Debt ridden Flour Mills announce “3 year” plan to raise N40 billion in equity
Flour Mills of Nigeria’s Chief Financial Officer, Jacque Vauthier revealed on Tuesday that the company had registered plans with the Security and Exchange Commission to raise up to N40 billion in equity over the next three years.
The company revealed that its equity raising efforts will be via a sale of shares in several tranches over a three-year period. According to information from Reuters, the company believes this is an appropriate way of raising equity.
Flour Mills also embarked on a N30 billion rights issue in 2015, which was disappointing by most counts as investors simply ignored taken up their rights. The company has a N28.2 billion rights issue in 2011.
The company also raised N50 billion from the sales of its 30% stake in Unicem Plc in a bid to generate enough cash flows for the business. However, the company is still neck-deep in debts with over N155 billion in external loans compared to an equity of about N100 billion.
Over N50 billion of Flour Mills debt is owed to the CBN and the Bank of Industry and at single digit interest rates. The company’s negative working capital of over N40 billion must be of serious concern to the management of the company. It also has about $20 million in foreign currency loans which has now nearly doubled in Naira terms due to the recent floating of the exchange rate.
[alert-note]”We are working on different options, right issues and or commercial paper and or refinancing our debt to ensure that we maintain profits,” Vauthier.[/alert-note]
The CFO also said Flour Mills intends to use the funds to pay down debt and support working capital.
Flour Mills 2016 first quarter results saw group pre-tax profits of about N5.8 billion compared to about N1.19 billion in the same period last year. The company share price is up 3.3% year to date and closed at N21.5 on Tuesday.