Board de­ba­cle casts dark cloud over PPC

Search for new chief un­der way

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

SHARES in PPC de­clined by more than 4 per­cent yes­ter­day to close at R25.81, after it re­ported lower earn­ings in the year to Septem­ber, ahead of next month’s spe­cial gen­eral meet­ing that will de­cide the fate of its board and for­mer chief ex­ec­u­tive Ketso Gord­han.

This de­cline fol­lows the ap­prox­i­mately R3 bil­lion wiped off PPC’s mar­ket cap­i­tal­i­sa­tion since his de­par­ture.

Bheki Sibiya, the ex­ec­u­tive chair­man of the listed ce­ment pro­ducer, ad­mit­ted yes­ter­day that part of the knock to PPC’s mar­ket cap­i­tal­i­sa­tion was as­so­ci­ated with Gord­han’s res­ig­na­tion but be­lieved the ap­point­ment of a new chief ex­ec­u­tive would help to re­coup the lost value.

Tryphosa Ra­mano, its chief fi­nan­cial of­fi­cer, said there was a need to look at PPC beyond the 2014 fi­nan­cial year be­cause it had pro­duced solid fi­nan­cial met­rics over the past 10 years and through the cy­cle.

Ra­mano said PPC’s rev­enue had grown almost three times, prof­itabil­ity had almost dou­bled and the earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion mar­gin was 26 per­cent but had av­er­aged 36.7 per­cent in this 10-year pe­riod. The av­er­age pay­out ra­tio to share­hold­ers in this pe­riod was about 76 per­cent and was “the kind of per­for­mance PPC is look­ing to pro­duce in the next 10 years”.

Sibiya said that an in­ter­na­tional ex­ec­u­tive search agency had com­piled a list of 85 can­di­dates and a short­list of 10 top can­di­dates for the chief ex­ec­u­tive po­si­tion.

The cur­rent board would be con­duct­ing in­ter­views with th­ese can­di­dates next month be­fore the spe­cial gen­eral meet­ing on De­cem­ber 8.

Sibiya stressed the fi­nal decision on the new chief ex­ec­u­tive would only be taken by the board after the spe­cial meet­ing out of re­spect for the rights of share­hold­ers.

The new chief ex­ec­u­tive would be an­nounced at the company’s gen­eral meet­ing on Jan­uary 26 and pro­vide as­sur­ance to share­hold­ers that PPC would con­tinue to be well led, he said.

Sibiya was “qui­etly con­fi­dent” the cur­rent board would be re­tained at the spe­cial gen­eral meet­ing. “Whether that majority is 50.1 per­cent or a higher num­ber, I can­not say with au­thor­ity.”

Gord­han re­signed at the end of Septem­ber but there­after at­tempted to get PPC’s board to re­in­state him, which was re- fused. This re­sulted in him em­bark­ing on a cam­paign to get him­self re­in­stated.

The dis­pute be­tween Gord­han and PPC’s board was over his in­ten­tion to ter­mi­nate the ser­vices of Ra­mano for sev­eral rea­sons, in­clud­ing her re­fusal to par­tic­i­pate in a vol­un­tary salary sacrifice scheme that Gord­han had ini­ti­ated to bridge the gap be­tween the higher- and low­est-paid worker, and that she was in­ter­ro­gat­ing a loan agree­ment Gord­han had ver­bally agreed with a po­ten­tial fun­der.

Fo­ord As­set Man­age­ment, with the support of Vi­sio Cap­i­tal Man­age­ment and Ned­bank Pri­vate Wealth, re­quested PPC’s board to call a gen­eral meet­ing about the pro­posed re­moval (of) the board and nom­i­nated a num­ber of can­di­dates to serve on PPC’s board.

PPC yes­ter­day re­ported a 9 per­cent growth in rev­enue to R9.04bn in the year to Septem­ber. This was largely at­trib­ut­able to the more than 20 per­cent growth in rev­enue from its Zim­babwe op­er­a­tions, with South African ce­ment sales de­creas­ing by 2 per­cent.

Op­er­at­ing profit slumped by 11 per­cent to R1.76bn from R1.98bn and op­er­at­ing mar­gins de­te­ri­o­rated to 19 per­cent from 24 per­cent.

Head­line earn­ings a share were flat at 179c. The to­tal div­i­dend re­duced to 114c from 156c.

Sibiya said PPC’s per­for­mance was ham­pered by in­dus­trial ac­tion that had a neg­a­tive im­pact on trad­ing con­di­tions in South Africa.

The mar­ket would re­main tough next year but start im­prov­ing in 2016 – when three new projects in Zim­babwe, the Demo­cratic Repub­lic of Congo and Ethiopia that formed part of PPC’s African growth strat­egy came on stream. Sibiya ex­pressed con­fi­dence PPC was on track to dou­ble its size by 2020.


Chief fi­nan­cial of­fi­cer Tryphosa Ra­mano says peo­ple need to look beyond the 2014 fi­nan­cial year be­cause PPC has pro­duced solid fi­nan­cial met­rics over the past 10 years.

Chair­man Bheki Sibiya is “qui­etly con­fi­dent”.

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