Board debacle casts dark cloud over PPC
Search for new chief under way
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.