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Cement major PPC has signalled that it will finally reward shareholders in this financial year either by reinstating dividend payments or through implementing a share repurchase programme.

JSE-listed PPC last paid a final dividend of 33c per share in November 2015 before scrapping payouts as it then grappled with fallout from an ambitious African expansion strategy in which it racked up debt totalling about R5.2bn by end-September 2020.

This was followed by the pandemic rattling the construction and building industries.

However, the group has since been focused on paying down that debt. Despite overall cement sales volumes falling in SA and Botswana, the Johannesburg-based construction materials group has managed to slash net debt to R381m by the end of September.

Moreover, the January sale of its 51% stake in Rwandan integrated cement manufacturer Cimerwa for $42.5m now allows PPC to focus on its core Southern African markets where it sees opportunities to drive improved profitability and secure a more sustainable return on capital.

After the receipt of the proceeds from the disposal of Cimiwera, PPC said SA and Botswana turned cash positive by the end of January to tally a net cash position of R280m.

“With the SA gross debt to earnings before interest, taxes, depreciation, and amortisation (ebidta) ratio expected to be well below the stated optimal level, PPC intends to continue to return cash to shareholders,” the group said last week in an operational update for the 10 months to January 31.

PPC said this would be done “through dividends or the implementation of a share repurchase programme in the absence of any value-enhancing corporate activity”.

However, the signs of a shareholder payout have not rallied the market as PPC shares have slipped 9% over the past 30 days and declined more than 19% in the year to date.

Historically, dividends from Zimbabwe have contributed to the deleveraging of the group’s SA balance sheet. However, in the 2023 financial year, the SA obligor group reached an optimal level of gearing that then allowed for the implementation of a new distribution policy.

The board approved a distribution in the form of a share repurchase of up to R200m, which reached the R200m approved level during the first half of March.

The policy is based on distributing an amount of cash such that the 12-month backwards and expected 12-month forward SA obligor group gross debt to ebidta is at a ratio of 1.3 to 1.5 times, PPC said.

Chronux research director, Rowan Goeller said PPC had weathered the weak SA market well and he expected increased distributions into full-year 2025 as continued degearing allows further dividends or share buybacks. 

“A dividend will be considered in the 2024 financial year — we believe that a dividend of R274m (19c per share) is allowable within the overall distribution for the 2014 financial year within the obligor gearing limits,” Goeller said.

“We assume a dividend of up to 10c will be considered after the $42.5m sale of Cimerwa, Rwanda.”

Meanwhile, PPC Zimbabwe remained debt-free and held R95m in unencumbered cash at the end of January. PPC Zimbabwe declared dividends of $4m in July and $7m in November with the next dividend declaration expected in July.

After CEO Matias Cardarelli took over from Roland van Wijnen with effect from December 2023, the board brought on former executives of Brazil-based InterCement whose SA business was sold in July to China-based Huaxin Cement, with the transaction being concluded in December.

The reorganised and strengthened executive committee, PPC Exco, which was announced in January is now conducting a comprehensive review of the company and its operations as it targets achieving a sustainable return on capital for its SA and Botswana business in the medium term.

To ensure that PPC is agile, well managed and resilient in a challenging SA macroeconomic context, the committee said it would focus on the optimisation of processes and controls; the refocusing of the business on contribution margin through an assessment of the SA business commercial footprint; and on the reduction in fixed operational and overhead costs.

“PPC intends to increase engagement with regulators and other key market stakeholders as a commitment to developing a sustainable cement industry in SA through creating a level playing field among local, regional and international competitors on key issues such as imported cement and low-quality standard products,” the group said.

Revenue growth in the SA and Botswana cement business continued to be driven by price increases, positively offsetting the declining sales volumes as experienced in the half-year.

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