UNDER FIRE
PPC shares take a further hammering on the JSE as earnings predictions are lowered
PPC SHARES yesterday took a buffeting for the second consecutive trading day on the JSE after the listed cement and lime producer reported that its headline earnings a share for the six months to September were expected to be between 65 percent to 85 percent lower than in the corresponding previous period.
PPC said the decline translated to expected headline earnings a share of between 19 cents and 8c in the six months to September.
In November last year, the company changed its financial year-end from September to March.
Yesterday, the share price slumped 15.5 percent to R4.93 shortly after PPC released a trading update after earlier opening at R5.84. However, PPC’s share price recovered in later trading to close 3.68 percent lower on the day at R5.50.
On Friday, PPC’s shares dropped 3.71 percent after the company announced amendments to its broad based black economic empowerment (BBBEE) transaction and a proposed framework for a new empowerment transaction. The amendments and new framework were aimed at ensuring PPC achieved a higher BBBEE shareholding.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said the expected reduction in headline earnings a share was not a surprise, but a decline of this magnitude was unexpected. He said PPC had provided valid reasons for the decline in earnings. Competition in the cement sector had been severe since the entry into the market of Mamba Cement and Sephaku Cement.
The contributor to the decline in headline earnings a share in the six months to September related to high financing costs incurred for the raising fee and related interest charges for the R2 billion liquidity and guarantee facility secured in June to redeem the outstanding PPC notes. The R2bn in bridging finance was effective until the proceeds were received from PPC’s R4bn rights issue.
PPC was planning a capital raising, but had to accelerate the raising
The capital raised from the rights issue was largely to be used to repay debt funders.
and increase the quantum of the rights issue when S&P Global Ratings in May this year downgraded the group’s credit rating.
The capital raised from the rights issue was largely to be used to repay debt funders for a guarantee extended to PPC bondholders, an existing term facility that redeemed a PPC bond in March this year and the redemption of black economic empowerment (BEE) debt that matures in December.
The non-recurrence of the exceptional profit of R117 million made on the sale of non-core assets in the prior period also contributed to the period-on-period decline in basic earnings a share.
The devaluation of local currencies against the US dollar, particularly in the DRC and Rwanda, had also led to revaluation losses being recognised on foreign currency denominated receivables and borrowings in the current reporting period.
PPC will release its interim financial results on November 16.