PPC chair Bheki Sibiya on cutting the dividend, defending his CFO – and Ketso Gordhan

The increasingly antagonistic boardroom shenanigans at PPC have completely overshadowed the company’s full year results which were released today. The ongoing battle between former CEO, Ketso Gordhan and the PPC board will draw to a head on December 8th when shareholders cast their deciding votes as to the future leadership of this company. As always there are three sides to a story – your side, my side and the truth. Here we are able to present one of those sides. Watch this in conjunction with today’s PowerLunch interview with Gordhan which will serve as the other side. And hopefully somewhere between these two distant sides is the truth. – CP

GUGULETHU MFUPHI: It’s good to have you with us here on Power Lunch. Cement producer PPC reported flat full-year headline earnings per share today, of 179 cents. The Company’s Executive Chairman, Bheki Sibiya joins us now for a look at their numbers and everything else that has been unfolding in the last couple of months. Let’s perhaps focus on your numbers. Earlier on, we were speaking to a market commentator with regard to the dividend taking a slight cut and Alec used the word that maybe, you’re not too streetwise in garnering investors’ support with the cut in the dividends. Perhaps you could explain that to us – how that decision was taken.

BHEKI SIBIYA: Good afternoon and thank you very much for the opportunity to engage with yourselves. We are growing into the rest of the African continent, as you are aware, and we are excited about that growth in Zimbabwe, DRC, Rwanda, and Ethiopia. When one grows, one needs to do a bit of own equity plus project funding and for us, we made the adjustment on the dividend policy on the basis of that. We would not want to do the garnering of the support at the expense of the company. For us…we always want to act in the best interest of the company.

ALEC HOGG: He did say that on a direct basis, your numbers were down if you strip out the… This is what Jan van Niekerk said to us. Actually, your operating profit was down 22 percent so a cut in the dividend seems to make sense, anyway.

BHEKI SIBIYA: I’m glad you agree. Yes, for us it made sense to say we really are getting into the era where we want say ‘to have it sustainable, we need to ensure that we grow far more aggressively with the African strategy’.

ALEC HOGG: This story here – and sure, we like to look at the results – but the story is what’s unfolding in the boardroom. We have people that we’ve spoken to at PPC. The morale is shot at the moment – not surprisingly – there are lots of things happening. Are you seeing it yourself, as the Executive Chairman? Do you go into work every day? Do you try to rally the troops?

BHEKI SIBIYA: We do rally the troops but when one looks at what we are doing, we are continuing to grow and the international team is excited. I think the domestic team is excited. The issue of the former CEO is indeed, troublesome. What we look at though is ‘here is someone who was performing well’ and we were generally excited about a number of things. He makes a judgment call, which the Board looks at and says ‘let’s help deal with this issue in a manner that is going to be lawful, procedural, and fair’ and he feels that it is going to slow him down. He tenders the resignation, which we reluctantly accepted and after reluctantly accepting his resignation, he comes back, withdraws it, and has a fight with the Board. The Board looks at it and says ‘why did you resign if you did not want to go’.

Again, the CEO has access to the shareholders at any time and therefore, he didn’t have to resign to have access to the shareholders. He just had to say ‘shareholders, here are the challenges that I have. Let’s deal with them appropriately’.

ALEC HOGG: What do you see as the Board’s remit? I ask this… For instance, Warren Buffett says ‘your remit is to appoint a CEO and to make sure that the CEO follows the strategy of the company’. That’s what he says. How do you feel about this?

BHEKI SIBIYA: We agree with him. That is our role. However, we are dealing with an Executive Director. As you know Alec, the removal of an Executive Director requires certain Companies Act procedures. He was not following those and for us, we were looking at it and saying ‘how do we explain to the world’… How do we explain to the shareholders, the termination of the CFO for her doing her job (and doing her job well) – the very fact that there may be stylistic issues between her and the Chief Executive?

ALEC HOGG: In his announcement that came out yesterday, he said that she basically behaved to such an extent that the funders who were coming in to support you (attractive funding, according to him) were so unhappy with her that they wanted to withdraw. Surely, that must worry you to the degree that you should do some investigation into it.

BHEKI SIBIYA: May I tell you what we know rather than what he says? He had come to the Board through the Deal Committee, which is the Investment Committee of the Board and come up with one alternative source of funding. We looked at that source of funding. We were excited about that source of funding and so was the CFO, but the CFO said ‘acting in the best interest of the Company, she needs to look for alternatives because she needs to promote the best interest of the Company’ and that’s what she did. Whatever disagreement… Strangely, we are still talking to both of those potential funders because our Africa growth strategy is hungry. For us though, the discussion is not about the former CEO, but rather it is about our results and we are excited about our results.

GUGULETHU MFUPHI: Has this not had a negative impact then on your discussions as well as sourcing funding?

BHEKI SIBIYA: It hasn’t. It may have just slowed it down, but let’s look at it. We have four EPC contracts. In Zimbabwe, where we are going to be building a mill of 700, 00 tons per annum – that is on track. In Ethiopia, we have acquired 51 percent of Habesha and we are building a mill, which is one-point-four million tons of funding – fully funded. In DRC, again, one million tons – fully funded. In Rwanda, we are 90 percent done – fully funded. In Algeria, we are busy with a feasibility study. At this stage, it’s going to be concluded in the first quarter of 2015 and that’s when the Board will take a decision. Therefore, for us, we are currently not in need of any funding.

ALEC HOGG: So these funders that Ketso Gordhan spoke about, are they only related then to Algeria?

BHEKI SIBIYA: We were exploring them for Algeria and any other opportunities for our pipeline, and so we are going to match the funding to when we need it. We are confident.

ALEC HOGG: Why did it need to be done with such haste? You say that your CFO wanted to investigate and look for alternatives. Why did it have to come to this?

BHEKI SIBIYA: It is my understanding that you are going to be seeing the former CEO. You need to ask him that because honestly, he was unnecessarily hasty, tripped himself in the process, and he got the Company into the situation it’s in and it’s deeply regrettable.

ALEC HOGG: When you look at the share price… Since he left, it’s been going one way. Again today, after these results, it fell still further.

BHEKI SIBIYA: Yes. When we look at it though, he has been negatively talking about the company. Look at the former CEO. We are releasing the results. These results are his results. His last day at work was on the 22nd of September and our end of the financial year is the 30th of September, and so these are his results, which he delivered and continued to talk negatively about the company. For us, we have been saying (and we’ll continue to say) it has the flavours of a delinquent director because there is delinquency in what he is saying.

GUGULETHU MFUPHI: Reflecting on his results, what do you make of his performance?

BHEKI SIBIYA: His performance… We need to be saying ‘look at the environment’. The GDP growth of one-point-four percent (and cement is more aligned with that)… We had a five-month strike in Rustenburg and we still have a lot of cement in Rustenburg. We have intensifying competition, and we had the rainy season, which was longer and therefore, somehow, it’s understandable. However, are they the sterling results, which enables us to say ‘he can walk tall and proud’? Not necessarily. For us however, we are saying that our growth is in the African continent and therefore, we look at the prize and we say ‘it is discounting our Africa growth strategy’. For us, the pressure is coming on stream in 2015 in Rwanda. In 2016, it is the DRC, Ethiopia, and Zimbabwe, and therefore, we’re excited.

GUGULETHU MFUPHI: Are these not projects that he pioneered, though?

BHEKI SIBIYA: No. We actually started the Africa growth strategy in 2011, ran with it in 2012, and he joined us in November 2012. He became the CEO in January 2013 when the Africa growth strategy was in place, and so he inherited it. The Board owns the strategy. The Board is committed to the strategy. The Board is saying ‘even the successor to the former CEO is somebody who is going to buy into the strategy, is going to be passionate about the African continent, the MNA, and indeed, is going to be a good leader of men and women’.

ALEC HOGG: Who is that successor going to be?

BHEKI SIBIYA: We are in the process of seeking the successor. We’ve just shortlisted ten people. We’re going to interview them early in December, and we want to conclude that process after that Watershed Special Shareholders meeting on the 8th of December.

ALEC HOGG: Very quickly, on the 8th: what are the votes stacking up for on your analysis?

BHEKI SIBIYA: We are continuing to inform our shareholders so that they are informed and the postal strike is not helping us in this regard. For us, we are quietly confident that the current Board is going to be retained. However, we say Corporate Governance is going to win on the 8th because the decision of the shareholders will be respected and it will be the right decision, whatever ‘right’ it will be.

ALEC HOGG: And the PIC is on board, from your perspective.

BHEKI SIBIYA: They are on board, together with others but we are not their spokesperson. They will speak at the appropriate time.

ALEC HOGG: Bheki Sibiya is the Executive Chairman of PPC. We will be talking to the ex-CEO of the Company, Ketso Gordhan in just a little while.

 

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