28 Sep - 7 min read

Restructuring and Refinancing Project Update and Operating update for the six month ending 30 September 2021

Restructuring and Refinancing Project Update and Operating update for the six month ending 30 September 2021

PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE ISIN: ZAE000170049
JSE code: PPC ZSE code: PPC
(“PPC” or “Company” or “Group”)

RESTRUCTURING AND REFINANCING PROJECT UPDATE
OPERATING UPDATE FOR THE SIX MONTHS ENDING 30 SEPTEMBER 2021

Shareholders of the Company ("Shareholders") are referred to the
previous announcements released on the Stock Exchange News Service
(“SENS”), relating to PPC’s Restructuring and Refinancing Project,
including the announcement released on 31 March 2021, wherein they
were advised on the status of the restructuring and refinancing
project underway.

UPDATE ON NEGOTIATIONS WITH THE SA LENDERS TO RESTRUCTURE THE SOUTH
AFRICAN BALANCE SHEET AND REMOVAL OF UNDERTAKING TO RAISE EQUITY
CAPITAL
PPC has previously advised Shareholders that its South African Lenders
("SA Lenders") had agreed to defer the timing of the proposed equity
capital raise to de-gear its South African balance sheet ("Capital
Raise") to the end of September 2021. PPC further advised Shareholders
that the SA Lenders had also agreed to review the need for the Capital
Raise should the South African businesses continue to de-gear towards
a sustainable debt metric of c.2x EBITDA.

PPC is pleased to inform Shareholders that it has signed non-binding
term sheets with the SA Lenders to refinance its existing debt
obligations and remove the undertaking for a Capital Raise subject to
the completion of the disposal of PPC Lime by 31 October 2021.

UPDATE ON THE DISPOSAL OF PPC LIME LIMITED
PPC previously advised Shareholders that PPC South Africa Holdings
Proprietary Limited had entered into a binding agreement to dispose
of its entire shareholding in PPC Lime for a consideration of R515
million ("PPC Lime Disposal") on terms and conditions set out in the
announcement. On 20 September 2021 Shareholders were informed that
all outstanding conditions precedent in relation to the PPC Lime
Disposal had been fulfilled on 17 September 2021.

In terms of the Agreement, the effective date of the PPC Lime Disposal
is the last day of the month in which the final condition precedent
is fulfilled and will therefore be 30 September 2021. The closing date
on which the purchase price, including interest, will be received is
expected to be 10 business days thereafter on 14 October 2021.

REFINANCING OF PPC’S SOUTH AFRICAN DEBT FACILITIES
PPC   refers Shareholders to      previous  announcements   regarding
negotiations with its SA lenders on its existing debt arrangements to
enhance the Group’s financial flexibility. The new facilities of R2.1
billion, as per the signed non-binding term sheets with the SA Lenders,
have an extended maturity profile with the long-term facility of R1.5
billion being repayable over three to five years. The margins have
been reduced across all facilities to reflect PPC’s improved credit
risk profile. PPC will use the new facilities to re-finance the drawn
portions of existing facilities, leaving adequate headroom and
financial flexibility over the next five years.

DRC CAPITAL RESTRUCTURING
As previously announced, the binding settlement agreement entered into
on 31 March 2021 with the DRC Lenders terminated PPC’s obligations to
make further deficiency funding payments to PPC Barnet. The term
sheet, also signed on 31 March 2021, envisaged restructuring of PPC
Barnet’s balance sheet by 30 September 2021. It is now envisaged that
binding long-form restructuring agreements with the DRC Lenders will
only be signed after 30 September 2021, with the administrative
processes to restructure PPC Barnet’s balance sheet to re-store
solvency and liquidity to be effective by mid-December 2021.
Notwithstanding the delay in the restructuring, the DRC Lenders have
no further recourse to PPC Ltd.

OPERATING UPDATE FOR THE SIX MONTHS ENDING 30 SEPTEMBER 2021

GROUP PERFORMANCE
PPC expects total Group cement sales volumes for the six months ending
30 September 2021 to increase by 10%-13% year-on-year, with double-
digit volume growth in most business units. Relative to the comparable
period in 2019, total cement sales are expected to increase by 6%-9%.
The Group’s materials businesses also experienced double-digit year-
on-year growth in sales volumes.

SOUTH AFRICA & BOTSWANA CEMENT
PPC expects cement sales volumes in the region to increase by 10%-13%
year-on-year for the six months ending 30 September 2021 due to strong
retail demand. Relative to the comparable period in 2019, cement sales
in the region are expected to increase by 3%-6%. Growth in cement
sales volumes in the informal and rural markets continues to outpace
other segments of the market. After experiencing a lagged recovery
relative to the inland region, PPC experienced double-digit year-on-
year growth in cement sales volumes in the coastal region, albeit from
a lower base, with most of the recovery in sales occurring after July
2021. PPC remains cautious on the outlook for demand in the coastal
area due to a slow recovery in commercial construction activity. PPC
implemented price increases to offset input cost inflation with
realised selling prices increasing by 5%-10% year-on-year for the six
months ending 30 September 2021.

Cement imports continue to threaten the sustainability of the South
African cement industry, with total imports increasing by 14% year-
on-year after adjusting for the impact of the hard lockdown in the
prior comparable period. PPC estimates that imports will account for
approximately 10% of total industry volumes by the end of 2021.
Although the South African cement industry has experienced an upswing
in demand following the initial COVID-19 related hard lockdowns in
2020, total industry demand is below levels that will incentivise new
investments in the industry. In addition, the lack of relief against
unfair   competition   [Dumping]   is   threatening   the   financial
sustainability of a vital component of the manufacturing and
construction sector. It is also eroding the industry's ability to
create jobs.

In conjunction with Cement & Concrete SA (CCSA) and other industry
players, PPC is awaiting a decision from the relevant authorities on
an application that seeks relief against unfair competition. The
application has been updated to include both clinker and cement. PPC
is committed to working with all parties to achieve a speedy outcome.
The South African cement industry is also awaiting a decision from
the authorities to classify locally produced cement as a designated
product, making it compulsory for locally produced cement to be used
in government-funded construction projects and to prohibit the use of
imported cement in such projects. Upon implementation, the local
cement industry is expected to benefit from increased demand due to
the new designation once the Government's infrastructure build
programme gathers pace. PPC continues to work with the relevant
stakeholders on this matter.

MATERIALS
Due to increased construction activity, the readymix and aggregates
businesses experienced a recovery in demand for the six months ending
30 September 2021. PPC expects readymix volumes to increase by 33%-
37% year-on-year, while aggregates volumes are expected to increase
by 22%-26% year-on-year. Fly ash sales volumes are expected to
increase by 2%-5%. Overall, revenues for the materials division are
expected to increase due to the increase in sales of readymix and
aggregates.

ZIMBABWE
PPC Zimbabwe continues to trade ahead of expectations despite the
challenging macro-economic environment. For the six months ending 30
September 2021, PPC Zimbabwe’s cement sales volumes are expected to
increase by 14%-18% year-on-year benefiting from retail demand,
increased sales to concrete product manufacturers, and support from
Government-funded projects. Relative to the comparable period in 2019,
cement sales volumes are expected to increase by 25%-29%.

RWANDA
COVID-19 related lockdowns imposed by the authorities to control the
spread of the virus continue to have an unfavourable impact on
CIMERWA's cement sales. In addition, the prior year benefited from
government infrastructure projects which did not reoccur in the
current period. Despite this, cement sales volumes for the six months
ending 30 September 2021 are expected to be in line with the prior
comparable period. Relative to the same period in 2019, CIMERWA
expects cement sales volumes to increase by 7%-10%. Revenue in Rands
for the six months ending 30 September 2021 is expected to decline
year-on-year due to Rand strength against the functional currency.
PPC expects additional improvements in sales over the coming months
as economic activity gathers momentum on the back of improving
vaccination rates and infrastructure projects.

LIQUIDITY & CASH FLOW
Cash generation benefited from the Group's financial performance
improvements and its numerous cash generation and preservation
measures. As a result, South Africa gross debt declined to R1.8 billion
(31 March 2021: R1.9 billion) and will reduce further by approximately
R550 million when the proceeds of the disposals of PPC Lime and PPC
Aggregate Quarries Botswana Proprietary Limited are received in
October 2021.

OUTLOOK
Although PPC continues to face uncertain trading conditions, the Group
is well-positioned to benefit from growing cement demand in the
territories in which it operates. PPC will also continue to take the
necessary measures to ensure that it can continue serving its
customers, protecting its employees, and implementing strategic
initiatives to ensure financial sustainability through all demand
cycles.

Sandton
28 September 2021

Sponsor
Sasfin Capital
A member of the Sasfin Group

Financial Communications Advisor:
Instinctif Partners
Louise Fortuin
Mobile: +27 71 605 4294

Date: 28-09-2021 07:59:00
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