From bad to worse

Finweek English Edition - - MARKETPLACE -

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.

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