PPC expects jump in earnings

PPC is expecting a significant earnings growth for the six months ended September 30, 2017, with Zimbabwean operations showing robust growth.

In a trading update released this week, PPC, which is listed on both the Zimbabwe Stock Exchange as well as the Johannesburg Stock Exchange, said net profit attributable to PPC shareholders is expected to increase by between 180 percent and 200 percent.

Basic earnings per share are expected to rise by between 45 percent and 60 percent (between 19 cents and 21 cents) and headline earnings per share are expected to rise by between 30 percent and 40 percent.

PPC’s group EBITDA is expected to increase by between 3 percent and 6 percent compared with the previous period. Group EBITDA has been negatively impacted by costs related to corporate action, legal costs and exchange rate fluctuations. Excluding these, EBITDA would have risen by between 5 percent and 10 percent.

The company said the key aspects to the improved profitability performance relate to

EBITDA growth from the rest of Africa cement business segment due to robust growth in Zimbabwe and Rwanda.

The company also attributed the significant growth to reduced finance costs mainly due to re-capitalisation and once-off liquidity and guarantee facility agreement (LAGFA) fees incurred in the previous reporting period.

The latest set of results should provide relief to the company’s shareholders. In its last set of results for the full year to March 31, 2017, the cement maker reported a 93 percent plunge in full-year earnings due to a liquidity crisis following a cut in its credit rating to junk status by S&P Global Ratings.

The downgrade resulted in a higher interest charge and tax rate as well as abnormal finance costs related to a liquidity guarantee facility. The situation has since been addressed after the Company was forced to raise R4 billion in a rights issue.

As a result the company is now well capitalised for the foreseeable future and doesn’t need to raise cash from shareholders a second time. PPC noted that debt re-structuring negotiations with the funders both in respect of the South African debt and the DRC funding agreements are progressing well.

PPC is currently the takeover target of LafargeHolcim and AfriSam. Other companies reportedly monitoring the situation include Dublin-based

CRH, Canadian insurer Fairfax Financial Holdings and Titan Cement Company of Greece, people as well as Nigeria’s Dangote Cement.

Analysts believe PPC is drawing attention because of its extensive footprint in a continent that still has a lot to do in terms of putting up infrastructure. PPC will release the audited interim results for the period ended 30 September 2017 on 23 November 2017.

On Tuesday PPC was trading at 346 cents on the Zimbabwe Stock Exchange, a percent premium to its JSE price of 50,82 cents, a 580,83 percent.