Mis­takes all round

Finweek English Edition - - MARKETPLACE -

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.

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