PPC repays bond and withdraws credit rating

  • PPC completes Bond Program payment and terminates rating service agreement
  • Investment in government bonds was worth R277 million
  • Return on capital and cash flows affected by persistent macroeconomic risks

Regional cement manufacturer Pretoria Portland Cement Company Limited (PPC) has cleared the Bond Program debt and has subsequently terminated the rating service agreement with the ratings agency S&P Global Ratings.

The group with operations in Zimbabwe and dual listed on the Zimbabwe Stock Exchanged informed shareholders that it successfully completed the repayment of the Bond Program on October 31, 2019 and subsequently terminated the rating service agreement with the ratings agency S&P Global Ratings (“S&P”).

The investment in government bonds of R277 million arose as a result of the requirement to invest the proceeds of the dividends of R232 million (2018: R66 million) and the rights issue proceeds of R85 million (2018: R82 million) which is invested in the 7% Zimbabwe government bonds for a period of one year.

Early last year, PPC Zimbabwe aimed at investing some of its dividends in government bonds as a way of lobbying them and increasing local procurement.

In the Interim Financial Statements ended 30 September 2019 the Group said, “Per the Zimbabwe exchange control guidelines these are treated as legacy debts and dividends pre-20 February 2019 (date of publication of Statutory Instrument 33).

“The investment was registered with the Zimbabwean authorities in accordance with Statutory Instrument 33 and therefore qualify for the 1:1 conversion of US$ to RTGS$.”

PPC is a cement manufacturing company with operations in the southern Africa region. The collective capacity of its plants currently stands at 11.7 mtpa spread across 18 plants in 6 countries. The six African countries include South Africa, Botswana, Democratic Republic of Congo, Ethiopia, Rwanda and Zimbabwe.

In Zimbabwe the company operates 3 plants with a combined capacity of 1.4 mtpa are operated and the produce is sold for both domestic and foreign markets. At this combined capacity, PPC is the largest cement producer in Zimbabwe.

Persistent macroeconomic risks and intense competition across PPC’s portfolio have however affected its return on capital and free cash flows, dampening debt-reduction prospects. Furthermore, the company is yet to refinance its largely amortizing debt maturity profile, which could pressure liquidity further. The ratings on PPC at the time of withdrawal reflected the weak trading environment across the company’s portfolio and risks on reprofiling its debt maturities.

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