PPC Extends Slump Amid Ongoing Weak Demand for Cement in Congo

KINSHASA (Capital Markets in Africa) – PPC Ltd. suffered its biggest two-day decline this year after reporting earnings that missed some expectations and as difficulties continue to plague the cement maker’s operations in the Democratic Republic of Congo.

South Africa’s biggest producer of the building material is seeking a fresh start under Chief Executive Officer Johan Claassen after fending off a series of takeover approaches last year. The Johannesburg-based company is counting on an upturn in demand in its home market and a change of fortune in new countries where it’s been expanding, especially Congo.

“The results overall were weaker than market expectations,” Peter Takaendesa, a money manager at Mergence Investment Managers in Cape Town, said by phone Monday. “South Africa, which is a key part of the business, went nowhere. The rest of Africa came through but with a lot of noise and a lot of other costs.”

The shares traded 5 percent lower at 6.97 rand as of 2:45 p.m. in Johannesburg Monday, extending the two-day slump to 13 percent. However, the price remains comfortably above the 5.75 rand offered by Fairfax Financial Holdings Ltd., a Canadian insurer, as part of its 2017 takeover proposal. Lafarge Holcim Ltd., CRH Plc and Dangote Cement Plc all walked away without publicly disclosing an offer.

PPC in January agreed with funders of its Congo plant to extend the period for debt repayments by two years and has also announced a 165 million rand ($12.2 million) impairment charge. The central African country is facing political uncertainty and weak selling prices, while production capacity outweighs demand, the company said.

While the depressed environment is likely to continue until delayed elections, scheduled to take place in November, the worst is probably over, Claassen said by phone. “From our assessment, we only really see the upside in the DRC. It is possible that the market can double very quick time.”

PPC said earnings before interest, taxes, depreciation and amortization fell 9 percent last year to 1.9 billion rand, dragged down by the Congo operation. However, net debt fell to 3.8 billion rand from 4.7 billion rand and headline earnings per share almost doubled, PPC said in a statement.

Source: Bloomberg Business News