Shareholders of Lafarge Africa Plc on Wednesday approved a proposal to raise N140 billion in new capital for the cement group.
The new capital raising will be done through a rights issue, issuance of pre-allotted shares to existing shareholders in proportionate to their shareholdings.
At the annual general meeting in Lagos, shareholders mandated the board of directors to raise up to N140 billion with a general provision that allows the company to convert its indebtedness to equities.
The subscription to the rights issue is expected to take place beginning of third quarter and is expected to be finalised by October at the latest. LafargeHolcim, the majority core investor, has stated that it will subscribe to its rights by converting the existing debt into equity.
Speaking about the rights issue, the first since 2005, Mobolaji Balogun, Chairman of the Board of Directors, noted that the decision of LafargeHolcim, its largest shareholder, to convert existing loans into equity “demonstrates the Group’s continued belief in the Nigeria story.”
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He further added that this “is the largest Rights Issue and the largest investment in a listed company by an investor.”
The company is embarking on a rights issue to reduce its exposure to adverse foreign currency translation losses as experienced in 2016 following a 40 per cent depreciation of the Naira against the US Dollar.
While listing the benefits of recapitalisation, the chairman said it will reduce foreign currency exposure by 50 per cent. The remaining portion of the debt, with the support from LafargeHolcim, has been refinanced and hedged for 12 months.
Michel Puchercos, Country CEO of Lafarge Africa stated that the acquisition of Unicem in 2016 was in line with the Company’s capacity expansion plans. He noted that doubling of the production capacity of the Mfamosing plant in Calabar to 5 million metric tons per annum has contributed significantly to Lafarge Africa’s capacity and footprint in Nigeria.
He said Unicem provides an opportunity to increase the company’s share of the cement market in the South East and South regions, which has begun to impact positively on the financial results of the group.
Commenting on the contribution of Unicem to the company’s 2016 performance, the Country CEO said, “Mfamosing line 2 was delivered ahead of time and above specification, it’s now fully operational. It contributed to fourth quarter 2016 cement production volume and going forward it’s expected to deliver significant cost savings”.