Funds released in BEE move by PPC

20-01-2017
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Bizcommunity.com
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PPC has concluded the components of its 2008 broad-based black economic empowerment (B-BBEE) transaction, releasing R1bn in funding.

Strategic black partners and community service groups subscribed for 15.6-million shares as part of earlier agreements. Subsequently, PPC received R1bn on December 15, 2016.

"The company will use the R1bn to reduce debt and fund capital expenditure further, in particular, relating to the Slurry Kiln 9 project near Lichtenburg," it said on Tuesday, 17 January.

PPC had invested about R1.7bn to upgrade kiln lines in the North West to obtain higher clinker production.

The transaction had reduced the company's empowerment credentials, the cement group said. But it was working to implement a new B-BBEE transaction, which would be communicated to shareholders in the first half of 2017.

As part of the transaction PPC bought back and cancelled 48.6-million shares at 10c a share. This resulted in group net stated capital being reduced by 33-million shares to about 1.6-billion shares.

Gareth Visser, cement analyst at Avior Capital Markets, said scheme participants subscribed for shares at R67 a share. "The scheme structure has R1bn cash available, which has been used to purchase 15.6-million shares - R1bn cash inflow to PPC - which have been in the scheme since its inception.

"Because the scheme structure cannot afford to subscribe for all the shares as per the original agreement, the remaining shares that have been set aside - which amounts to 33-million shares - have been purchased back at 10c a share and cancelled. This is simply the winding up of the ... scheme as per its terms," he said. The effect of the transaction on PPC's net stated capital was "negligible".

Azola Lowan, PPC executive for strategy and communications, said the R1bn received was a paper profit offset by the dilution of shares.