From bad to worse
I wrote last week that PPC’s management had failed shareholders and that shareholders had failed themselves by not noticing management’s failings. And now things have gone from bad to worse. After PPC initially said it would need to raise R3bn to R4bn due to its debt burden, it has now said that after being downgraded four notches, it will need to raise an even larger unspecified amount.
The share now trades back where it did in 2003, but things are worse than back then. Its plants are over a decade older and in need of upgrading; it has local competition in the form of Sephaku Cement and it has a pile of US dollar-denominated debt for its African expansion.
Beleaguered shareholders may be tempted to hang on, hoping that it all goes well, but I think the risks outweigh the benefits and I would cut my losses and run. This 124-year-old company may not survive; the African expansion has risks, locally it is under pressure and so far management has not covered itself in glory.