BUSINESS MAVERICK: Could it be third time lucky for PPC in possible tie-up with AfriSam?

It might be a case of third time’s a charm for SA’s largest cement-maker PPC in its possible merger with AfriSam.

The last collapse in merger talks was in December 2017. At the time, AfriSam, chaired by prominent businessman Phuthuma Nhleko, faced an R8-billion debt load and its major shareholder, the Public Investment Corporation , was reluctant to inject more money into the company. Arguably, it would be opportunistic for PPC to launch a bid for AfriSam. After all, some dealmakers argue that a distressed business environment is good for acquisition opportunities.

After the cement industry approached the International Trade Administration Commission to investigate allegations of cement dumping in SA by Pakistan, the commission found in 2014 that there was evidence of bagged cement dumping. From May 2015, SA introduced import tariffs ranging between 14.29% and 77.15% on cement from Pakistan. The tariffs were effective as cement imports dropped by 497,269 tons in 2016, said TCI chief executive Bryan Perrie.

Some local producers cannot compete on price, resulting in them mothballing productivity on their cement plants. PPC alone has shut down one production unit at its Dwaalboom cement plant in Limpopo that directly employs more than 230 people. PPC’s Lekula said the company is selling cement today at 2008 prices to protect its demand. And because of this, producers are making profit margins of between 11% and 15% compared with the 28% they made before the growth of imports, he said.

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