Our core market, South Africa, continues to experience subdued conditions and stagnant volumes. However, we are very well positioned for growth in the medium to longer term. GDP growth rates are expected to improve in all regions where we operate, which will in turn lead to growing demand for our products.
PPC was approached by a number of potential acquirers in the review period. The board viewed these offers as opportunistic, significantly undervaluing the group’s quality portfolio and favourable footprint, coupled with an experienced leadership team.
In recent years PPC has built solid foundations on which to grow a relevant and sustainable business and keep delivering on promises
PPC has transitioned from an iconic South African brand into a leading provider of construction materials in regions where we operate. The company has delivered all its key projects over the past five years, investing over US$750 million in new plants in select countries in Africa and upgrading existing plants in South Africa. This puts the group in a strong position to deliver long-term sustainable value for all PPC stakeholders.
We have also bolstered senior leadership including the change in CEO, managing directors of the southern Africa and rest of Africa business units and reconstituting the board during the year. The senior leadership team has over 100 years’ combined industry experience. We believe these personnel changes, with the necessary and relevant experience, will further improve the execution of strategic priorities for the group.
Key aspects of 2018
PPC was approached by a number of potential acquirers in the review period. These included the Fairfax Africa Investments (Canada) and AfriSam consortium, LafargeHolcim (Switzerland), CRH plc (Ireland) and Dangote Cement (Nigeria). The board viewed the offers as opportunistic, significantly undervaluing the group’s quality portfolio, favourable footprint, and experienced leadership team. After board deliberations, all negotiations were terminated. During the corporate action processes, an independent expert expressed an opinion that the transaction proposed by the Fairfax Africa Investments (Canada) and AfriSam consortium was not fair to shareholders.
Geopolitics dominate the macro-environment
Our core market, South Africa, continues to experience subdued conditions and stagnant volumes, but we are very well positioned for growth in the medium to longer term. From a pricing perspective, the market is recovering, with increases in realised prices. However, the environment remains competitive and cost-related increases are yet to be realised.
Zimbabwe's political landscape has improved, while Rwanda remains a geographical highlight in our portfolio. The leadership change in Ethiopia is expected to restore stability to one of the most populous nations in Africa. Amid ongoing political challenges, the DRC has scheduled elections for 2018. GDP growth rates are expected to improve in all regions where we operate, which will in turn lead to growth in demand for our products.
Key priorities achieved in the year
During the year, the board approved a new organisational structure to support the group's long-term strategic priorities. One of the key priorities was to strengthen the balance sheet and improve liquidity. It is pleasing to note that S&P Global Ratings has upgraded the group to investment grade.
As a good corporate citizen and in compliance with South African legislation, we will be implementing our BEE III transaction in the 2019 financial year to give us an effective 30% black ownership.
Looking ahead to 2019 and beyond
As chairman of the board, my primary responsibility is to ensure the board provides informed and objective oversight of the group's strategy and performance, and that it delivers effectively on its fiduciary responsibilities.
The PPC board and management are committed to delivering the group's strategic priorities, outlined in the strategy segment on page 8. These initiatives are aligned to creating value for all stakeholders by optimising our existing and newly established businesses. We look forward to reaping the rewards of the foundation laid in recent years.
Evolution of our board
The PPC board is acutely aware of the skills required to capitalise on opportunities and identify and mitigate risks in creating value for all stakeholders. During the year, we changed the composition of the board to be more inclusive in terms of diversity and independence, based on shareholder engagements and recommendations.
In the first half of the period, Mr Tito Mboweni (independent non-executive director) and Mr Darryll Castle (CEO) resigned from their board positions. In the second half, Mr Peter Nelson resigned as chairman of the board and non-executive director of PPC from 2 March 2018. In addition, Mr Sydney Mhlarhi, Mrs Dawn Earp and Mr Tim Ross resigned as non-executive directors. The board thanks these directors for their valuable contributions in achieving significant milestones during their tenures with the group, and wishes them well in their future endeavours.
In reconstituting the board, we appointed Mr Johan Claassen (with 28 years' experience in the business) as CEO, myself as chairman, and Mr Anthony Ball and Ms Noluvuyo Mkhondo as non-executive directors. In April 2018, the board also appointed Mr Ignatius Sehoole and Advocate Mojankunyane Gumbi as non-executive directors. Collectively, these directors add significantly to the depth of skills on the board. All appointments will be presented for confirmation by shareholders at the next annual general meeting.
In closing, I thank my colleagues on the PPC board and executive team, all of whom have provided valuable support and insight in my first months as chairman. I also acknowledge the hard work and dedication of management teams and employees across the group in a challenging year. I look forward to realising the company's full potential.
12 July 2018