Shareholders approve N2bn rights issue for CCNN

Shareholders of Cement Company of Northern Nigeria (CCNN) Plc have mandated directors of the company to raise about N1.6 billion new equity funds and finance its business development programmes.
Chinedu Dike

At an extra-ordinary general meeting in Sokoto, shareholders authorised the directors to issue new ordinary shares of 50 kobo each to existing shareholders, thus strengthening the company’s plan to access the capital market for funds.

To realise this aim, the board of the cement company has commenced moves to speed up the rights issue to ensure that they get the offer proceeds by the third quarter.

The net proceeds of the rights issue, estimated at N1.5 billion would be used to set up a 12 megawatts power plant for the company through the purchase of three units of four megawatts (4MW) electric generating sets.

Part of the net proceeds would also be used to buy equipment to store, blend and burn biomass in the cement kiln in furtherance of the company’s alternative energy programme.

Ibrahim Gobir, Chairman, CCNN says the rights issue would enhance the growth of the company as the new power plant and alternative energy project would greatly reduce cost of operations.

He says the board is committed to implementing growth initiatives that would stabilize the operations of the company and ensure better returns for shareholders.

Alf Karlsen, managing director, CCNN), says the energy projects are important for the sustainable profitable operations of the company noting that costs of heavy fuels and diesel constitute about 40 per cent of total costs in 2006.

He points out that the completion of the company-owned power plant would enable CCNN to quit the leasing arrangements it has been using for energy generation since 2001, and be in a better position to manage its energy costs.

"Replacing a portion of the low pour fuel oil (LPFO) we used for heating the kiln and producing clinker with biomass like rice husk and peanuts shells, will further reduce energy costs in the production process," he explains.

According to him, since CCNN does not have access to gas now like its competitors in the southern part of the country, it has to use alternatives it can find to match any cost advantages its competitors are enjoying.

Karlsen expresses optimism that the rights issue would be fully subscribed as shareholders fully support the business development programme of the company.

The CCNN managing director notes that the company is being repositioned for sustainable growth.

According to him, operational and technical problems that adversely affected the profitability of the company in recent times are being addressed to forestall disruption in production that usually lead to operational losses for the company.

He explains that the cement maker has commenced aggressive replacement of facilities and a refurbishment programme since 2001, and is making more investments to strengthen the operations of the company. The replacement of machinery and refurbishment of the kiln would forestall break down in production and sustain increasing capacity utilization that began in 2002.

Karlsen says the company has put in place an efficient monitoring system that would facilitate effective maintenance of machinery and other facilities.

The approval of the rights issue shows the willingness of Heidelberg Cement (HC) Group, the world’s fourth largest cement produer, and other key stakeholders to inject about N1.56 billion new equity funds into CCCN.

Heidelberg Cement, through its subsidiary, Scancem International ANS, is expected to inject about N791 million and could raise their commitment. Three other key stakeholders, Nasdal Bap Nigeria Limited, Dantata Investment & Security Company Limited and five Northern States are expected to inject N184 million, N129.5 million and N199.7 million respectively.

Heidelberg Cement, through Scancem International, has gradually increased its shareholding in CCNN from 40 per cent, acquired from the federal government during privatisation of CCNN in 2000 to 50.7 per cent equity stake through additional subscriptions to two rights issues during the period. This led to reduction in shareholdings by the five Northern States of Kebbi, Sokoto, Kano , Kaduna , Jigawa and Katsina from 36.8 per cent to 12.8 per cent.

Nasdal Bap Nigeria and Dantata Investment hold 11.8 per cent and 8.3 per cent equity stakes respectively while another foreign company, Ferrostal AG holds 0.1 per cent. The Nigerian investing public hold the balance of 16.3 per cent of equities.

Heidelberg Cement (HC) Group is the world’s fourth largest cement supplier, with operations in 50 countries through 469 subsidiaries. The HC Group sold 68 million tonnes of cement in 2005 alone. With a share capital of Euro 296 million and 41,000 employees, the HC Group turnover was more than Euro 7.80 billion while profit before tax totalled Euro 772 million in 2005. The Group commenced operations in Africa in 1965 and its presence in Nigeria dates back to 1981. HC Group, through its subsidiary Scancem International, currently operates in nine African countries including Sierra Leone, Liberia , Ghana , Togo , Republic of Benin , Republic of Niger , Gabon , Tanzania and Nigeria .

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