PPC eyes prospects in African markets

Pretoria Portland Cement (PPC) CEO Ketso Gordhan says the more ambitious plan to double group earnings and capacity meant PPC was "looking to do at least one if not two more deals in Africa.

Pretoria Portland Cement (PPC) CEO Ketso Gordhan says the group’s management is looking at concluding one or two big deals in Africa in a bid to double earnings by 2018.

The cement manufacturer reported normalised earnings before interest‚ taxes‚ depreciation and amortisation of R2.5bn for the year ended September 2013. But Mr Gordhan said "we’d love to have it at about the R5bn mark" by 2018.

This has been part of management’s internal five-year plan since the start of Mr Gordhan’s tenure in January last year.

Another objective is to see 40% of group sales coming from the rest of Africa by 2017‚ from about 22% now. Successful completion of four projects will get the group to that goal.

The projects include a joint-venture plan for a 2-million-tons-a-year plant in Algeria‚ announced this month. PPC is also building cement plants in Ethiopia‚ Rwanda and the Democratic Republic of Congo.

Mr Gordhan said the more ambitious plan to double group earnings and capacity meant PPC was "looking to do at least one if not two more deals in Africa". Target markets included the likes of Ghana and Kenya.

But the group would not rush into any deals.

"It must be more attractive than investing that money in South Africa‚" Mr Gordhan said. "I think the chances are of one acquisition and one greenfields project."

He added that‚ as with PPC’s other African projects‚ "all of them will have a local partner".

PPC is facing increasing competition in the South African market‚ which is prompting its growth into the rest of Africa where margins are higher.

Sephaku Cement‚ an associate of JSE-listed Sephaku Holdings and a 64%-held unit of Nigeria’s Dangote Cement‚ joins the South African market this year.

Mr Gordhan said this would "further delay any new expansion plans".

But PPC would upgrade its Port Elizabeth plant and one of its inland plants to gear up for the expected pickup in public and private sector investments in the 2015 and 2016 financial years.

African growth "is a huge opportunity for PPC‚ because the subcontinent requires 40-million tonnes of new capacity‚ and some of the biggest players are absent at the moment because they’ve got constraints on their balance sheets"‚ Mr Gordhan said.

Meanwhile‚ Mr Gordhan punted Algeria as a highly attractive investment destination for South African companies looking for opportunities further abroad than sub-Saharan Africa.

"I think it’s an attractive place for South African companies who want to explore outside of the sub-Saharan environment‚" he said.

PPC could play a role in leading business delegations to Algeria over the next year.

But Mr Gordhan said South African companies looking to expand into Algeria would have to deal with different conditions to what they might be used to. "It’s a very different economy.

"It’s got much more state control‚ state involvement and state regulation‚ but it’s a huge opportunity because it’s a country that is rich in oil and gas‚ but has very limited industrial development.

"You have got to get your head around the fact that you can’t own more than 49% of the business.

"You can have management control‚ you will be able to structure it in a way that allows you to consolidate the numbers‚ which is what we’ve done."

But Algeria was growing at a faster pace than South Africa‚ was the largest country in Africa and "the opportunities are great". PPC is doing feasibility studies for its R3.9bn plant there.