 2016. Given the unexpected event driven
ratings review, the outcome was the downgrade to sub-investment grade to ZaBB-/ZaB from ZaA/ZaA-2 long and
short-term South African national scale. Due to long-term rating falling below ZaBBB-, the company was
required to offer early redemption in terms of its Domestic Medium Term Note (“DMTN”) programme memorandum.
The principal value of the notes issued in terms of DMTN programme amounted to R1 750 million as at
31 March 2016 and their maturity date was from the company’s 2019 financial year onwards. At period end,
the company reclassified the full outstanding notes’ value from long-term borrowings to short-term
borrowings, thereby creating a technical insolvency where its current liabilities exceeded current assets.
In addition to this early redemption requirement, the company negotiated and finalised the liquidity and
guarantee facility to a maximum of R2 billion, from Standard Bank of South Africa Limited, Rand Merchant
Bank, Absa/Barclays Bank Limited and Nedbank Limited, that will bear interest at JIBAR plus 10% and
guarantee fees of 7.5%. This facility was utilised to redeem the outstanding notes of R1 614 million on
15 July 2016 where noteholders opted to accept the company’s offer (refer long-term borrowings, note 14,
and events after reporting date, note 20). The balance of the outstanding notes of R136 million will
continue following the original terms of the respective notes, as no response was received from
noteholders. Should there be a subsequent response from noteholders, the company may consider the
request of noteholders but is not legally bound in terms of the DMTN programme. Raising and transaction
fees, incurred post the reporting date, of R171 million will be capitalised to borrowings and amortised
to the income statement over the five month period of the facility.
The repayment of the liquidity and guarantee facility will be funded from the proceeds of the proposed
rights issue, or 1 November 2016 if earlier. An additional R1 billion will also be utilised to repay
other existing debt facilities out of the rights issue proceeds.
The board’s review of the group’s capital structure has resulted in significant steps being taken to
strengthen the group’s financial position. As released on the JSE SENS on 31 May 2016, the board is
undertaking a R4 billion rights issue. A significant step to the rights issue was taken on the
1 August 2016, where shareholders approved the following resolutions at a general meeting of shareholders:
- The increase of the authorised stated capital from 700 000 000 shares to 10 000 000 000 shares
- The amendment to the memorandum of incorporation reflecting the increase in the authorised stated capital
- The authorisation to issue additional shares that will exceed 30% of the existing voting power of
the shares that were in issue
- The granting of a general authority to directors to issue the required number of shares for purposes
of implementing the proposed rights offer.
Following these approvals, the company is proceeding with the R4 billion proposed rights offer, which is subject
to standard material adverse change clauses.
Management have prepared cash flow forecasts for a period in excess of 12 months. Various scenarios
have been considered to test the group’s resilience against business risks including:
- Significant adverse movements in the rand / US dollar exchange rate, from current forex levels,
and cement selling prices or a combination thereof; and
- Failure to meet forecast demand targets.
The directors have concluded that the group’s new capital structure, after a successful rights issue
and debt facilities amendments, provides sufficient headroom to cushion against downside operational
risks and reduces the risk of breaching new debt covenants.
If the rights issue is unsuccessful for whatever reason, the group would have to consider other
alternatives which may reduce the risk that the group would be able to meet obligations as they fall
due. These options may include:
- renegotiating or refinancing existing facilities;
- full or partial curtailment of capital projects, which may result in significant financial penalties;
- exploring the disposal of assets; or
- merger or acquisition transaction involving the company, although there is no certainty that such sales
or transactions could be realised in the available timeframe on acceptable terms, or at all.
The above actions require the participation and agreement of external parties, the directors are
therefore not confident that any such alternative courses of action could be achieved in the limited
time available, or that they would ultimately be successful or be in the best interest of shareholders
over the long term. As a result, in the event that the proposed rights issue is not completed and the
amended facilities agreements do not come into effect, the group would be unable to meet its
obligations as they fall due.
The need for shareholder approval of the planned rights issue therefore represented a material
uncertainty that could have cast significant doubt about the group’s and company’s ability to
continue as a going concern such that it may be unable to realise its assets and discharge its
liabilities in the normal course of business. Following approval from the shareholders at the general
meeting on 1 August 2016, the directors believe that this uncertainty has been significantly eliminated.
The directors have concluded that the group’s new capital structure, after fulfilling the successful
rights issue, will provide the necessary headroom to cushion against increased business risks and
depreciation in the currency, and reduces the risk of breaching new debt covenants. Accordingly, the
directors believe that the successful completion of the planned rights issue is the best option
available to the company.
Based on the group’s expectation that the conditions of the planned rights issue will be met, in
addition to the group’s current trading position and forecasts and facilities 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 the financial statements on a going concern basis. These 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 the financial statements.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Audited 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 intangible assets (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
Audited 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 were processed in September 2015.
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
Audited 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
Audited 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
Audited Unaudited Audited
Rm Rm Rm
5 Earnings and headline earnings continued
Headline earnings
Profit for the period 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.
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
Audited 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
Audited 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
Audited 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
Audited 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
Audited 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 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
Audited 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 was initially planned to be finalised by June 2016 but is now anticipated to
be completed by November 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
Allowances for doubtful debts (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
Audited 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 Cement
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
Audited 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 Cement
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.
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
Audited 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; (refer note 6) points
thereafter 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 L IBOR 1 542 - 938
interest payable bi-annually property, plant and equipment plus 725 basis points
starting July 2017 ending (refer note 6)
January 2025 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-term borrowings
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
Audited 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
During the period PPC 001 of R650 million was redeemed.
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 early redemption to noteholders in terms of the bond programme
memorandum. The notes have therefore been reclassified from long-term to short-term borrowings.
During June 2016 the company has secured funding up to a maximum of R2 billion from Nedbank, Standard Bank,
Rand Merchant Bank and Absa (the liquidity and guarantee facility agreement) which can only be used to
reimburse the noteholders for the outstanding notes and related accrued finance costs.
The liquidity and guarantee facility will bear interest at JIBAR plus 10% and repayment is due from the proceeds
of the proposed capital raise or 1 November 2016 if earlier. Post-reporting date, the company utilised this
facility to repay noteholders. The facility incurred fees of R171 million which will be amortised to the
income statement over the five-month period of the facility. Further details are included in note 20.
(b) During the period the company secured funding of R2 billion repayable in September 2017. The funding was partly
used to settle the first note 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 where applicable
received waivers in respect thereof. Refer to the going concern basis of preparation in note 1.
Twelve
Six months Six months months
ended ended ended
31 March 31 March 30 Sept
2016 2015 2015
Audited 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 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 on 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 was exercised during the
2015 financial year for R108 million. The remaining put option 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
Audited 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 tonnes per annum
plant in the DRC is expected to be commissioned during PPC's financial year, while the 700 000 tonnes per annum mill in Zimbabwe is also
on track to be commissioned at the end of the 2016 calendar year. The one million tonnes per annum kiln expansion at Slurry is planned
to be commissioned during the 2018 financial year. A portion of the planned rights issue will also be used to fund existing capital
commitments.
The transaction to acquire a 100% shareholding in 3Q Mahuma Concrete Pty Limited was concluded past the reporting date. The purchase
consideration of R135 million will be settled via the issue of new PPC shares. Details of which are available in note 20.
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
Audited 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 2 086 1 556 3 906
Level 2 8 564 6 417 5 841
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 Safika Cement options have been settled at period end.
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
Liquidity and going concern
Following the finalisation of the liquidity guarantee facility, the company early redeemed R1 614 million of the outstanding notes
on 15 July 2016, with the balance of the outstanding notes of R136 million (excluding transaction costs) following the original
terms of the respective notes.
On 1 August 2016, the shareholders approved the following resolutions at a general meeting of shareholders:
- The increase of the authorised stated capital from 700 000 000 shares to 10 000 000 000 shares
- The amendment to the MOI reflecting the increase in the authorised stated capital
- The authorisation to issue additional shares that will exceed 30% of the existing voting power of the
shares that were in issue
- The granting of a general authority to directors to issue the required number of shares for purposes
of implementing the proposed rights offer.
Following these approvals, the company was able to proceed with the proposed rights offer.
On 24 August 2016, the proposed R4 billion rights offer was fully underwritten by the banks which is subject to
standard material adverse change clauses. The company believes that the proceeds from the capital raise provides
it with the necessary funding to continue as a going concern for the foreseeable future.
On 1 July 2016, all terms and conditions on the transaction to acquire 100% of 3Q Mahuma Concrete (Pty)
Ltd (3Q) were achieved and 3Q became a wholly owned subsidiary. The acquisition consideration was settled
via the issuance of 17 565 872 new PPC shares. The fair value of the shares issued for the acquisition,
using the ruling share price of R7.68 on the effective date of the transaction, amounted to
R135 million.
The commercial rationale for the transaction is to progress the company’s channel management strategy
that serves as a complementary platform for cement growth in South Africa. PPC’s strategic intention is
to be a provider of materials and solutions into the basic services sector. Cementitious distribution
channels including readymix is increasingly being utilised as a conduit to grow and sustain cement sales
volumes. At the time of acquisition, 3Q was the largest independent readymix concrete provider in South
Africa and provides PPC with a further complementary platform to grow our service offering in this market
segment. The South African market is evolving towards a concrete delivery model, which requires
complementary building materials including cement, aggregates and readymix. Controlling cement distribution
channels are vital, with customers and end users requiring integrated solutions. 3Q will assist PPC in
achieving its vision.
The company is in the process of finalising the fair value of the assets and liabilities as on the
acquisition date. Provisional fair values of assets and liabilities are reflected below:
Non-current assets 113
Current assets 108
Non-current liabilities (9)
Current liabilities (77)
Total consideration 135
Administration
PPC Limited
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE code: PPC
JSE ISIN: ZAE 000170049
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
The Place, 1 Sandton Drive, 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: 24/08/2016 04:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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