PPC starts year on strong note as investors eye bargains

Shares in PPC, one of the largest suppliers of cement in SA, have gained the most in almost a month in two sessions running as investors hunt for possible bargains.

The company’s share price, which lost about 57% in 2022 in part due to a number of challenges in the construction industry — including economic decline, the construction crisis, cheap imports and environment-related issues — began the new year on a tear, up 16.5% so far.

David Shapiro, chief global equity strategist at Sasfin Wealth, said markets are surging ahead and there have been a lot of investors seeking bargains. 

“By historic measures, PPC is very cheap so it’s hard to think logically about the buying or, for that matter, the SA economy, but markets think far ahead,” said Shapiro.

According to Cement & Concrete SA, the industry faces low levels of public infrastructure investment, while business activity in construction has suffered several years of decline. Industry players in the cement and construction materials business have said the industry remains under immense strain.

The SA Institution of Civil Engineering’s (SAICE’s) “2022 Infrastructure Report Card for SA”, published in November, provided evidence of the deficit in infrastructure investment. The overall grade for public infrastructure declined from C-minus in 2011 and D-plus in 2017 to D-minus in 2022, the lowest grade yet recorded by SAICE.

According to the organisation, such a rating implies that infrastructure is at risk of failure.

In its last trading update, PPC reported a 2% fall in cement sales volumes in its SA- and Botswana-based operations.

At the time, the company said without a significant rise in infrastructure spending and tangible action against imports, SA’s cement demand was expected to remain subdued.

The company’s share price was up 9% to R2.54 on Tuesday, its biggest one-day climb since late November.

Shapiro said despite a few challenges, emerging markets are in favour with investors. “I suspect interest is coming from emerging market funds. In foreign currencies, PPC is dirt cheap. So the downside risks are minimal,” said Shapiro, adding that the market does remain volatile with volumes quite small, warning that the company’s share price could easily reverse the gains.

tsobol@businesslive.co.za