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PPC loss exceeds its market cap
PPC loss exceeds its market cap
Published Date: 2020-10-12 | Source: Stephen Gunnion | Author: Stephen Gunnion
Covid-19 has added to a torrid time for the cement producer, which it taking urgent steps to reduce its debt.
PPC has reported a lost more than twice its market value after impairing its operations by more than R3 billion due to Covid-19. Its directors also say that its debt pile needs to be tackled as it threatens its going concern status, with liabilities exceeding assets.
The company's results for the year to end-March were delayed a number of times due to Covid-19 and a number of restatements. After detecting errors over how Ethiopian associate Habesha was accounted for in August, more mistakes were picked up last month.
CEO Roland van Wijnen, who took over a year ago, said already difficult trading condition, particularly in South Africa, were made worse by the pandemic, which emerged in SA during the last month of its trading year. He said it acted quickly to protect employees, improve competitiveness and preserve cash.
The company booked impairments before tax of R3.07 billion, including the R1.95 billion write-down of its local cement and readymix operations and R1.13 billion on its business in the Democratic Republic of Congo.
Revenue declined by 2.4% to R10.2 billion from last year's restated R10.5 billion. Excluding Zimbabwe, revenue declined by 7% to R8.38 billion, mainly due to lower revenue from its SA cement operations. While its cost of sales fell 3% to R8.25 billion, administration and other operating revenue jumped 16% to R1.2b billion due to the impact of hyperinflation in Zimbabwe and an increase in fees paid to consultants. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 18% to R1.6 billion. It swung to a R2.39 billion loss from a profit of R162 million last year. That resulted in a loss per share of 124c, down from earnings of 16c in 2019. Headline earnings per share, which exclude the impact of the impairments and other capital items, improved by 35% to 27c.
PPC's debt swelled by R800 million to R5.8 billion, mostly due to the currency impact of R638 million on its international debt. It said it had embarked on a detailed refinancing and restructuring project, which would ensure it was sustainably capitalised and self-sufficient on a standalone basis across its regions of operation. It planned to raise capital from non-core asset sales and from shareholders by way of a rights issue in the range of R750 million to R1.25 billion in order to strengthen the balance sheet and enable the broader restructuring.
The company said it remained cautious on its outlook for the current year but was hopeful that the government's commitment to an infrastructure investment led economy recovery would lead to increase cement consumption.
Van Wijnen said the group's capital restructuring remained a key priority. Over the next nine months, it would take the strategic and operational actions needed to improve its financial position and performance.
PPC's shares rose 4.7% to 67c on Friday, taking its market capitalisation to R1.07 billion. The shares have fallen 89% this year.
Like many other rights issues in this market, the PPC share price gets supported (presumably to get the rights issue away). Any bets on share price performance after the rights issue is concluded?-- Dave Hazelwood (@hazelwood_dave) October 9, 2020