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PPC LIMITED - Update on Financial Reporting and Auditing Guidance in Zimbabwe and S&P Downgrade

Release Date: 27/03/2019 08:05
Code(s): PPC PPC003 PPC005     PDF:  
 
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Update on Financial Reporting and Auditing Guidance in Zimbabwe and S&P Downgrade

PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE ISIN: ZAE000170049
JSE code: PPC ZSE code: PPC
JSE code: PPC003   JSE ISIN: ZAG000117524
JSE code: PPC005   JSE ISIN: ZAG000117532
("PPC" or "Company" or "Group")

UPDATE ON FINANCIAL REPORTING AND AUDITING GUIDANCE IN ZIMBABWE AND S&P DOWNGRADE

BACKGROUND

Following the SENS announcement on 7 March 2019, PPC wishes to update investors on
the accounting implications of the announcement by the Zimbabwe Public Accountants
and Auditors Board (PAAB) on 21 March 2019 regarding currency changes in Zimbabwe.

KEY ACCOUTNING CONSIDERATIONS AND IMPLICATIONS FOR PPC GROUP

The PAAB guidance was issued to highlight considerations auditors of financial
statements would be required to make for reporting for periods commencing on or
after 1 January 2018. By implication, acknowledgement that the functional currency
of Zimbabwe businesses has changed to the Real Time Gross Settlement (RTGS) $, PPC
has reviewed the guidance issued by the PAAB and the impact on the group is as
follows:

   1.   PPC will consolidate PPC Zimbabwe according to IFRS with the effective date
      of the change in functional currency being 1 October 2018
   2.   The reported results of PPC Zimbabwe being consolidated in PPC Group as at
      30 September 2018 remains unchanged. There will be no restatement of
      previously reported figures;
   3.   The reported results of PPC Zimbabwe being consolidated in PPC Group from 1
      October 2018 will be based on prevailing commercial rates for the remainder
      of the 2019 financial year, ranging between 2.5 RTGS$ : 1 US$ to 3.5 RTGS$ :
      1 US$;

In terms of guidance and reference to March 2018 results, PPC Zimbabwe’s EBITDA in
rands is expected to be within 5% to 15% of previously reported EBITDA for March
2018 of R573m. PPC will, for the 2019 Group financial results reporting, provide
extensive financial statement disclosures with regard to the Zimbabwean business
and the impact of the change in functional currency on the reported results.

S&P GLOBAL RATINGS DOWNGRADE

BACKGROUND AND RATIONALE

On 22 March 2019, S&P Global Ratings (“S&P”) downgraded PPC’s long - and short-term
South African national scale corporate credit ratings from ‘zaA-/zaA-2’ to ‘zaBBB-
/zaA-3’.       The       full        report       can        be        found      at
https://www.standardandpoors.com/en_US/web/guest/home.   The    rationale    for the
downgrade was attributed to the announced changes to monetary policy in Zimbabwe
and challenging domestic trading conditions.
It is important to note that S&P has excluded the Zimbabwe operations in their
assessment of PPC's financial profile, and will do so until there is more certainty
on reporting and cash repatriation prospects. It should also be noted that PPC’s
latest rating is still four rating levels above that of the ‘zaBB –’ rating on the
national scale S&P ratings, when the company was downgraded in 2016.

While they do acknowledge that the Zimbabwean business is will not require
financial support from PPC group, we do believe that this approach is unduly
punitive and not reflective of the economic reality of our business.

PPC GROUP LIQUIDITY AND BALANCE SHEET POSITION

The PPC group remains adequately capitalised with previously guided liquidity
headroom of 15% being maintained. Furthermore, the maturity profile remains
adequate and covenant levels are aligned to previously guided ranges as shown on
page      12      of     the      Merrill      Lynch      presentation  booklet:
https://www.ppc.co.za/investors/presentations/financials.aspx.

Management is confident that the facilities in place are adequate to enable the
group to navigate any volatility in the markets in which the company operates. As
reported in the operational update on the 5 February 2019, group gross debt has
remained at similar levels to that reported in September 2018. The downgrade does
not trigger early repayment of debt, however the downgrade may impact PPC’s cost of
debt in future.

The information in this update      has   not   been   reviewed   or   reported   on   by   the
Company’s external auditors.


Sandton

27 March 2019

Sponsor

Merrill Lynch South Africa (Pty) Limited


PPC:

Anashrin Pillay

Head Investor Relations

Tel: +27 (0) 11 386 9000


Financial Communications Advisor:

Instinctif Partners

Gift Dlamini

Mobile: +27 11 050 7536

Date: 27/03/2019 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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