Key message: a positive trading update with the removal of an undertaking for a capital raise the highlight.

  • PPC released a restructuring and operational update for the six months to September 2021.
  • The highlight is the removal of the undertaking for a capital raise as new term-sheets have been signed with lenders. The new R2.1bn facilities have R1.5bn of long-term debt repayable over 3-5 years at improved rates. Gross debt levels are R1.8bn (down from R1.9bn).
  • The DRC debt restructuring should be signed by December 2021, with some delays on the initial effective date of 30 September 2021. This does not alter the agreed position that DRC lenders have no recourse to PPC Ltd.
  • The operating update was positive. Group cement sales have increased 10-13% for the interim period (up 6-9% from the comparable 1H20 period). Cement demand in September has slowed 10-15% relative to September 2020, but August – October 2020 was characterised by catchup cement spend in the construction sector. Retail demand remains strong.
  • South African cement EBITDA margins are still under 20% (although pure operational margins are higher, but the cement division bears a large portion of allocated costs).
  • Cement South Africa and Botswana: volumes up 10-13% (up 3-6% on 1H20). Rural demand remains robust, and the coastal regions experienced strong growth. Price increases of 5-10.
  • Zimbabwe: volumes increased by 14-18% (25-29% up on 1H20).
  • Rwanda: flat volumes due to non-recurring government infrastructure projects (up 7-10% on 1H20).
  • Materials: Readymix volumes increased 33-37% and aggregates 22-26% due to increased construction activity.
  • Cement imports remain high despite global supply chain issues and the cement industry is waiting for a decision on relief from unfair competition for clinker and cement. Blender activity remains relatively low.
  • We adjust our forecast marginally but roll our valuation year to FY23 and increase our Target Price to R5.17 (from R4.50).

Download full report