Displaying items by tag: PPC
South Africa: AfriSam is preparing to replace its chief executive officer (CEO) to aid its merger discussions with PPC. Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, is set to replace current Stephan Olivier on a short-term contract, according to sources quoted by Boomberg. The personnel manoeuvring would also potentially place PPC’s current CEO Darryll Castle in a strong position to become the merged company’s new leader. PPC and AfriSam announced that they had resumed merger talks in February 2017 after a previous attempt stalled in 2015.
Zimbabwe: PPC Zimbabwe’s managing director Kelibone Masiyane has said that duty on cement imports has done little to discourage the market. The government introduced a 25% duty on every 100t of imported cement in 2016, according to the NewsDay newspaper. He singled out imports from Zambia as well as those from South Africa, Mozambique and Botswana.
“In addition to liquidity challenges, we continued to face pressure from cheap imports. Government has tried to assist by introducing duty on imported cement, but the reality on the ground is that imports continue to pour in, particularly from Zambia,” said Masiyane. Despite this he added that PPC Zimbabwe was confident that the local economy would pick up in 2017 supported by infrastructure projects.
The Cement and Concrete Institute of Zimbabwe lobbied the Ministry of Industry and Commerce to ban imported cement in 2016. In a paper it suggested including a protection tariff to equate the landed price of imported cement to the cost of the local product, granting of import licences to local producers, cancelling or reviewing all issued permits that are circulating in the country and lowering duty on raw materials.
Zimbabwe: President Robert Mugabe has opened PPC’s US$85m cement grinding plant at Msasa in Harare. China’s Sinoma built the 0.7Mt/yr unit that includes a palletiser and cover-wrapping machine, according to the Xinhua News Agency. The plant, PPC’s third production site in the country, was commissioned in late 2016.
South Africa: PPC has said that adverse weather negatively affected cement and concrete sales in South Africa in January and February 2017. Rainfall in excess of 200mm was experienced in many parts of South Africa over the two months.
The company also said that it has reduced its net debt further to US$334m as at 31 December 2016 due to the conclusion of a component of its first empowerment transaction. PPC concluded a Strategic Black Partners and Community Service Groups components of its 2008 broad-based black economic empowerment transaction, resulting in a cash inflow of US$77m in December 2016. It said that the improved balance sheet would mitigate the adverse impact of the cyclical nature of its business and that business continued to generate superior cash earnings despite capital expenditure requirements.
Elsewhere, it has been estimated that PPC would be liable for an estimated US$7m in carbon taxes, should South Africa’s proposed carbon tax bill be enacted. However, Darryl Castle, the chief executive of PPC, said the company was looking at a number of initiatives to reduce the forecast amount, including the replacement of coal with carbon-neutral energy sources and further reduction of the clinker factor.
Castle added that the carbon tax regime did not apply to imports into South Africa and had not been meaningfully implemented elsewhere. He noted that a similar scheme was scrapped in Australia because of the impact on the industry. "PPC is ready for the implementation of the carbon tax regime in January 2018. However, we will continue to engage the government on this matter," he said in a presentation at the Merrill Lynch investor conference in Sun City.
The merger between South Africa’s larger cement producers, PPC and AfriSam, is back on this week. PPC issued a statement advising its shareholders that the board of directors of both companies were about to enter formal talks to thrash out a potential deal. Issues such as the merger ratio, black economic empowerment and local competition concerns are all on the agenda.
The resumption of merger talks follows the cancellation of the previous round in mid-2015. No reason for the breakdown was publicly released but possible factors may have included the fallout at PPC from the resignation of its chief executive officer (CEO) Ketso Gordhan and competition concerns. Given the investigations by the South African Competition Commission from around 2008 to 2012 these may have been very real concerns. At this time the two companies held about a 60% share of the country’s cement production capacity.
Events have changed since then with the opening and ramp-up of Sephaku Cement’s cement plant at Aganang and its grinding plant at Delmas since late 2014. Today, PPC and AfriSam control just under 50% of the cement production capacity in South Africa and PPC’s current CEO Daryll Castle remains in post since early 2014. What a difference a year or so can make.
PPC moved its financial year end from September to March in 2016 making it hard to compare like with like. However, its revenue appears to have grown by 10% year-on-year to US$396m for the six months to 30 September 2016. Its earnings before interest, taxation, depreciation and amortisation (EBITDA), a measure of operating performance, fell by 7.5% to US$80m at the same time. Since then PPC notified markets with a trading statement saying that its sales volumes in South Africa had risen by 4% in the nine months to the end of December 2016 but that its prices had fallen by 4%. It also noted that its local cement sales volumes declined marginally when compared to the same quarter in the previous year, with the exception of the Western Cape region.
PPC also has various projects underway in sub-Saharan Africa, including plant builds in Democratic Republic of Congo (DRC) and Ethiopia. Of note to any potential merger with AfriSam are its plans to build a new 3000t/day production line at its Slurry plant in Lichtenburg. The project was reported 54% complete in early February 2017 with first clinker production scheduled for the first half of 2018. CBMI Construction, a subsidiary of China’s Sinoma, is the main contractor for the upgrade project. Once complete the new line will add about 1Mt/yr to the plant’s cement production capacity. One implication of this project is that it will push PPC and AfriSam’s market share over 50% that may have consequences with the local competition body.
For its part AfriSam appears to be suffering financial problems according to local press. The Public Investment Corporation (PIC), a government investment body, revealed in late 2016 that it had invested over US$100m in the cement producer since 2008. The PIC holds a controlling share of AfriSam with a 66% stake in the group. Other than this, solid facts about the state of AfriSam’s business are thin on the ground. However, competition in South Africa’s cement sector has certainly increased in recent years both within and without, from the import market.
As this column has said a few times merger and acquisitions seem to be the way to go for cement producers in weak markets. However, as annual results from Cementir and HeidelbergCement show this week, the initial boost from new asset and business purchases may not be so rosy when viewed in a pro-forma basis or when taking into account new units’ past performance. A lot here rides on these companies being able to take advantage of synergy effects and to make crucial savings. The big example of this in the global cement sector is LafargeHolcim. It will announce its financial results for 2016 on 2 March 2017. It also operates a cement plant in South Africa and the results may have implications for the PPC and AfriSam merger.
In other news, the European Union parliament has voted today, on 15 February 2017, to amend its Emissions Trading Scheme (ETS) in line with a proposal made by the European Commission. This is unlikely to impress the environmental lobby or users of secondary cementitious materials in cement production, amongst other parties. More on this topic next week.
South Africa: PPC and AfriSam have resumed talks to discuss merging the companies. The cement producers will prepare an assessment on the proposed merger and then report back to their respective shareholders and boards. AfriSam previously proposed a merger with PPC in late 2014 before talks were called off in mid-2015. At that the time the two cement producers controlled about 60% of the local market.
South Africa: The Congress of South African Trade Unions, a federation of unions, has publicly complained about government permission granted to China’s CBMI Construction to bring workers into the country. CBMI Construction was awarded a tender for a US$90m upgrade project at PPC’s Slurry plant in 2015 and the union says it was allowed to import 242 Chinese workers to work on it. It is alleged that these workers have been working in the country since October 2015 and will continue to do so until 2018. The federation has asked the Department of Labour to look into the issue.
Nigeria/South Africa: Bolloré Logistics has detailed its work on two cement plant projects in Nigeria and South Africa working with China’s CBMI Construction. Teams from the logistics and transport firm in China and Africa have managed both projects.
Supplying equipment to the United Cement Company of Nigeria (Unicem) plant near Calabar involved transporting 500 twenty-foot equivalent units (TEU) and 150,000 freight tons of project cargo with the shipment of 12 break bulk vessels to the Calabar Port. This was completed by more than 5000 round trips from the port to the construction site by truck. This project also included transporting cement mills, ‘out of gauge’ items of cargo that weigh 125t each. Two multi-axle hydraulic trailers were used to transport these 14 pieces of cargo in one shipment. A preliminary road survey and subsequent adjustments to the road infrastructure quality were required for successful delivery.
Work on a 3000t/day PPC plant in Lichtenburg started in August 2015 and is expected to be completed in the autumn of 2017. Bolloré Logistics secured the break bulk sea transportation and inland transport of the construction material and cement plant equipment cargo. To date, 200 TEUs have been moved to the site and 45,000t of freight cargo have been transported from Jingtang and Tianjin port in China to the plant site in South Africa.
South Africa: PPC has completed the components of its 2008 broad-based black economic empowerment (B-BBEE) transaction, releasing US$74m in funding in mid-December 2016. Strategic black partners and community service groups subscribed for 15.6 million shares as part of earlier agreements. The funding will be used to reduce company debts and pay for a new production line at its Slurry cement plant in Lichtenburg.
Rwanda: Bheki Mthembu has been appointed the chief executive officer of Cimerwa, PPC’s subsidiary in the country. Mthembu has been in post since December 2016, according to the Business Day newspaper. Mthembu holds a degree in chemistry from the University of KwaZulu-Natal. He has worked for PPC since 1995.