CityPress - - Business - JUSTIN BROWN justin.brown@city­press.co.za

PPC was hop­ing to get back its in­vest­ment grade credit rat­ing from S&P Global Rat­ings be­fore the end of this year, now that it had re­duced its debt fol­low­ing a R4 bil­lion is­sue of shares for cash, PPC CEO Dar­ryll Castle said this week.

In May, S&P cut PPC’s credit rat­ing to “junk” sta­tus af­ter the rat­ings agency warned of a pos­si­ble cash crunch within weeks. Af­ter the rights of­fer was com­plete, S&P at the end of Septem­ber moved PPC off its “credit watch neg­a­tive” sta­tus.

How­ever, S&P an­a­lysts Mashiyane Mabunda and Ter­ence O Smiyan said they be­lieved PPC’s per­for­mance and lever­age met­rics would re­main volatile ow­ing to the com­pany’s ex­po­sure to South Africa’s slug­gish econ­omy.

Bloomberg this week re­ported that it had heard from anony­mous sources that PPC was in talks with ri­val AfriSam.

Castle de­clined to com­ment on the spec­u­la­tion, but said that PPC was open to con­sol­i­da­tion in the lo­cal ce­ment sec­tor.

“A con­sol­i­da­tion in the lo­cal ce­ment sec­tor needed to make sense from a value per­spec­tive. As the mar­ket leader, PPC should drive the con­sol­i­da­tion,” he said.

The price war in the lo­cal ce­ment mar­ket had dis­si­pated and last month PPC hiked its ce­ment prices and some of its ri­vals fol­lowed suit. How­ever, some of the lo­cal ce­ment mak­ers weren’t able to hold their price hikes, but PPC has stuck to its price in­crease, Castle said.

PPC needed to cover in­fla­tion-based in­creases in costs, he ex­plained.

“As the do­mes­tic ce­ment mar­ket re­mains highly com­pet­i­tive, the im­me­di­ate fo­cus is on man­ag­ing cost per­for­mance, pay­ing par­tic­u­lar at­ten­tion to costs within man­age­ment’s con­trol and max­imis­ing ef­fi­cien­cies.

“PPC in­tro­duced price in­creases in Oc­to­ber and has seen vol­ume losses on the back of the re­vised pric­ing,” the com­pany said this week.

As a re­sult of the price in­crease, PPC’s sales vol­umes in Gaut­eng and the com­pany’s in­land re­gions fell by 7% for Oc­to­ber.

Turn­ing to the out­look, Castle said that it was likely to main­tain its oper­at­ing profit lev­els in the months ahead, while its bot­tom line profit was set to show de­cent im­prove­ment as the group’s fi­nanc­ing costs de­clined.

This week PPC re­ported an 83% drop in half-year profit to R58 mil­lion.

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