Confidence Cement to issue preference shares worth Tk150cr

Confidence Cement – a flagship company of the Confidence Group – is going to issue convertible preference shares worth Tk150 crore to invest in associate companies, and to repay a portion of its long-term loans.

The shares will be converted at a 20% annual rate, and in five years, the preferred shares will be fully converted into ordinary shares.

The preference share issuance is subject to the approval of the shareholders, and the Bangladesh Securities and Exchange Commission (BSEC). 

Besides issuing convertible preference shares, the company has decided to increase its authorised capital from Tk100 crore to Tk350 crore, and also change its memorandum of articles. 

To secure shareholders' approval of the preference shares, the company will hold an extraordinary general meeting (EGM) on 25 March through a digital platform. 

Having secured the shareholders' approval, the company will then apply to the BSEC for approval, according to a disclosure on the Dhaka Stock Exchange (DSE) website on Sunday. 

Confidence Cement's Vice Chairman MD Imran Karim told The Business Standard, "The preference share proceeds will be invested in two projects."

"Firstly, in an under-construction cement mill in Dhaka, which is owned by a subsidiary of Confidence Cement. The mill is expected to go into production in the middle of 2024."

"And secondly, in a 660 MW gas-based power plant which is being built by Confidence Cement's associate company and where it holds a 36% stake. Commercial operations will be started in 2026," he added. 

Convertible preferred stocks are preferred shares that include an option for the holder to convert shares into a fixed number of ordinary shares after a predetermined date.

According to Investopedia, preferred shares typically pay steady dividends, while common stock only pays dividends if they are approved by the board of directors based on financial performance of the firm.

Additionally, preferred shares do not usually come with voting rights, as ordinary shares do.

Strong dollar, costly raw materials bite into half-yearly profit

Despite a 5.81% growth in consolidated revenue, Confidence Cement has suffered a 22.85% profit drop in the first-half of the current fiscal year compared to the previous year.

The company has attributed the profit decline to the soaring prices of raw materials and losses brought on by fluctuations in foreign currency rates. 

According to its financials, during the July-December period, its consolidated revenue rose to Tk195.13 crore, and consolidated net profit to Tk44.89 crore, which was Tk184.39 crore and Tk44.95 crore in the same time of the previous year respectively. 

In the second quarter from October to December 2022, its consolidated revenue declined to Tk105.09 crore, and net profit Tk21.46 crore, which was Tk106.55 crore, and Tk31.02 crore respectively in the same time of the previous fiscal year. 

Established in 1991, Confidence Cement Limited went into commercial operation in 1994.

It was listed on both stock exchanges in 1995. At present, the company has an annual production capacity of 12 lakh tonnes.

In fiscal 2021-22, the company witnessed a drastic fall in profit owing to a drop in sales, devaluation of the taka against the dollar, a rise in raw material prices, as well as losses incurred by its associate companies namely Confidence Batteries Limited.

In FY22, its profit declined to Tk10.94 crore, a 91% fall from the previous fiscal year. 

As profit declined, it paid a 5% cash, and 5% stock dividend to its shareholders.

Earlier in FY21, it had paid a 25% cash dividend to its shareholders. On Sunday, Confidence Cement's shares stuck at Tk89 each at DSE.