PCC – Special reprint from €uro am Sonntag
Issue No 2/2018 of January 13-19; page 65
˃˃ PCC Group’s direct-sale approach to bonds-based financing. Twenty years of attractive returns for investors.
By THOMAS STROHM
2018 sees PCC celebrate a round anniversary – for the last 20 years, the group of companies from Duisburg in Germany has been funding its activities primarily on the basis of corporate bonds which it issues directly ‘ex-works.’ Two bonds offering a useful addition to any interested investor’s portfolio are currently available for sale (see box below), with the direct purchase method offered by PCC ensuring that there are no additional fees payable. Yet the bonds issued are also traded on the Frankfurt Stock Exchange – an important advantage for investors wishing to offload prior to maturity.
PCC was founded by Waldemar Preussner in 1993. Today he is the sole shareholder and chairman of the administrative board of the holding company. This has participating interests across 17 countries in some 70 entities in the chemicals, energy and logistics sectors, representing a total workforce of around 3,150 employees. The Chemicals division is by far the most important within the Group; with companies manufacturing feedstocks such as polyols for foam plastics, surfactants for detergents, and chlorine, it accounts for around 85 percent of the consolidated sales total which, in 2016, amounted to 569 million euros.
High hidden reserves
The most important portfolio company in the Chemicals division is PCC Rokita. This was floated on the Warsaw Stock Exchange in 2014, with the parent company still holding 84 percent of the shares. Two further majority shareholdings in Poland – the chemicals company PCC Exol and the logistics company PCC Intermodal – are likewise listed, with their shares again quoted on the Warsaw Stock Exchange. Of particular interest for bond investors is the fact that the asset values of these listed affiliates as recognized in the Group’s financial statements are significantly below the current market value of the respective companies, which means high hidden reserves.
Low equity ratio
Given this background, investors tempted to buy these securities will also need to examine the financial metrics of PCC which, at first glance, may appear to be less promising. At the end of the third quarter of 2017, the equity ratio was disclosed at a relatively low 12.7 percent. The Group’s net debt was shown to be comparatively high at 7.6 times its operating profit (EBITDA).
PCC issued its first corporate bond in 1998, i.e. long before so-called mid-cap bonds first came into fashion – and then into disrepute. Although their small volumes of up to 25 million euros put these securities in the mini-bond segment, the PCC Group has avoided the problems that caused some issuers to harm its reputation. And indeed, at the end of the year, a maturing profit participation certificate issued by PCC was redeemed on schedule without any major fuss.