Was PPC a screamingly obvious bargain back in September 2023 when Argentinian Matias Cardarelli was named CEO? It certainly looks like it now. Since his appointment, the share price has risen almost threefold — from R2.60 to R7.22 as of this week. But, as he tells the FM, few at the time paid much heed after more than a decade of new management, new promises and failed turnarounds.
Did it take much convincing to keep you on to see the turnaround through to 2030? Or did you push for this?
I would say neither. Of course I was always looking to cross the finish line in terms of completing the strategy that we built two years ago. And … the board was also very keen for me to stay. So we both wanted this to continue. We’ve made a big effort the first two years of this turnaround and we are still looking for important opportunities. I have a very good relationship with the board and with some of the main shareholders.
Value Capital Partners was instrumental in persuading you to join PPC; I presume they’re the shareholder you’re referring to?
100%. I have built a very strong personal and professional relationship with them — we trust each other, we like each other and we’re aligned. I’m not afraid to say I would not have come to PPC if Nono [Mkhondo, VCP’s CEO] and Antony [Ball, VCP’s chair] were not involved, and they’re also pivotal in terms of me staying. For me the “who” is very important — who I work with and who I work for, and VCP ticks all the boxes in terms of what I think is important to have as an active shareholder and board members.
PPC’s results for the year ended March were hugely improved — the ebitda margin was over 20% from 12% previously, and in a stagnant economy. Is there a point, though, where you can’t do much more fixing and you really need the economy to grow?
Our operational turnaround has not progressed by more than 50%. We’re still running our plants way below where we should. And I can give you an easy example: our slurry plant, the newest in the country, is still operating at only 20% capacity. When we came in, it was much worse, but there’s still a lot of improvement possible. Then, if you look at the new plant that is going to open next year, RK3, this is going to be an absolute game-changer for PPC, with huge cost reductions and CO2 emissions and efficiencies. So with just two examples you can find the answer to your question.
In the results you mentioned that you had to reset the legacy way of thinking within the company. What did you actually do and what are you still doing?
The only thing I asked Antony and Nono was whether they would empower me to build a new team. We needed to bring experienced and focused people, so the first thing we did was announce a new executive team in January 2024. Unfortunately, we inherited a company where a lot of people were appointed but not capable of performing the roles. You can’t ask people to perform if they can’t, and linked to that was the change in organisational culture. PPC was a very complacent organisation: I think at a certain point in time it fell in love with the idea that the company couldn’t do better and that the only problems it was facing were the economy and imported cement. Which of course are problems, but they’re not the only problems PPC had. The business was not run in the proper way. We’ve recruited more than 20 managers from the South African market, and we’ve put a lot of focus on developing and coaching people. Then we aligned our personal incentive targets to the shareholders. And this has also created a culture where if the company wins, the shareholders win and employees win. You know that in the past two years, all of our employees have received salary increases above inflation? And we have paid record incentives because of the results. Usually people think that turnarounds are about cutting salaries and massive layoffs, and we haven’t done that. Which has also created this team spirit in the company — our employees know that if PPC does well, they will do well.
As part of your contract extension, you’ve been awarded 10-million PPC shares that vest in March 2030. Do those come with particular conditions?
Of course the value of the share will depend on the results and execution, so I think it’s really aligned between shareholders and myself.
Since you came in, the share price has more than doubled. Would you personally buy shares in PPC now?
Because I have quite a lot of information about the company, sometimes I’m quite restrained to buy PPC shares. But in the case of my previous allocation, I paid taxes from my pocket to expand my position in PPC. So I have not bought shares, but I have personally paid the tax to avoid selling shares. So, I have kind of bought 45% of my shares. And in this contract extension, I didn’t ask for an increase in salary or a sign-on cash payment.
