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Restatement to Prior Period Results, Trading Statement, Delay in Reporting of FY20 Results & Renewal of Cautionary
PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE ISIN: ZAE000170049
JSE code: PPC ZSE code: PPC
("PPC" or "Company")
PPC LTD – FURTHER RESTATEMENT TO PRIOR PERIOD FINANCIAL RESULTS, UPDATED TRADING
STATEMENT, DELAY IN REPORTING OF 31 MARCH 2020 FINANCIAL RESULTS, OPERATIONAL
UPDATE, RESTRUCTURING AND REFINANCING PROJECT UPDATE AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
FURTHER RESTATEMENTS TO PRIOR PERIOD FINANCIAL RESULTS
Shareholders of the Company (“Shareholders”) are referred to the announcement on
the Stock Exchange News Services (“SENS”) issued on 18 August 2020. The Company
wishes to advise Shareholders that during the audit process for the year ended
31 March 2020, and subsequent to 18 August 2020, additional prior year errors were
identified and corrected. These corrections and financial impacts are detailed
below.
EQUITY-ACCOUNTED INVESTMENT IN HABESHA - ETHIOPIA
PPC previously advised Shareholders that the equity accounted investment in Habesha
of R146 million should have been fully impaired in the prior year. PPC has
subsequently discovered that Habesha restated their FY19 financial statements due
to the first-time adoption of International Financial Reporting Standards (“IFRS”)
in Ethiopia, highlighting the fact that PPC should have adjusted its share of
losses in previous years to comply with IFRS, which it did not do.
The result of correcting the error by accounting for the IFRS losses reduced the
carrying value of the associate at 31 March 2018 by R126 million and by a further
R20 million at 31 March 2019. Therefore, no impairment is required in the current
financial year as the additional losses decreased the carrying value to zero by
31 March 2019.
DEMOCRATIC REPUBLIC OF CONGO PUT OPTION
As part of the project financing arrangements for the development of PPC’s
Democratic Republic of Congo (“DRC”) operations, PPC entered into a put option
agreement with an international development finance institution in terms of which
the latter can put its investment, or part thereof, in PPC Barnet DRC Holdings, to
PPC. The exercise price is determined by way of a formula stipulated in the
agreement.
In previous years, PPC applied the formula incorrectly in determining the carrying
value of the put option. Correcting this error resulted in a reduction in the
carrying value of the put option from R245 million (as previously stated) to
R176 million as at 31 March 2018 and from R274 million (as previously stated) to
R251 million as at 31 March 2019. Consequently, the loss on revaluation of the put
option in 2019 increased by R46 million.
NON-CONTROLLING INTERESTS
In finalising the Group annual financial statements, further prior year errors
relating to non-controlling (“NCI”) interests have come to light that require
additional investigation and conclusion. Whilst any required adjustments are not
expected to impact the financial loss for the period ended 31 March 2020, these
adjustments are important in ensuring the financial statements present fairly, in
all material respects, the financial position of the Group at the respective balance
sheet dates. The adjustments required are expected to be a reclassification between
NCI and Retained Earnings and further details will be disclosed together with the
release of the audited financial statements.
UPDATED TRADING STATEMENT FOR THE YEAR ENDED 31 MARCH 2020
Further to the announcement on 18 August 2020, providing guidance on the financial
results for the period ended 31 March 2020, the Company would like to update its
Shareholders as outlined below.
Group revenue for the year ended 31 March 2020 is confirmed to have decreased by
less than 5% compared to the prior year (March 2019: R10.409 billion). Earnings
before interest, tax, depreciation, and amortisation (“EBITDA”), is confirmed to
have decreased by approximately 16% compared to the prior year
(March 2019: R1.946 billion). Before taking into account any adjustment resulting
from the NCI re-allocation to retained earnings referred to above, basic earnings
per share is expected to reflect a loss per share of between 120 and 130 cents per
share, and headline earnings per share is still expected to be between 25 cents
and 30 cents per share.
Total Group assets and total Group borrowings were R17.093 billion and R5.8 billion
at 31 March 2020 respectively. Total Group equity is expected to be approximately
R7.793 billion.
DELAY IN REPORTING OF 31 MARCH 2020 ANNUAL FINANCIAL RESULTS
PPC announced on 18 August 2020 that it expected to release its year ended 31 March
2020 financial results by no later than 30 September 2020. As a result of the
required restatements and the finalisation of the year-end audit, PPC now expects
to release its financial results for the year ended 31 March 2020 in the week of
5 October 2020. PPC has received dispensation from the JSE in terms of this extended
reporting date given the impact of the Covid-19 pandemic on the business, the
complexities of finalising the year-end audit as well as the impact of the
restructuring and refinancing project underway.
OPERATIONAL UPDATE AUGUST 2020 – SEPTEMBER 2020
As reported to Shareholders in the Company’s 30 April 2020, 23 July 2020, and
18 August 2020 operational updates, PPC’s cement operations ramped up in May 2020
post the Covid-19 restrictions imposed at the end of March 2020 across most of the
jurisdictions in which the Group operates. Double-digit year-on-year growth of
cement volumes in South Africa were experienced in June and July and have continued
at a high rate in August and September. For these two months combined, PPC expects
volume growth of more than 25% when compared to the prior year. The resumption of
construction activities and the temporary effect of high activity in construction
projects to catch up on the delivery of these projects have had a positive impact
on the performance.
Given the inherent uncertainty of the current South African economic environment,
the Company is cautious on the sustainability of strong cement volumes experienced
and continues with the implementation of measures to reduce costs and increase
cash generation from its operations. As at the date of this announcement, total
borrowings in the South African operations have decreased by over R200 million as
a result of the increased cash generation and these initiatives.
In the international subsidiaries, the businesses have been less affected by the
Covid-19 pandemic. In aggregate, total cement volumes sold also showed double-
digit growth comparing July 2020 with July 2019. Strong sales volumes have continued
in August and September 2020, with PPC Barnet (DRC) and PPC Zimbabwe experiencing
approximately 25% sales volume growth respectively compared to the prior comparable
period. In Rwanda, CIMERWA expects August and September cement volumes sold to
increase by approximately 10% compared to the same period last year. All markets
of these international subsidiaries of PPC benefit from a good performance of the
cement plants and healthy construction activities. The increased sales volumes and
the effect of the cost reduction and cash preservation measures have resulted in
cash flows for the last few months showing a positive trajectory.
The financial information contained in this announcement has neither been reviewed
nor reported on by the Company’s external auditors.
RESTRUCTURING AND REFINANCING UPDATE
As outlined in the announcements on 13 August 2020, 18 August 2020, and
15 September 2020, PPC is undertaking a restructuring and refinancing project with
the objective of implementing a sustainable capital structure. PPC continues to
make positive progress on the project with finalisation of revised facilities
documentation with its South African lenders expected in October 2020 and
standstill documentation with its DRC lenders in November 2020.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution when dealing in securities
of PPC until the release of the annual financial statements for the year ended
31 March 2020 and full details of the funding arrangements with the lenders and
the capital raise are published.
Sandton
30 September 2020
Sponsor
Merrill Lynch South Africa (Pty) Limited
Financial Communications Advisor:
Instinctif Partners
Louise Fortuin
Mobile: +27 71 605 4294
Date: 30-09-2020 08:10:00
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