Aluworks raises GH¢7.2m through right issue

Aluworks Limited, an aluminium manufacturing company, has raised GH¢7.23 million through the sale of 144.64 million new shares to its shareholders.

The amount was raised from a rights issue that ran from February 25 to March 22 on the Ghana Stock Exchange.

A circular from Strategic African Securities, the sponsoring broker and financial advisor to Aluworks during the offer, said the amount raised represented about 24 per cent of the total amount – GHC30 million – that the company sought to raise.

Aluworks has since listed the new shares on the First Official List of the Ghana Stock Exchange and that brings its ordinary shares on the bourse to about 268.7 million, a separate circular from the exchange indicated.

On the amount raised from the offer, the Managing Director of the company, Mr E. Kwasi Okoh, said “it's not enough but that's what we got.”

“We will work with it as we look for other options,” he added in an interview.

Aluworks was seeking to raise GHC30 million through the sale of 600 million ordinary shares.

Every existing share was matched to about 6.5 of the new shares offered and the company needed to raise at least GHC6 million for the offer to be declared successful, according to the rules that governed it.

The company’s MD had earlier said proceeds from the offer were to help restructure Aluworks’ debts, fund the refurbishment of its cold mill and help construct a new warehouse.

Attempts by the company to refurbish an existing cold mill and construct a new one stalled around 2009, as its sources of funds dried up amidst unfair competition from cheap Chinese imports.

The diminishing of the company’s funds partly caused it to resort to debt-financing, most of which were foreign-currency denominated, and that has continually eaten into its revenues and denied it the opportunity to post profits.

Speaking on the offer, a Senior Investment Analyst at Strategic African Securities , Ms Thelma Maclean, told that the rights issue suffered from a misunderstanding of Aluworks’ predicament by its shareholders.

“Most shareholders are used to dividend payment and so if you do not make profit and doesn't declare dividend often, they tend to see you as not doing well.”

“That is the problem Aluworks is facing,” Ms Maclean noted.

She explained that although demand for the company's products was far above supply, its inability to invest in the business had stalled production over the years, leading to a cyclical posting of losses.

“If the shareholders had bought into the offer and helped the company to raise the needed funds, it would have used it to retire its loans and right after, begin to post profits and declare dividends,” she added.

But once that has not happened, Ms Maclean said Aluworks would have to make do with what was at hand while strategising for a possible come back to the bourse for funds.