PPC seeks bailout for subsidiaries

PRETORIA Portland Cement Limited (PPC) is seeking shareholder approval to extend financial assistance to its subsidiaries, a move which the directors believe will benefit the group.
Shareholders of the cement and related products supplier will vote on a special resolution to authorise financial assistance to related parties, among other resolutions at the company’s 126th annual general meeting on August 30.
“The reason for the special resolution is that the company advances loans and other financial assistance to subsidiaries and other related companies or corporations in its group,” the group said in a notice.
PPC has 18 subsidiaries across Africa, including PPC Zimbabwe in which it has a 70 percent stake.
The company says it believes that the financial assistance will help subsidiaries’ operations in a way that will benefit the group.
“Such financial assistance to a recipient is, in the opinion of the board, required for the purpose of meeting all or any of such recipient’s operating expenses, including capital expenditure and/or funding the growth, expansion, reorganisation or restructuring of the businesses or operations of such recipient, and/or funding such recipient for any other purpose which, in the opinion of the board, is directly or indirectly in the interests of the company,” the company said in a circular to shareholders.
The proposed financial assistance will only be extended, subject to the board meeting the solvency and liquidity tests as well as other conditions.
“The recipients of such financial assistance, the form, nature and extent of such financial assistance and the terms and conditions under which such financial assistance is to be provided, are determined by the board from time to time,” the company added.
The group’s outlook for its subsidiaries in South Africa is muted, as it is linked to infrastructure investment growth, with the lime division mainly exposed to the steel industry, and ready-mix and aggregates relying on construction projects.
To mitigate this, the management of the company will implement a “transaction to strategically position” the business through the growth of volumes.
“The business will continue to defend and maintain its leading position and competitive advantage from the perspectives of footprint, scale and efficiency,” the company said.
In its subsidiaries in the rest of Africa, the group plans to ramp up operations in the DRC and Ethiopia.
The company says it plans implement an optimised capital allocation across its subsidiaries in the next 12 to 18 months.
This coincides with tenure of the financial assistance program for which the group is seeking shareholder approval, which will be for a period of two years after the resolution passes.
The company expects reduced capital expenditure, coupled with significantly lower interest rate charges, to improve its cash flow position going forward. Self-financing would help the group a great deal in this regard.
The company ended the year to March 2018 with a profit after tax of R37 million representing a significant improvement from the R27 million in 2017. The group’s attributable headline earnings and headline earnings per share for the year increased by 172 percent and 114 percent to R231 million from R85 million in 2017. Group revenue rose seven percent to R10 271 million form R9 641 million in 2017, impacted by the strengthening of average rand exchange rates against most foreign curr