Any bidder trying to buy PPC’s profitable Zimbabwe unit must have the cash ready, able to do a quick deal, and must not be under US sanctions, CEO Roland van Wijnen says.
The company has previously received unsolicited offers for PPC Zimbabwe, the country’s largest cement company that is delivering up to US$9 million in dividends to the group per year. But none of these offers has been considered at all because they were too low, van Wijnen told a meeting with investors Thursday.
“We’re fully aware that a lot of people look at our investment in PPC Zimbabwe on this dividend model. From our perspective it has to be looked at from a DCF (discounted cash flows) model using the US dollar, so there’s quite a significant gap,” he said.
DCF measures the value of a company based on future returns, and van Wijnen says this is the best way to value PPC Zimbabwe.
He says: “We got a number of unsolicited offers, especially in the early days, and they were too low for us to even consider them. They were based on old dividends, so those kinds of things are not interesting for us.”
Some 79% of PPC’s sales are now in USD, shielding the company from inflation at a time cement demand in Zimbabwe is firming.
Reports recently suggested that PPC may sell its Zimbabwe business, but van Wijnen has set conditions for any sale.
“If we are to be looking seriously at an offer, there are three considerations that we apply; number one is whether the value properly reflects the value of the business in terms of the DCF. Number two is whether the counterparty that gives the offer is creditworthy and can actually write out the cheque, and is not on the sanctions list preferably. And number three is can the deal be done swiftly, because we don’t want a protracted process,” he says.
Not another Lafarge
PPC, should they sell, would be looking to avoid the sort of transaction that rival Lafarge went through last year. Zimbabwe was part of Holcim’s global selloff, and the company picked Fossil Mining as the buyer for the business. The deal took almost a year to complete.
Just as the deal finally went through, Fossil and its owner, Obey Chimuka, were placed under US sanctions. Because of the sanctions, the company, now Khayah Cement, has had to suspend trading on the ZSE and may face hurdles in its operations, including an ambitious expansion plan.
Cement demand in Zimbabwe has increased from under 1 million tonnes per year in 2017 to 1.8 million tonnes in 2023, driven by infrastructure projects and housing, PPC says.
PPC has capacity of 1.4 million tonnes of cement per year. Future plans in Zimbabwe include a 30MW solar plant to feed its operations in Bulawayo and Colleen Bawn.
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