Marc Hasenfuss Editor-at-large
Market leader: CEO Mike Arnold says Consol’s JSE listing will allow it to pursue a growth strategy in Africa. Supplied
Market leader: CEO Mike Arnold says Consol’s JSE listing will allow it to pursue a growth strategy in Africa. Supplied

Glass-packaging group Consol will use the bulk of the capital raised for its listing on the JSE in early May to ease its heavy debt burden.

According to a prelisting statement issued on Monday, Consol will pitch 761-million shares to selected investors at a price range of 150c to 650c per share. If all the shares are placed and a mid-range price achieved Consol will raise about R3bn.

The prelisting statement disclosed R1.8bn would be used to reduce debt facilities, R635m to redeem preference shares and R241m to repay a portion of shareholder loans in cash.

Shareholders include Brait (29.7%), Old Mutual Private Equity (22.8%), Sanlam Private Equity (12%), Sphere (10%), HarbourVest Partners (9.8%) and the Public Investment Corporation (7.5%).

Shareholder loans not repaid in cash would be converted into shares and the balance of the raised capital retained "for general corporate purposes".

The prelisting statement showed Consol managed operating profit of R668m off turnover of R3.7bn in the half-year to end December.

But the group posted a pretax loss of R80m after finance expenses of R625m.

The interim financial statements showed noncurrent shareholders’ loans topping R4.5bn and preference share liabilities of R595m as well as current borrowings of close to R4.2bn and an overdraft of R388m. At the end of the interim period Consol’s total liabilities of R11.9bn were larger than total assets of R10.8bn. The acid test ratio showed current assets of R3.5bn dwarfed by current liabilities of R5.7bn.

Directors said that since the close of the interim trading period the group had continued to perform in line with management’s expectations, disclosing that the performance in the first quarter of 2018 was ahead of the corresponding period in 2017.

They said growth was driven mainly by sales volumes in SA.

Directors predicted that strong revenue growth should continue, with sales volume growth in the rest of Africa supported by the commissioning of the Juniper Glass plant (Ethiopia) in the last quarter of 2018 and additional capacity commissioned at Glassforce (Nigeria) in the third quarter.

Consol CEO Mike Arnold said the listing would allow Consol to pursue its growth strategy in Africa.

"We are a market leader in a highly attractive industry and we operate in consumer markets with solid long-term growth prospects," Arnold said.

Neil Brown, a fund manager at Electus Fund Managers, noted Consol had beer giant AB InBev as its largest client. "AB InBev is well known for being extremely tough on payment terms … being much tougher than SABMiller. So this could be an issue in the next negotiation between Consol and AB InBev."

Brown noted that Consol was aggressively geared up with debt and "a bit starved of capital expenditure" after it was delisted from the JSE in 2007.

"Now that Consol is being listed again, it would seem that the new owner or investors will be funding the catch-up in capital expenditure," he said.