Mistakes all round
PPC has announced a potential rights issue of between R3bn and R4bn, which spooked the market. The cement producer’s market cap has fallen to below R6bn, with some R8.8bn of non-current debt at the financial year-end in September 2015. This is expected to balloon to between R10bn and R12bn by the end of the 2017 financial year as PPC executes its African expansion plans. Both the market and PPC’s board have made huge mistakes. The board should have planned for a potential debt downgrade and seemingly it didn’t, and as it didn’t, the market should have seen this potential risk. The African expansion is expensive and not without risks, yet nobody seemed to have planned for these potential problems. I would stay well away from both the stock and the rights issue.