Confidence Cement has decided to issue rights shares to raise Tk 1.29 billion for investment in an associate company named Confidence Cement Dhaka and for repayment of term loans.
The Chittagong-based cement manufacturer will issue one right share for every 3 existing shares at Tk 45 each, including Tk 35 as a premium, as per the board decision at a meeting held on Monday.
Currently, the company's total number of ordinary shares is 86.25 million, meaning the cement maker will issue 28.75 million rights shares.
The rights shares issuance is subject to approval by the shareholders at the annual general meeting (AGM), the securities regulator and compliance with the requirements embodied in relevant laws.
The rights issue is an offer of new shares by a company to its existing shareholders in proportion to the shares that they already own and usually at a discount to the market price within a stipulated time.
Confidence Cement scheduled the annual general meeting for October 23 and the record date is September 30.
Another record date will be fixed for entitlement of rights shares after the Bangladesh Securities and Exchange Commission gives its approval, said the company.
A portion of the rights proceeds would be invested in an associate company named Confidence Cement Dhaka, which was built at Palash Upazila in Narsingdi to expand presence in Dhaka and its surrounding market.
Confidence Cement has a 50 per cent stake in Confidence Cement Dhaka, whose annual production capacity would be 1.8 million tonnes.
Annual business performance
Confidence Cement has posted a 77 per cent year-on-year growth in profit to Tk 753 million in FY24, owing to a decline in raw material prices and foreign currency fluctuation loss.
Its consolidated earnings per share (EPS) stood at Tk 8.73 for FY24, up from Tk 3.15 the year before, according to a stock exchange filing on Tuesday.
Efficient cost management and increased share of profit from associates companies resulted in the growth in profit, said the company.
The company also managed to offset costs partially by adjusting sales prices and also because foreign currency fluctuations eased.
Based on the profit growth, the cement maker declared a 10 per cent cash dividend for FY24. The company paid 5 per cent cash and 5 percent stock dividends last year.
Discontinuing ready-mix concrete business
Confidence Cement, a flagship company of Confidence Group, is engaged in manufacturing cement, aggregates and ready-mix concrete.
It, however, will discontinue the business of ready-mix concrete if shareholders give their consent to the decision. It has made the decision for disruptions to imports of raw materials, stagnation in infrastructure development, and imposition of new taxes on ready-mix business.
Stock performance
Meanwhile, the stock price of the cement maker plunged 9.63 per cent to Tk 73.2 per share on the Dhaka Stock Exchange on Tuesday, becoming the second top loser for the day, despite the disclosure of the profit growth.
Market analysts said the number of outstanding shares would rise after the issuance of rights shares. Hence, income will get diluted.
Investors fear that they would be affected after the disbursement of rights shares, which might be the reason as to why they dumped their holdings, said Akramul Alam, head of research at Royal Capital.
Moreover, the decision regarding the ready-mix concrete plant will lead to downsizing of the business, which would have an adverse impact on profitably, added Mr Alam.
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