Cemex PHL eyes stock rights offer
CEMEX Holdings Philippines, Inc. (CHP) plans to more than triple its authorized capital stock as part of efforts to raise up to $250 million through a potential stock rights offering.
In a disclosure to the stock exchange on Wednesday, the listed cement manufacturer said its board of directors has approved the increase of its authorized capital stock to P18,310,395,454, consisting of 18,310,395,454 common shares with a par value of P1 per share.
The company’s authorized capital stock currently stands at about P5.195 billion divided into around 5.195 billion common shares at P1 each.
“The rationale for the amendment is for the ability to raise equity capital including, but not limited to, a rights offering, that the corporation may undertake, subject to the final decision and approval of the board of directors,” the company said.
Investors reacted negatively to CHP’s planned offering, prompting a 15.04% drop in its shares to P2.26 each at the stock exchange after Wednesday trading.
Sought for comment, Timson Securities, Inc. Trader Jervin S. De Celis said the offering will have a dilutive effect on current shareholders.
“(T)he company stated that in the future they might offer stock rights but since no additional details have been disclosed, it somewhat scared investors urging them to sell heavily today,” Mr. De Celis said in a mobile message.
Mr. De Celis noted that investors decided to sell their holdings in the firm as its share price has been struggling to rise above P2.90 in previous sessions.
“The sell-off today could not be just a knee-jerk reaction...when the short-term support levels at P2.50 and P2.40 were broken, investors with large number of shares raced to liquidate their positions,” he said.
CHP is looking to raise up to $250 million to improve its capital structure and provide flexibility in its balance sheet. The funds will also support the company’s expansion of its Solid Cement plant in Antipolo, Rizal.
Worth about $235 million, the expansion will add 1.5 million metric tons (MT) a year to Solid Cement’s current capacity of 1.9 million MT. This will increase CHP’s overall capacity by 26%.
In a presentation posted on its website in February, CHP said it has already invested $64 million for Solid Cement plant’s expansion, $39 million of which are advances that will be capitalized in 2019 and 2020.
The company expects the new product line to start operation by the fourth quarter of 2020, which will serve the cement requirements of the National Capital Region and Southern Luzon. It has recently secured approval form the Board of Investments for the new line, which entitles it to tax incentives during the first few years of operations.
CHP booked a consolidated net loss of P930 million in 2018, compared to a net income of P659 million in 2017, weighed down by the landslide in Naga City which affected its supplier of raw materials. The company was further affected by higher foreign exchange losses and higher income tax expenses.
The net loss came amid a seven percent increase in net sales to P23.42 billion, driven by residential construction due to the high demand from overseas Filipino workers, foreign investors, and outsourcing and offshoring companies.