Lafarge Africa Mulls Raising Additional Cash for Expansion

LAGOS (Capital Markets in Africa) – Lafarge Africa Plc, which is busy with a share sale to cut its debt levels, will consider raising additional funding for an expansion that could boost cement production by 24 percent.

Lowering the debt will enable the Lagos-based company to get cheaper funding for the next stage of expansion, Chief Financial Officer Bruno Bayet said in interview Nov. 30. “If you want to expand or construct a cement plant, it is not a small investment,’’ he said, without giving details as the funding plan hasn’t been communicated to regulators.

The unit of Lafarge Holcim Ltd., the world’s largest cement maker, plans to increase its capacity to 17.5 million metric tons from 14 million tons, Bayet said, adding that it could take at least three years to build a new plant to achieve the target.

Lafarge Africa plans to raise net proceeds of 130 billion naira ($361 million) in a rights offer that closes December 15 and will use it to convert part of $507 million in shareholder loans to equity. The company is seeking to stem a drop in profit by lowering its finance charges, while also addressing high operating costs. At least 71 percent of the proceeds from the share sale will be used to convert debt into equity, almost 14 percent to fund the company’s working capital needs and the balance to expand operations, Bayet said.

Take Up
Parent company, Lafarge Holcim “has clearly confirmed that they will be taking up their rights in full,” Chairman Mobolaji Balogun said in letter handed to investors. The rights “provides the company the opportunity to prepare and position for future capacity expansion” he said.

Lafarge Africa also plans to issue 25 billion naira in bonds by the end of this year as part of its 60 billion-naira debt program, he said. Money raised from the sale of the notes, a portion of which was done last month, will be used to refinance overdrafts and support other short-term working capital needs, Bayet said.

The company’s shares have climbed 29 percent this year compared with a 41 percent gain for the 171-member Nigerian Stock Exchange All Share Index.