PPC plunges on Gordhan



23-09-2014
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Moneyweb
Source

Abrupt exit unwinds management premium but opportunities remain.

Shares in JSE-listed cement group PPC Limited fell more than 7% on the news that Chief Executive Officer (CEO) Ketso Gordhan has stepped down.

Gordhan appeared to have re-energised a struggling business and had committed a significant capital to the business and was a regular buyer of shares in the open market.

On top of this he also elected to take a pay cut and freeze a number of short-term management incentives, moves which made him popular with the South African investment community. Since March this year, PPC has risen from R28.60 per share to hit R34.63 at the start of September.

Following the news, PPC shares closed at R30 - down 7.69% on Monday.

However the market has now been rocked by the abrupt announcement via Sens that Gordhan has resigned with “immediate effect due to differences of opinion with the board, regarding board procedures for the approval of certain decisions.”

Gordhan’s resignation came as a complete surprise to leaders in the cement and construction industry Moneyweb talked to.

Gordhan was in the news earlier when he took a R1 million pay cut to reduce the 1:120 ratio between his salary and that of the lowest-paid person in the company.

The 60 top executives also took a pay-cut and the 1 000 PPC workers at the lowest pay-grades got an increase of about R10 000 per year, reducing the ration to 1:40.

While Gordhan said at the time the executives made the sacrifice “Happily and voluntarily”, industry sources said it would have been very difficult to refuse such a request from their boss.

In its statement PPC said Gordhan resigned “due to differences of opinion with the board, regarding board procedures for the approval of certain decisions”. The company would not reveal what the differences were.

One industry player said PPC is notorious for slow decision-making, because “many things have to go to the board for it to decided”. The source speculated that Gordhan might have felt he should be given more freedom to take decisions.

Olof Bergh, analyst at Sanlam Private Investments said PPC is becoming attractive as it nears R30.00. “At R25.00 it will definitely offer a buying opportunity”, he said.

In a recent interview with Moneyweb, Anthea Gardner from Cartesium Capital said she was a fan of the business. She told Moneyweb editor Ryk Van Niekerk: "I particularly like PPC as well, not because of the sector but just because I believe management is really good and they’ve got this regional diversification, so they’re expanding into Africa and that’s where we need to be looking. “

For now the market appears to be waiting for the dust to settle and to find out whether new management will continue to make the tough decisions that Gordhan appeared to be prepared to make.

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