Ambrian still facing cement sales difficulties

Ambrian updated the market on its cement production activities in Beira, Mozambique and on its current financial position on Tuesday.

The AIM-traded company said cement sales volumes for the second and third quarters of 2017 reflected the trends reported by the National Department for Statistics in respect of overall cement sales in the central part of Mozambique, being 16% lower in the third quarter compared to the same time in 2016, but 20% higher compared to the second quarter of 2017.

It said general economic conditions in the country had been “very challenging” over the last 12 months.

However, the group had seen activity within the construction sector improving over the last six months and, in terms of sales, the fourth quarter of 2017 had been “very strong” and had represented the first quarter where the group's operations were ahead of budget for three consecutive months.

“For the year ending 2017, sales are forecast to be approximately 25% higher than for the same period 2016,” the board confirmed in its statement.

“In addition, the group has seen cement prices improve year-on-year and the plant in Beira is now generating a positive EBITDA.”

With regards to the debt position of Cimentos de Beira, Ambrian said the restructuring of the term loan facilities with the Industrial Development Corporation of South Africa, as it outlined in its interim results in September, still remained subject to conditions precedent being satisfied.

CdB also had local working capital facilities which charged interest based on national lending rates, which were currently in excess of 25%, and which impacted upon the net income of the business.

Looking at the books, Ambrian said that while the operational performance of the cement operations in Mozambique were improving, the company was facing urgent short-term liquidity issues owing to difficulties in moving cash resources held within the group to the company.

“As a consequence, the board is closely monitoring the cash position of the company and anticipates that short-term, external financing will be required in order to ensure the company can continue to meet its obligations as they fall due,” it explained.

“In that regard, the company is currently in discussions with potential counterparties in relation to securing both short-term financing for the company and a longer-term strategic partnership and investment for the group as a whole to allow it to reduce its debt and develop its principal asset in Mozambique significantly.

“Whilst these discussions are at an advanced stage, there can be no certainty that any such financing or strategic partnership will be concluded.”

The Ambrian board said it had undertaken a number of steps in an effort to mitigate the extent of the cash outflows in the short-term, including deferral of non-executive director fees for December.

As of Tuesday morning, it confirmed that the majority of non-executive board members had agreed to the deferral.

“The company is also in discussions with all board members and senior management of Ambrian who hold convertible loan notes issued on 16 October 2015 … about the possibility of deferring the interest payment due on those notes for the period 1 July to 31 December 2017, with such interest currently scheduled to be paid in December 2017.”