PPC’s share price shot up 6.54% on the JSE after it announced the sale of its 51% interest in Cimerwa (Rwanda), finalising PPC’s exit of all its central and eastern African businesses.
PPC’s subsidiary, PPC International Holdings, on Friday concluded an agreement to dispose of its shareholding in Cimerwa to National Cement Holding, for $42.5 million (R780.3m) cash . The share price closed at R3.42, this after the price steadily clawed back some 50% of value over a year.
Roland van Wijnen, the CEO of PPC, said the deal enabled PPC to focus efforts and resources on its core southern African markets. With the proceeds from this transaction, PPC would have further options in deciding the best approach to allocate capital that delivered enhanced value for stakeholders.
“We consider National Cement to be well-placed as a strong regional player with the financial and technical resources to continue to develop and strengthen Cimerwa’s position in Rwanda and the broader east African region,” said Van Wijnen.
Cimerwa is a Rwandan-based integrated cement manufacturer in which PPC has held a 51% interest since 2013. The remaining 49% is held by minority shareholders, and this 49% is listed on the Rwanda Stock Exchange.
The buy is a privately-owned company and is part of the Devki group that is one of the largest manufacturers of clinker and cement in east Africa, with operations in Kenya and Uganda.
PPC said they sold the stake because of its revised strategy to focus on its core southern African markets. The disposal means PPC will have exited its last central and east African assets.
“PPC believes that the disposal enables the entry of a new long-term strategic investor in Cimerwa that has the required financial and technical resources to continue to support and execute its strategy,” a statement said on Friday.
The transaction was also in line with the Devki's strategy to be an expanding regional cement producer.
“The use of the disposal consideration will be considered by PPC in terms of its capital allocation model and its optimal gearing levels,” PPC’s board said in a statement.
They said that National Cement Company, a significant operating company within the Devki group, had furnished PPC with a corporate guarantee in respect of payment of the purchase consideration.
Cimerwa had a net asset value of R1.2 billion as at March 31, 2023, the date of the company's last financial year-end. Net profit after tax amounted to R237m on that date.
On March 31, 2023, PPC had recorded the disposal shares at a total book value of $38.5m.
Devki Group chairman Dr Narendra Raval said in a statement they looked forward to the integration of Cimerwa into their network of other cement factories in the region.
“We believe in the potential for this business and its people and are excited by the opportunity to support infrastructure development in the region in line with our strategic expansion ambitions.”