CAIRNS Holdings Ltd intends to embark on a rights issue to raise $30 billion to recapitalise.
The funds will be used t
o finance new projects, replace old plant and equipment and increase the company’s working capital.
The rights offer will be on the basis of one new ordinary share with a nominal value of two cents for every six ordinary shares already held at an issue price of $1 400 per share.
“The board is proposing to recapitalise Cairns Holdings through a rights offer to raise approximately $30 billion,” Cornelius Sanyanga, the chairman of Cairns, said.
He said the $30 billion was being raised on behalf of its subsidiary, Cairns Foods Ltd.
Cairns Foods is a 100%-owned subsidiary of Cairns.
Sanyanga said the upgrading would significantly improve the company’s efficiency, reduce production costs and enhance quality.
“This would provide Cairns with an opportunity to increase the size of its export base.”
Out of the $30 billion, Cairns intends to invest $10,1 billion in the upgrade of the Lakker Nax production line, one of the company’s leading products.
Sanyanga said there were also additional projects in the pipeline with an estimated cost of $10,9 billion.
The additional projects include the purchase of processing and packaging equipment for the company’s cooking aids factory and upgrading of the cornflakes line to meet increasing demand.
However, Sanyanga said the execution of the projects was contingent on the availability of foreign currency from the Reserve Bank of Zimbabwe as a significant portion of the equipment would have to be imported.
There is a serious shortage of forex in the country as companies are struggling to access forex on the foreign currency auction, which can only allot a weekly amount of about US$11 million, way below the required.
“Cairns has already applied for exchange control approval to source foreign currency for these projects,” he said.
Sanyanga said Cairns proposes to invest the capital raised in additional working capital if the forex is not immediately available.
After the de-merger of Astra Holdings Ltd, Cairns now consists of Cairns Foods and M E Charhon (Pvt) Ltd, 60%-owned.
Since the de-merger the group has been under-capitalised.
“Cairns has faced ongoing cashflow constraints since the de-merger with Astra,” Sanyanga said.
“These have become exacerbated by the inflationary pressures the economy is going through,” he added.