The JSE-listed shares of cement producer PPC fell
by nearly 17% on Thursday morning as the company warned of lower earnings for
the six months ended September 30, mainly as a result of the “hyperinflationary”
environment in Zimbabwe.
PPC expects its basic earnings per share (BEPS) to
decrease by between 90% and 110%, or by between 19c and 23c, from the BEPS of
21c reported for the six months ended September 30, 2018.
Earnings before interest, taxes, depreciation and
amortisation (Ebitda) was expected to decrease by between 15% and 20%, compared
with the Ebitda of R1.03-billion posted for the prior comparable period.
PPC said the main drivers for the lower Ebitda were
the impact of Zimbabwe’s hyperinflationary environment, a difficult trading
environment in South Africa and one-off restructuring costs of R85-million
incurred in the reporting period.
Headline earnings per share (HEPS), meanwhile, were
expected to decrease by between 65% and 85%, or by between 14c and 18c, from
the HEPS of 21c reported for the prior comparable period.
In dealing with the issues in Zimbabwe, PPC had
been monitoring the economic situation in the country and, while the PPC
business itself was self-sufficient, the Zimbabwe Public Accountants and
Auditors Board announced that Zimbabwe was a hyperinflationary country.
This conclusion was supported by a rapid increase
in the inflation rate, which at the end of September was more than 150%; as
well as by a deterioration in the traded interbank Zimbabwean dollar exchange
rate over the period; and a lack of access to foreign currency to discharge
foreign liabilities.
The impact, therefore, on PPC Zimbabwe’s Ebitda
will be a decline of between 40% and 45% on the Ebitda of R352-million achieved
in the prior comparable period.
The company will release its interim results on November 20. http://www.engineeringnews.co.za/article/ppcs-shares-fall-as-hyperinflationary-zim-environment-drags-down-earnings-2019-11-07
