PPC shares slump on back of BBBEE announcement

SHARES in PPC slumped by 3.71 percent after the listed cement and lime producer announced amendments to its broad-based black economic empowerment (BBBEE) transaction and a proposed framework for a new empowerment transaction.

The amendments and new framework are aimed at ensuring PPC achieves a higher BBBEE shareholding.

PPC shares closed at R5.71 on Friday after closing at R5.93 on Thursday.

Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said if PPC did not embark on a new BEE scheme and once its certificate expired in December, its empowerment rating would probably drop to level 7 under the revised Trade and Industry Department BBBEE codes of good practice.

Nyanga said PPC’s current BBBEE transaction had also run into sustainability problems because it had relied heavily on a positive trajectory in PPC’s share price, but due to weak market conditions PPC’s share price had been under sustained pressure.

PPC’s existing BBBEE transaction dates back to December 2008. It involved four strategic black partners (SBP) – women’s empowerment group Nozala, black-owned and managed Peu, empowerment investment firm iLima Portland Consortium and broad-based group Capital Edge Cement Consortium – and two community services groups (CSG).

Agreements Explaining the rationale for the amendments and new framework, PPC said the 2008 BBBEE transaction was implemented prior to the impact of the global financial crisis on South Africa.

PPC and the SBP and CSG have agreed that on December 16, the final date of the transaction, PPC will repurchase the initial subscription shares as originally contemplated.

However, the SBP and CSG will be obliged to only subscribe at the compulsory price of R66.84 for the number of PPC shares that was equal to the cash they each had available at that date instead of the same number of PPC share as their initial share subscription.

They had also agreed in a separate transaction and as part fulfilment of the broader objectives of the mining charter, that PPC would issue additional PPC shares equivalent to 30 percent of the original number of shares acquired by the SBP and 8.93 percent of the CSG original subscription for 1 cents a share, which would be subject to a 12-month lock-in period.