ARM Cement’s #ticker:ARM deeper losses have compelled it to embark on a new round of fundraising that will see the company sell a stake to a new investor in the short term, diluting existing shareholders.
The company, which recently raised Sh14 billion by issuing a 42 per cent equity to UK-based CDC Group, says it requires additional funds to steady current operations and fund new investments.
Chief executive Pradeep Paunrana told the Business Daily the amount to be raised from the sale is yet to be determined, adding that the company’s existing major shareholders will provide debt funding in the interim period when it will also complete the sale of its fertiliser business.
“We will first sell the non-cement business, take short term shareholder loans and then bring a strategic long-term investor,” Mr Paunrana said.
“We will do what is right for all shareholders to restore the value. The value has been eroded because of our Tanzanian operations.”
Mr Paunrana said CDC will remain a shareholder in the company and has opted not to pump in more capital because it has reached its limit as an institutional investor.
ARM will prefer to get a cement firm to bring in capital, operational and technical expertise but other investors are also being considered.
The fundraising was prompted by deeper losses in the half year ended June which Mr Paunrana attributed to its Tanzanian business.
The firm’s net loss stood at Sh1.4 billion in the review period, widening 5.3 times from Sh266.7 million a year earlier.
“We were selling cement at a price below cost in Tanzania for the past six months,” Mr Paunrana said, adding that the commodity’s price in the Dar market fell from $88 per tonne in September last year to lows of $60 per tonne this year.
The price wars were sparked by the entry of Nigeria’s Dangote Cement which is known to slash prices to gain market share, hobbling weaker players.
Besides raising new funds, ARM is also planning to restructure its current debt to 10-year obligations to ease pressure on its cash flows.