S&P downgrades PPC on weaker profit and debt-reduction prospects
S&P Global Ratings has downgraded PPC’s credit rating due to the cement maker’s “weaker profit and debt-reduction prospects”.
The ratings agency lowered its long- and short-term credit ratings on PPC to zaBBB-/zaA-3 from zaA-/zaA-2.
“The downgrade follows weaker-than-expected profitability in PPC’s SA business coupled with ongoing macro-economic and currency regime uncertainty in Zimbabwe,” S&P said.
The group’s debt-to-earnings ratio is expected to increase, and PPC might become more reliant on shorter-term working capital facilities to meet upcoming debt maturity obligations, the agency said.
PPC said earlier in March it is considering selling off non-core assets. It is also looking at options to repatriate funds stuck in Zimbabwe, which is suffering from a liquidity crisis. Its cash balance in that market had been reduced to $60m (R865m) due to a debt payment at the end of February, it said.
S&P said that due to declining demand and increased competition in SA, PPC’s debt-reduction prospects in its home market have been “dampened”, and the group’s margins in SA could fall in the financial year to end-March.
S&P said, “Additionally, we consider that macro-economic and currency regime uncertainty in Zimbabwe will have severe negative implications for PPC’s Zimbabwe business in the short term, from a trading and financial reporting perspective.”