PPC rocked by S&P downgrade
South African cement-maker PPC has reported an astonishing 93% plunge in full-year earnings after enduring a liquidity crisis following a cut in its credit rating to junk status by S&P Global Ratings.
The market did not take well to the news, with shares in the firm falling more than 26% since May 2016, when S&P - the agency that downgraded South Africa's credit rating to junk status in April - slashed the company's long- and short-term South African national scale corporate credit ratings to zaBB- and zaB. It also placed all PPC credit ratings on CreditWatch with negative implications.
"PPC endured a challenging financial year, while still delivering on a number of key initiatives and projects during the year. Our results were impacted by a liquidity crisis precipitated by an unexpected S&P debt downgrade," said chief executive Darryll Castle.
The seasoned executive has more than 15 years of experience in the civil engineering, mining and financial sectors and has held a number of senior management positions with international organisations. He is one of the few industry leaders to hold MBA, CFA and engineering qualifications. PPC CFO Tryphosa Ramano is an active member of the CFO SA community and has also held the financial reins at SAA.
Established in 1892 as De Eerste Cement Fabrieken Beperkt, the world-class provider of materials and solutions into the basic services sector has a history that is closely linked to the growth and development of South Africa. It has produced cement for many of the country's most famous landmarks and construction projects.
Group revenue rose 5% to R9,6 billion, buffeted by PPC's African concerns, where the group draws 70% of its income, while EBITDA fell by 13%. Headline earnings per share fell to seven cents from 107 cents in the comparable period the year before.
Despite enduring a number of challenges over the year, PPC still managed to come completed a number of initiatives with the aim of diversifying its portfolio as profits dry up in its domestic market. PPC has commissioned a mill in Zimbabwe and production facilities in Ethiopia and the Democratic Republic of Congo (DRC) to boost cement capacity by 33% to 11.4 million tonnes per annum. It is currently negotiating a merger with Afrisam.
"I believe we have reached the bottom of the pricing cycle in South Africa and am looking forward to the ramp up of our new operations in the DRC, Ethiopia and Zimbabwe which will grow our operating base and further diversify our earnings," Castle said.