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PPC LIMITED - PPC Attending BofA Securities Investor Conference and Operational Update for the 11 months ended February 2020

Release Date: 18/03/2020 08:00
Code(s): PPC     PDF:  
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PPC Attending BofA Securities Investor Conference and Operational Update for the 11 months ended February 2020

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" or "Group")


PPC ATTENDING BofA SECURITIES INVESTOR CONFERENCE AND OPERATIONAL UPDATE FOR THE 11
MONTHS ENDED FEBRUARY 2020


BofA SECURITIES INVESTOR CONFERENCE
PPC will be participating in the virtual BofA Securities Investor Conference on
Wednesday 18 and Thursday 19 March 2020. In preparation for this event, PPC has prepared
an operational update, which reflects information on PPC operations for the period
April 2019 to February 2020 as outlined below.


GROUP PERFORMANCE
The trading performance in the Group’s Southern Africa businesses has started to show
signs of stabilisation in terms of cement volumes whilst the business continues to
realise year-on-year cement price increases. The International cement business has
delivered a resilient performance for the period with continued year-on-year revenue
growth in DRC and Rwanda whilst PPC Zimbabwe has seen an improvement in EBITDA margins
and is fully self-funding. The Group has continued with stringent cost containment
supported by a restructured Group head office. Group capex has reduced significantly
when compared with the same period last year, and is expected to be at the lower end
of the guided range of R600m to R800m given at the Group’s interim results. The
reduction in capex is expected to counter the negative impact of reduced EBITDA. All
business units are meeting their debt obligations other than the DRC operations, which
has continued to pay only its interest obligations. In the DRC, PPC has successfully
negotiated an extension to the capital moratorium which expired in January 2020.


UPDATE ON THE CAPITAL STRUCTURE
PPC indicated to investors in November 2019 that management was reviewing the capital
structure of the Group. Subsequently, PPC has embarked on a project to refinance and
restructure the Group. There are three parts to this, all of which are at various
stages of development.


1) The first part of this project entails:
a) The relaxation of covenants in respect of South African debt. This is partially
complete and is expected to be finalised within the next three months,


b) The extension of capital repayments with regard to the maturity profile in South
Africa is in the early stages and progressing well.


2) The second part aims to achieve an extension of the capital holiday in the DRC,
which would complete a process which commenced in July 2019. These negotiations have
concluded, and the parties are finalising the related legal process. This will extend
the capital moratorium in the DRC to January 2022.


3) The third part relates to the unsustainable debt levels in the DRC, and its
requirement for deficiency funding from PPC Ltd. These negotiations have commenced
and PPC is considering various options for the refinancing and restructuring project
that     may   include   a   capital   injection       by   interested         third   parties     into   the
International cement business. PPC will update shareholders at its interim results in
June 2020 in this regard. PPC does not envisage a capital raise at PPC Limited level
for this purpose.


SOUTHERN AFRICA CEMENT
PPC    realised   average    cement    price   increases      in   its    Southern       African    business
(including Botswana), of 8.0% to 10.0% for the period. SA cement sales volumes declined
by 16% to 18% compared to the corresponding period in 2019 (“comparable period”).
Increased importer and blender activity has impacted PPC’s domestic volumes and
pricing. Total cement imports increased by 17% for January 2019 to December 2019
compared to the same period in 2018, amounting to approximately 1.2 million tonnes.
The coastal business is experiencing a downturn in volumes impacted by imports, whilst
inland volumes are showing signs of improvement. The Concrete Institute (“TCI”) on
behalf    of   the   domestic   cement    industry      has   completed         its    submission    to   the
International Trade Administration Commission (“ITAC”) highlighting the impact of
imports on domestic cement production.


MATERIAL BUSINESS
The    material   businesses    consisting     Lime,    aggregates       and    readymix    experienced    a
combined decline in revenue and EBITDA of 5% to 10%. The Lime business has been
hampered by constrained steel demand, exacerbated by the Saldhana shutdown, whilst
the aggregates and readymix businesses experienced muted demand due to their exposure
to the domestic construction sector. The Lime and aggregates businesses benefitted
from increased steel production in the Gauteng region and a diversification strategy
to broaden the customer base.


INTERNATIONAL CEMENT


ZIMBABWE
Despite     the   challenging    trading   conditions   in    Zimbabwe,     including     liquidity
constraints and inflationary pressures, PPC Zimbabwe remains self-sufficient. Overall
cement sales volumes have declined by 15 to 20% due to a weaker economic climate,
offset by cement pricing which has been aligned to input cost inflation. PPC Zimbabwe
achieved EBITDA margins of 35% to 38%. PPC Zimbabwe has continued to meet its debt
obligations in country.


RWANDA
In Rwanda, Cimerwa continues to benefit from increased construction activity and high
economic growth. The business achieved higher volumes, with EBITDA tracking in line
with the prior period supported by stable pricing. Cimerwa in which PPC holds a 51%
stake, has indicated to PPC its intention to list the business in this calendar year
on the Rwandan Stock Exchange. PPC views this as a positive step by the company to
diversify its shareholder base and unlock value for PPC shareholders.


DEMOCRATIC REPUBLIC OF CONGO (DRC)
The EBITDA performance of the business is tracking higher compared to the same period
last year, supported by stable sales volumes and pricing. PPC is currently engaging
with its lenders to restructure the debt in the DRC and put in place a more sustainable
capital structure, as addressed above


CORONA VIRUS (COVID-19)
In early March 2020, PPC formed a dedicated task team to deal with the Corona virus
(COVID-19) outbreak and implemented the first protective measures. The company is
following the guidelines from the World Health Organisation, South African government
and other regulatory bodies in the countries where the Group has operations. Such
guidelines related to items such as staff travel, protection of the premises, hygiene
measures and social distancing. PPC continues to monitor the impact on the business
both from an economic and social perspective and actively supports the containment of
the risks for its employees and business partners contemplating various scenarios for
future     developments.   PPC   will   keep   investors     updated   as   to   any    significant
developments that are impacting the business. Currently, PPC is fully operational
across all jurisdictions.
OUTLOOK
PPC management is focused on concluding the refinancing and restructuring in the
International cement business. The Group will continue to focus on improving the
performance of its core operations and positioning the Group for future growth as the
leading organization in the South African cement industry.


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


Sandton
18 March 2020
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: 18-03-2020 08:00:00
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