Proposed PPC Merger. 11 September 2017

Transcription

1 Proposed PPC Merger 11 September 2017

2 Summary of Proposed Merger Merger Ratio & Deleveraging 1 Merger Ratio: 58:42 (PPC:AfriSam) provides a 57% premium to PPC on pro forma P/E basis and a 24% pro forma normalized EPS accretion before synergies Net Debt: With R7.0 billion deleveraging (R4.0 billion cash injection and conversion of R3.0 billion of PIK note in AfriSam, held by the PIC and Phembani), combined net debt of the merged entity would be R5.6 billion, representing a 1.75x Combined Net Debt / L12M Combined EBITDA Substantial Value Creation for PPC Shareholders Relative Premium: Cost Savings: BEE Injection: Represents c. R0.90/share of additional value creation for PPC shareholders before cost savings Represents c. R3.50/share of additional value creation potential at R800 million of cost savings (per industry comps) at 10x pro forma P/E 40% of AfriSam will be held by the PIC (private equity) and Phembani (which will equate to 17% of the combined entity). This is a significant building block for the creation of a black empowered national champion in cement Significant Premium to PPC 1,2,3,4 Relative Value Premium to Various PPC Share Prices P / Pro Forma Normalized L12M Earnings 57% 57% 57% 57% EV / Installed Capacity (per 1mm tpa) 22% 15% 9% 5% EV / Sales Volume (per 1mm tpa) 35% 28% 23% 19% EV / L12M EBITDA 23% 17% 12% 9% 1) Based on 58:42 Merger Ratio; AfriSam FY Dec-16; PPC FY Mar-17; AfriSam 2) PPC FY17 EBITDA: R1.8 billion; PPC Normalized PAT of R566 million, per FY17 results presentation; AfriSam FY16 EBITDA: R1.1 billion 2 3) AfriSam FY16 Pro Forma PAT based on R4.0B paydown of bank debt and conversion of PIK Notes; excludes changes in goodwill and tax credits on balance sheet 4) Assumes an additional $87mm of funding to complete DRC, per PPC s FY17 results presentation; volume calculations considers pro rata share of Habesha while all other subsidiaries are fully consolidated

3 Key Strategic Rationale for PPC Immediate value creation for PPC shareholders through relative premium to PPC in merger ratio Unlocks substantial value creation through realizable hard cost savings in South Africa from overlapping infrastructure and route-to-market Will create a strong, black empowered National Champion in cement in South Africa, better able to compete against large foreign-owned multinational players and withstand challenging market conditions Strongly capitalized entity to withstand any further industry downturns and deal with liquidity pressures in jurisdictions under pressure Will provide firepower to participate in long-term growth on the continent and compete with other cement majors as a pan-african leader Sufficient balance sheet capacity to overcome short-term financial and operational difficulties in Tanzania, DRC and Ethiopia Strong and long-term African focused shareholder in Fairfax Africa: permanent capital, not a competitor, no incremental regulatory risk, fair and friendly approach, and no funding contingencies 3

4 Immediate Value Creation for PPC Shareholders L12M Actual Pro Forma Normalized L12M Income Statement, ZAR millions MergerCo AfriSam Dec-16, PPC Mar-17 AfriSam PPC MergerCo AfriSam PPC 1 w/o Savings w/ Savings Revenue 6,605 9,641 16,246 6,605 9,641 16,246 16,246 Less: Cash Operating Expenses (5,476) (7,576) (13,052) (5,476) (7,576) (13,052) (13,052) Plus: Estimated Synergies Normalized EBITDA 1,129 2,065 3,194 1,129 2,065 3,194 3,994 Less: D&A (364) (832) (1,196) (364) (832) (1,196) (1,196) EBIT 765 1,233 1, ,233 1,998 2,798 Less: Finance Charges 3 (1,089) (578) (1,667) (132) (578) (710) (710) Less: Impairments of goodwill (2,962) - (2,962) Less: BEE transaction charges - (206) (206) FX Gain / (Loss) - (124) (124) Liquidity and Guarantee Facility - (163) (163) Other Consolidated PBT (3,232) 180 (3,052) ,386 2,186 Less: Taxes 4 (33) (153) (186) (33) (199) (232) (344) Consolidated PAT (3,265) 27 (3,238) ,154 1,842 Net of Minority Interest (Gains)/Losses (9) (9) Attributable PAT (3,274) 93 (3,181) ,210 1,898 Net Debt / EBITDA 0.8x 2.3x 1.8x 1.4x Maintenance Capex (Rmm per 1mm tpa of capacity) Earnings Enhancement EPS % Increase for PPC Shareholders 24% 95% Illustrative Value Creation per 10x P/E ) Based on PPC s FY17 results presentation 2) Illustrative, based on similar precedent transactions 3) Pro forma finance charges, assuming R4.0B repayment of existing bank debt and conversion of PIK notes 4) Assumes 28% tax rate on 50% of the savings, i.e. taxes on AfriSam savings netted against balance of assessed losses; excludes utilisation of assessed loss on balance sheet 5) AfriSam EPS calculated using a share ratio of the 58:42 merger ratio 4

5 Deleveraged Combined Balance Sheet AfriSam Dec-16; PPC Mar-17 (ZAR millions) AfriSam PPC 1 MergerCo ASSETS South Africa PP&E 2,444 4,116 6,560 RoA PP&E 2,300 7,304 9,604 Plus: SK9-1,111 1,111 Net PP&E 4,744 12,531 17,275 Equity accounted investments Goodwill & other intangibles 2, ,575 Deferred taxation assets ,025 Other Total Non-Current Assets 8,289 14,230 22,519 Cash and equivalents ,311 Other current assets 1,367 2,815 4,182 Total Assets 9,977 18,035 28,012 LIABILITIES Long-term borrowings 1,231 3,555 4,786 Deferred taxation 553 1,073 1,626 Provisions Other non-current liabilities Total Non-Current Liabilities 2,004 5,626 7,630 Short-term borrowings - 2,181 2,181 Trade and other payables 668 1,843 2,511 Total Liabilities 2,672 9,650 12,322 EQUITY Book Value of Attributable Equity 3 6,927 8,051 14,978 Non-controlling interests Total Equity 7,305 8,385 15,690 Total Equity + Liabilities 9,977 18,035 28,012 ROE (on Pro Forma Normalized L12M Earnings) w/o Cost Savings 9.3% 7.0% 8.1% Net Debt 910 4,746 5,656 Net Debt to Equity 0.1x 0.6x 0.4x 1) Per the FY17 AFS 2) AfriSam: Deferred tax asset relates to agreed, audited and assessed loss with SARS 3) Pro Forma based on AfriSam recap prior to merger 5

6 Key Operating Stats AfriSam Dec-16, PPC Mar-17 AfriSam 1 PPC 2 Total CEMENT CAPACITY (tpa, millions) South Africa Rwanda Zimbabwe DRC Ethiopia Tanzania Total Installed Capacity of which RoA CEMENT SALES (tpa, millions) South Africa RoA Total Cement Sales Volumes UTILIZATION (% of installed milling capacity) South Africa 64% 67% 66% RoA 63% 19% 29% Total Utilization 64% 49% 54% 1) Per FY16 audited AFS 2) Per Information in the FY17 AFS results presentation; Analysts research reports 6

7 Disclaimer Please note that this presentation is for informational purposes only. Any comments or statements made herein do not necessarily reflect the views of the AfriSam Group of Companies ( the Company ). Although great care is taken to ensure accuracy of information neither the author, nor the Company (including but not limited to its employees, directors etc.) can be held responsible for any decision made on the basis of the information cited. All figures for PPC sourced from publicly available materials.