Cement maker PPC should consider some of its secondary businesses in the lead-up to a rights issue in 2021.
The group — which wants to become an SA corporate champion that can be trusted to adhere to environmental, ethical and production standards as opposed to some importers who dump cement on SA’s market — should do its best to present an attractive investment case.
PPC directors said in October the company needs to raise a hunk of capital or it may no longer be a going concern in the near future. This can happen with the help of a rights issue and through the sale of some businesses.
PPC is likely to ask investors for at least R1bn in the first quarter of 2021. The Covid-19 lockdown had stopped construction projects for a few months and while the industry is now working through that backlog, PPC is still being held back by its struggles with its Democratic Republic of the Congo (DRC) subsidiary.
Its DRC business has debt of about $150m (R2.4bn). This while PPC’s market capitalisation is R733m.
A standout business they could sell is PPC Lime, which market commentators say could be coveted by companies in the cement and building materials industry. Rumours are that materials group Afrimat might consider buying the subsidiary but could see a bidding war that would deter it.
Anthony Clark, a small- and mid-cap company analyst, reckons PPC Lime would be worth between R800m and R1.2bn.
He says if PPC can raise about R1bn from a rights issue and another R1.2bn for PPC Lime, the group would make huge inroads in reducing its debt, which sits around R5.8bn.
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