HARARE – Listed wines and spirits maker African Distillers Limited (Afdis) plans a $5 million rights issue with the funds earmarked to repay debt and clear a new equipment purchase balance.
The group said $1,5 million will pay off a shareholder loan while $3,35 million will go towards settling a the difference on acquired bottling plant and ancillary equipment.
Under the proposed fund raising scheme — awaiting shareholders’ approval at a December 9, 2013 meeting — Afdis will offer 15 451 174 shares of $0,01 nominal value.
“It is anticipated that these actions will result in the improvement of the company’s market share in the ready to drink market,” said Afdis company secretary Lydiah Mutamuko in a circular to shareholders.
The issue will be underwritten by Afdis Holdings.
A rights issue is an offer of rights to buy additional securities in a company made to the company’s existing shareholders.
When the rights are for equity securities, such as shares, in a public company, it is a way to raise capital under a seasoned equity offering.
Afdis said it has over the years been importing and distributing cider products from South Africa.
However, owing to the ever-increasing duties on imported products, margins and sales volumes on the products have been declining.
“Accordingly, the board has found it prudent to invest $5 million towards a new packaging line as well as modernising other existing production facilities,” said Mutamuko, adding that the move “will allow the company to compete in the regional markets while meeting the demands of our ever growing base of discerning consumers.”
This comes as the group’s after-tax profit for the six months to June 2013 declined to $808 767 from $1,1 million recorded during the same period last year due to rising costs.
Earnings per share decreased to 0,85 cents from 1,2 cents.
Despite achieving revenue growth, administrative costs went up to $1,2 million from $900 000 while distribution and other operating costs also increased.
During the period under review, revenue was up 16 percent to $22 million from $19,5 million while sales volumes grew 18 percent.
Operating income increased by 43 percent to $1,66 million from $1,16 million leveraging on improved efficiencies and cost control.
“Revenue growth was driven largely by increased sales from locally-produced beverages which grew in volume by 21 percent to 3,2 million litres and accounted for 57,7 percent of total revenue,” the company said.
“Revenue growth was lower than volume growth due to unfavourable mix from imported products whose growth was largely constrained by two increases in customs duties during the year.”
The groups’ volumes were up despite an influx of cheap imports from the region.
Networking capital went up by $1,9 million and was financed by increased borrowings as the business grew. Net funding was $2,8 million.
Going forward, the group is underpinning its growth in investing in new and modern manufacturing facilities, increasing its ready-to-drink product portfolio, improvement of production efficiencies and capabilities and cost effectiveness throughout the organisation.
The beverage sector is one of the fastest growing sub-sectors of the country’s troubled manufacturing sectors.
Capacity utilisation for the country’s manufacturing sector last year plunged to 44 percent from 57 percent in the prior year due to a host of constraints besetting the sector.