Lafarge Africa pegs N89bn rights issue at N12 per share

The board of directors held an emergency board meeting Monday, December 3, 2018 where it was agreed that the issue would be executed by offering six shares for every seven shares held by existing shareholders.

The cement producing company said the terms of the rights issue now approved by directors, were earlier passed by shareholders at an extraordinary general meeting held on the 25^th September 2018 and that the qualification date will soon be announced.

The approved price of N12 represents a 10.45 percent discount on Lafarge Africa’s traded closing price of N13.40 as at Monday, December 3, 2018 when the decision was taken.  The price, however, trails its year-open price of N44.19 by 70 percent.

The rights issue according to Mobolaji Balogun, the board’s chairman will help to further deleverage the company’s balance sheet and provide headroom for the expansion of the business.

Michel Puchercos, Lafarge’s chief executive also said the refinancing plan is aimed at preparing for future development in Nigeria, improving the company’s leverage as well as strengthen its profitability.

The statements by Balogun and Pucheros were made at the company’s September 25, 2018 EGM, 10 months after it opened a rights issue to raise N131.65 billion by way of 3,097,653,023 ordinary shares of 50 Kobo each at N42.50 per share on the basis of five new ordinary shares for every nine ordinary shares held as at November 1, 2017.

At the conclusion of the 2017 offer, the rights issue were 100 percent subscribed and in March 2018 the allotments were finalized.

Financials of the company for the first half of 2018 however showed that loss after tax of the company increased to N3.9 billion as against a profit of N19.7 billion recorded in June 2017. Finance costs were N23.7 billion as against N11.5 billion in 2017.

Analysts however believe that the impact of the approved rights issue on both earnings and balance sheet will be positive from 2019.

“Both the substitution of expensive short-term debts with equity and the restructuring of USD loans (from USD308 million to USD293 million, maturity extended to 7.5 years, and with 2-year moratorium on both interest and principal effective September 2018) should moderate finance cost, said Christian Orajekwe lead analyst at Cordros Capital in October.

“That said we believe the outstanding USD debt is underlined by FX risk in a possibly volatile 2019 environment.”