Business News of Sunday, 17 March 2013
Source: Graphic Business
Aluworks to move from losses to profit
Aluworks Limited, an aluminium manufacturing company at Tema, is optimistic it will soon move from the cyclical posting of losses to profits if its on-going rights issue ends successfully.
Such profits, it said were needed to pay dividends to shareholders while helping to resuscitate the company’s operations. The Managing Director of Aluworks, Mr E. Kwasi Okoh, told the Daily Graphic that proceeds of the rights issue, which started on February 25 and would end on March 22, would be used among other things, to retire outstanding debts that had made it difficult for the company to make and declare profits.
“We have some forex denominated loans that we are repaying and exchange rate losses are not helping. Any profit we make in a year goes into repaying those loans leaving nothing to be declared as profit,” Mr Okoh said in an interview. “So, the idea now is to raise some money from the rights issue, use part to pay off our bankers and then we can begin to make profits for our shareholders,” he added.
Aluworks has over the last few years recorded consistent losses due, in part, to a decline in the volumes of its business in the midst of increased under-priced Chinese substitutes in the country. The unstable exchange rate regime also caused loans it took around 2007 to tumble, causing the company to redirect all profits made in the year into defraying such loans.
Its financial results for the first nine months of 2012 showed a net loss of GHC1.93 million similar to those recorded in the last few years. The results further showed various outstanding loans and overdrafts on the company’s books. One such loan is a US$4.2 million facility from Barclays Bank which has a monthly interest rate of 7.85 per cent.
The repayment of the loan has been rescheduled from January 2009 to September this year as the company strategises for repayment options, Mr Okoh said. “Most of these loans were taken around 2007 and 2008 to support our expansion drive. But because the credit crunch hit around that period, the business slowed and the expansion had to stop.”
“What that means is, the small business that we were operating with had to work to pay its own expenses while repaying the loans and that put a lot of pressure on the business,” the MD said.
As a result, the company sought for and got the approval of its shareholders and the Securities and Exchange Commission (SEC) last year to raise GHC30 million through the sale of 600 million new shares to existing shareholders.
Each share is offered at five pesewas, three pesewas lower than the company's current share price on the Ghana Stock Exchange. The circular announcing the rights issue said proceeds of the rights issue would be used to significantly restructure “the company’s debt portfolio, thereby appreciably reducing leverage.”
At the moment, the Mr Okoh said his prayer was that the rights issue succeeded since Aluworks’ dream of rebounding from the losses was heavily tied to it.
“Our prayer is that the offer becomes successful. As soon as it’s through, we just use the money to pay off our commercial banks and start making profits because the issue of exchange rate losses and interest on loans will no longer be there,” the MD noted.
