Booming Cement Sales Support Lender Discussions

Key message: Strong cement sales in all regions are a welcome respite for PPC – and will help in the capital restructuring.

  • PPC released a Trading Statement to October 2020.
  • South Africa & Botswana: Cement sales increased by 20-25% in July-Sept, with strong growth continuing into October (+15-20%). Sales have been predominantly retail (little large civil work in underway).
  • PPC Barnet (DRC): Cement sales increased by 20-25% in July-Sept, with strong growth continuing into October (+25-30%). 1H FY21 growth was 5-10% (which includes the Covid-impacted period).
  • PPC Zimbabwe: Cement sales increased by 35-40% in July-Sept, with strong moderating into October (+5%). 1H FY21 growth was 5-10% (which includes the Covid-impacted period).
  • Rwanda: Cement sales increased by 15-20% in July-Sept, with strong moderating into October (+25-30%). 1H FY21 growth was 5-10% (which includes the Covid-impacted period).
  • The strong demand for construction materials in South Africa has been noted by a number of companies exposed to the sector, although the reason for the strength is still unclear. PPC believe it to be driven by increased disposable income (reduced discretionary spending due to restricted movements), lower interest rates and social grants.
  • The restructuring and refinancing project is making positive progress
    • Finalisation of revised facilities with SA lenders expected this month
    • Restructuring negotiations with DRC lenders progressing on basis of agreed term sheet and standstill agreement from September 2020
    • Investor appetite for International equity raise to be tested before end CY20 (we believe this could be a debt for equity swap with the common lenders – IFC and TBD Group).
  • The strong cement market should provide some support to lender discussion, with possible support from government (tariffs, local content designation) pending. We maintain our current forecasts and outlook.

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