PPC, whose debt levels have been reduced to far more manageable levels, is poised to benefit from the resumption of big state infrastructure projects and the lifting of the private sector self-generation threshold to 100MW.
Analysts believe SA's largest cement manufacturer, which has slashed debt by more than half and restructured operations to better suit market demand, is seeing daylight after some difficult years and is finally in a position to take advantage of any favourable market changes.
Adrian Saville, speaking with his Gordon Institute of Business Science hat on, said a government-led infrastructure drive would be a "tide that would lift everyone" in the construction industry, including PPC.
But a potential boost closer on the horizon was the surprise announcement this month that companies would be allowed to generate up to 100MW of their own electricity without a licence.
This, Saville said, "is going to be an important source of project spend that will benefit PPC". Companies would be building facilities to take advantage of the higher cap and PPC would benefit because they would need cement to do so.
In an interview following the release of results for the year ended March 31, PPC CEO Roland van Wijnen agreed the lifting of the generation threshold would "definitely help our business".
It would also provide fresh impetus for the solar projects that PPC, itself a big electricity user, had initiated at its own large plants, he said.
Chris Reddy, fund manager at All Weather Capital, called the lifting of the self-generation limit "a positive step to improving business sentiment".
Reddy said the market had seen from retailers such as Cashbuild, Builders and Build it that the consumer was still spending on cement for new homes and renovations. "What we need now is the return of business and state-owned enterprise infrastructure spend," he said.
Saville said the buoyancy in the mining sector could be a "very big" source of infrastructure spend. "When mining businesses go on big spending programmes, it spills over immediately into the engineering and construction segments, which include PPC."
PPC reported that its customers' order books are filling up thanks to government tenders starting to roll out.
"You also listen to what Raubex says, what Afrimat says and they are seeing tender activity increasing a lot," Van Wijnen said.
"We start seeing that slowly but gradually coming into cement demand as well. We are optimistic.
"At the same time, equally important to me is that in these interactions, more and more people who are relevant to decision-making in government are understanding the necessity of local manufacturing and the jobs it can create versus using dumped, imported material."
The group reported that it cut its debt from R5.8bn to R2.6bn. It had made significant progress with capital restructuring and refinancing during the year, "with a number of key milestones met". These included an agreement signed with the lenders to its Democratic Republic of Congo (DRC) operation PPC Barnet which "removes a R2.5bn debt liability by terminating their right to recourse to PPC".
Agreements to sell noncore operations PPC Lime and Botswana Aggregates will generate more than R500m once finalised. PPC said this resulted in it reaching an agreement with its South African lenders to defer a possible rights issue for six months, to September. PPC also recorded a much reduced loss of R118m from R2.38bn in the previous year.
But Van Wijnen said while things had improved significantly for PPC, "we still have to implement what we have agreed to, so give it another 6-12 months before we can say we have turned the ship around".
He said the improvement in results was due in large part to the team coming together at "critical times".
Van Wijnen, who joined PPC at the end of 2019, also credited the company's improved position to actions initiated before he arrived "to right-size the business to the demand there is".
He singled out PPC executive director Antony Ball for his role in "some of the debt negotiations we have had over the last 12 months". Ball is chair of Value Capital Partners, which owns more than 15% of PPC.
Saville said the results were a "substantial improvement from where they were. I think [management] has done a huge amount to improve things materially for the group."
"They've dealt with a major balance sheet issue, which was the DRC, and if you look at language around operational performance and balance sheet positioning, it's now a language of tailwinds rather than headwinds."
Reddy said PPC's "management have done an exceptional job in turning around the business".
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