PPC LIMITED - Update Regarding Changes to Monetary Policy in Zimbabwe

Update Regarding Changes to Monetary Policy in Zimbabwe

PPC Ltd
(Incorporated in the Republic of South Africa)
(Company registration number 1892/000667/06)
JSE ISIN: ZAE000170049
JSE code: PPC ZSE code: PPC
JSE code: PPC002   JSE ISIN: ZAG000111212
JSE code: PPC003   JSE ISIN: ZAG000117524
JSE code: PPC005   JSE ISIN: ZAG000117532
("PPC" or "Company" or "Group")

PPC LTD – UPDATE REGARDING CHANGES TO MONETARY POLICY IN ZIMBABWE

BACKGROUND

The PPC Zimbabwe business has remained resilient despite the challenges experienced
in the Zimbabwean economy in the last 12 months. The company has kept its pricing
in line with inflationary increases in the economy and demand remains strong.
Furthermore, EBITDA margins remain within the previously guided range of 30% - 35%
for FY19. PPC Zimbabwe continues to follow a rigorous approach to liquidity
management and cash preservation as highlighted in our update on 5 February 2019.
Initiatives include:

   •   90% of input costs sourced locally,
   •   Increasing exports to neighbouring countries,
   •   Continuing with clinker imports from South Africa,
   •   Shares purchases of PPC on the Zimbabwe Stock Exchange

On 20 February 2019, Zimbabwe’s Central Bank Governor John Mangudya announced that
the Bank would be establishing an inter-bank foreign exchange market in Zimbabwe to
formalise the trading of RTGS balances and bond notes with US dollars and other
currencies.

We view the introduction of a formalised floating foreign exchange market as a
positive development toward curbing the high inflation and excessive premiums
created by the parallel exchange rates. The exchange market should result in a more
efficient allocation of foreign currency, removing the distortions that were
impacting the market, and facilitate the repatriation of cash in the medium to
long-term.

KEY CONSIDERATIONS

The key elements of the announcement issued on the 20 February 2019, are:

       1. The RTGS (Real Time Gross Settlement) $ will become the functional
       currency in Zimbabwe, with the initial rate being 2.5 RTGS $:1 US$;

       2. All foreign liabilities or legacy debts and declared dividends, will be
       treated separately after registering such transactions with the exchange
       control department of the Reserve Bank of Zimbabwe; and

IMPLICATIONS FOR PPC GROUP BALANCE SHEET AND LIQUIDITY

PPC has reviewed the monetary policy statement issued on the 20 February 2019. The
impact on the group is as follows:

       1. The functional reporting currency will be the RTGS $. A full impact
       assessment including systems alignment is underway;

       2. The Public Accountants and Auditors Board (PAAB) is expected to pronounce
       on the impact of the monetary policy statement. In particular the
       determination of the effective date of conversion to the RTGS $ being October
       2018 or February 2019;

       3. PPC reported a cash balance of US$63m at the end of September 2018 which
       was reduced to US$60m by a debt repayment at the end of February 2019;

       3.1. The initial rate of 2.5 RTGS $:1 US$ applies only to a portion of the
       US$60m cash balance, amounting to US$30m – US$35m;

       3.2. The remaining balance including US$16m in dividends and US$5m rights
       offer proceeds, qualifies as legacy debt due to PPC RSA which is awaiting
       repatriation.

In terms of group liquidity, PPC Zimbabwe is excluded from covenant calculations.

LOOKING AHEAD

PPC Zimbabwe’s maintains a good relationship with the Zimbabwean monetary
authorities  and  will  persist in  engaging  the  regulators and  monitoring
developments. The business continues to implement strategies to protect its
financial position and utilise regulatory channels to repatriate funds where
possible.

The information in this update      has   not   been   reviewed   or   reported   on   by   the
Company’s external auditors.

Sandton

7 March 2019

Sponsor

Merrill Lynch South Africa (Pty) Limited

PPC:

Anashrin Pillay

Head Investor Relations

Tel: +27 (0) 11 386 9000



Financial Communications Advisor:

Instinctif Partners

Gift Dlamini

Mobile: +27 11 050 7536

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