PPC earnings plunge 93% on junk rating
South African cement maker PPC reported a 93% plunge in full-year earnings yesterday due to a liquidity crisis following a cut in its credit rating to junk status by S&P Global Ratings.
Shares in PPC have fallen more than 26% since May 2016, when S&P cut the company’s long- and short-term South African national scale corporate credit ratings to zaBB- and zaB respectively and placed all credit ratings on credit watch with negative implications.
“PPC endured a challenging financial year, while still delivering on a number of key initiatives and projects during the year. Our results were impacted by a liquidity crisis precipitated by an unexpected S&P debt downgrade,” said chief executive Darryll Castle.
The downgrade resulted in a higher interest charge and tax rate as well as “abnormal” finance costs related to a liquidity guarantee facility.
PPC, which is negotiating a possible merger with rival Afrisam, said headline earnings per share fell to 7 cents from 107 cents in the comparable period the year before. Shares in PPC were down 2.9% to R5.43 at 9.19am.
Group revenue rose 5% to R9.6 billion ($748 million), supported by the “rest of Africa”, while the group’s operational 13%.
PPC, which makes 70% of its revenue from South Africa, said sales volumes rose by 2% in its local market.
In a challenging financial year, PPC completed a number of its projects as it looks to diversify its portfolio.
The company said the commissioning of a Zimbabwe mill and projects in Ethiopia and Democratic Republic of Congo increased its cement capacity by 33% to 11.4 million tons per annum.
“I believe we have reached the bottom of the pricing cycle in South Africa and am looking forward to the ramp up of our new operations in the DRC, Ethiopia and Zimbabwe which will grow our operating base and further diversify our earnings,” Castle said. profit decreased
Our results were impacted by a liquidity crisis precipitated by an unexpected S&P debt downgrade. Darryll Castle PPC chief executive