Displaying items by tag: South Africa

Democratic Republic of Congo: South Africa’s PPC has agreed with its lenders to reschedule debts from the construction of a cement plant in Democratic Republic of Congo (DRC). The cement producer said that the total capital requirements for the DRC plant will now be limited to interest payments from January 2018 until January 2020, according to Reuters. The debt renegotiation has included an extension of the repayment period by an additional two years and a change to the interest rate.

PPC Barnet DRC is 69% owned by PPC, 21% owned by Barnet Group and the remaining 10% is owned by the International Finance Corporation (IFC). The plant is 60% debt funded by the IFC and Eastern and Southern African Trade and Development Bank.

South Africa: Peter Nelson, the chairman of PPC, says that the company is not interested in merger or acquisition activity. Instead the cement producer will focus on its current business strategy by development projects in Sub-Saharan Africa, executing its ‘mega plant’ plan in South Africa and making further efficiency drives in its subdued domestic market. In an interview with Reuters he described talks with LafargeHolcim about a potential takeover as ones that, “…fell short on value”. "PPC is not looking to sell its assets, it's not looking to merge it's assets, it's looking to focus on its business, deliver cash flow and deliver shareholder value," said Nelson.

South Africa: LafargeHolcim has ended its talks with PPC regarding a possible transaction in Africa. The Switzerland-based building materials company originally said it was discussing a possible bid for PPC in October 2017. Fairfax Holdings stopped its bid for PPC in December 2017 and expressions of interest by CRH and Dangote Cement have also ceased.

South Africa: Canada’s Fairfax Holdings has stopped its bid for PPC. The investment body made an offer of around US$150m in September 2017 to buy a partial stake in PPC on condition that the cement producer agreed to a merger with AfriSam. The South African cement producer subsequently described the offer as low to its shareholders and said that is was anticipating a higher offer. Rival expressions of interest were also received from CRH, Dangote Cement and LafargeHolcim. Dangote Cement withdrew its bid in October 2017 and CRH decided not to continue its bid in December 2017.

South Africa: PPC says that Ireland’s CRH has formally decided not to continue in a bid for it. The Irish building materials company made a non-binding expression of interest in mid-November 2017. It then had time to conduct due diligence before submitting an updated bid. PPC is still dealing with offers from Fairfax Africa Investments and LafargeHolcim.

There are two significant cement producers around the world up for sale at the moment. Last week we dealt with India’s Binani Cement, which has so far attracted 15 separate bids from a number of international and domestic players. Now, we turn our attention to South Africa, where PPC remains the target of approaches by LafargeHolcim and CRH.

This week PPC rejected a partial offer from Canada’s Fairfax Holdings, which it considered neither fair nor reasonable. Like a mutual friend at a party that insists two people ‘really are perfect for each other,’ Fairfax had stipulated in its terms that PPC should merge with AfriSam to create a South African super-producer. It does not appear that this idea went down well and that particular combination now seems further away than ever.

When the news broke that it had rejected Fairfax, we thought that PPC’s stance seemed a little ‘too cool.’ However, looking just at the oversized and import-addled South African market does not give the full picture of what’s happening for PPC at the moment. It has significant and growing activities in the rest of Africa too.

Later this week PPC released its results for the first half of its 2018 fiscal year. Suddenly, its handling of the Fairfax offer made more sense. Over the six months to 30 September 2017, PPC nearly tripled its profit to US$21.1m. Crucially, sales from outside South Africa grew far more rapidly than those at home. While domestic earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 4%, EBITDA from elsewhere increased by 25%. These results bode well for a potential bidding war that now favours PPC.

Even from this greatly enhanced position, PPC was not finished with its announcements for the week. Today it revealed that it plans to build a new ‘mega-factory’ in the Western Cape. Johan Claassen, the interim chief executive of PPC, said there would probably be a formal announcement about new capacity in the Western Cape in 2018. He said that PPC had decided to conduct a feasibility study into a possible replacement for its Riebeeck plant. An Environmental Impact Assessment (EIA) is in progress and the plant is reported to be ‘semi-brownfield.’ Claassen said that the new facility would use around 25% of the current Riebeeck equipment and cost US$200/t of installed capacity.

The news of its results and announcement of the new plant represent a good PR move by PPC given the difficulties faced by the wider South African market. The new information will certainly give cause for CRH and LafargeHolcim to think again about the values of their offers, should PPC also be of the view that these also undervalue the company.

South Africa: PPC is planning a ‘mega-plant’ in the Western Cape Province. Johan Claassen, PPC’s interim chief executive, stated that it was looking to replace its Reibeeck plant with a ‘semi-brownfield’ facility that used around 25% of the current plant’s equipment. The company has long planned to expand its Western Cape capacity but domestic demand has not yet been high enough to justify the investment. There has been overcapacity in the market as well as imports from other regions, both of which have depressed cement prices.

Claassen said that the plant would cost around US$200/t of installed capacity, without mentioning the intended capacity. He said that financing was already in place. He added that PPC had been able to increase its selling prices by 2% in the six months to 30 September 2017 and that, even with slow growth, South Africa would need the additional capacity supplied by the new plant by 2020.

Claassen said that a formal announcement would be likely in early 2018.

South Africa: PPC has seen its net profit rise significantly in the six months to September 2017. It nearly tripled its profit year-on-year to US$21.1m from US$7.3m.

The company benefited particularly from a strong performance from its assets outside of South Africa. Its earnings before interest, tax, depreciation and amortisation (EBITDA) from its non-domestic assets rose by 25%, while group EBITDA grew by 4% to US$86m. The results bode well for a potential bidding war that now favours PPC shareholders.

Earlier in the week, PPC effectively rejected a conditional partial offer from AfriSam and Canada’s Fairfax Group for the company, stating that it undervalued the company. This latest set of results brings this assessment into sharper focus and may give cause for CRH and LafargeHolcim to think again about the values of their own non-binding offers, should PPC also be of the view that these also undervalue the company.

South Africa: PPC has said that its independent board would not recommend Canadian firm Fairfax Africa Investments' partial offer to shareholders, considering it neither fair nor reasonable. In September 2017 Fairfax offered to buy 22% of PPC for US$144m on the condition that PPC accepted a merger proposal with rival AfriSam.

"The Independent Expert, having considered two possible outcomes of the proposed merger, is of the opinion that the partial offer, both in the context of the proposed merger as well as on a stand-alone basis, is not fair and reasonable," said PPC in a statement.

South Africa: Ireland’s CRH has submitted a formal expression of interest to PPC towards making a cash offer for a controlling stake in the South African cement producer. The board of PPC has given CRH until the week commencing 20 November 2017 to conduct due diligence and make a firm offer. PPC said that it is still considering an offer from Fairfax Financial Holdings with the aid of Investec. It is also in discussion with LafargeHolcim about a potential deal.