October 31, 2016 / 12:47 PM / 4 years ago

Shares in cement maker PPC hit five week-low after profit warning

JOHANNESBURG (Reuters) - Shares in South African cement maker PPC fell to a five week-low on Monday, after the company said it expected half-year profit to be lower due to high financing costs.

People chat in front of an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton Johannesburg July 9, 2015. REUTERS/Siphiwe Sibeko

PPC said headline earnings per share for the six months ended September would be between 8 cents and 19 cents, down 65 and 85 percent from the comparable period.

“The main contributor to the decline relates to high financing costs,” PPC said in a statement.

Shares in PPC, which are down 50 percent year-to-date, fell more than 12 percent after the announcement. They were down more than 7 percent at 1203 GMT.

South Africa’s biggest cement maker scrapped its dividend earlier this year to conserve cash to help to repay debt. PPC is grappling to service dollar-denominated debt after a sharp fall in the rand and other currencies in Africa, including the Democratic Republic of Congo and Rwanda.

“On the face of it the trading statement appears negative, however the contraction wasn’t unexpected,” Avior Capital Markets analyst Gareth Visser said.

PPC also said it achieved reasonable cement volume growth, but weakness in selling prices has led to a marginal increase in gross profit.

Earnings before interest, taxation, depreciation and amortisation for the period will approximate that recorded for the six months ended 31 March 2016, the company said.

“It all comes down to what you’re seeing with growth in the country with manufacturing and construction, there is no real buy in that space at the moment and they’ve got debt to continue to service,” Independent Securities trader Ryan Woods said.

“That’s what the market is also worried about, they’ve got debt to service and there is no real sign of growth coming through.”

In September, PPC raised 4 billion rand ($295 million) via a rights issue, which was heavily oversubscribed, allowing the company to settle some of its debt.

PPC has begun pushing deeper into the rest of Africa, building factories in Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of Congo in a bid to generate 40 percent of sales outside its home market by 2017.

($1 = 13.5585 rand)

Reporting by Nqobile Dludla. Editing by Jane Merriman

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