Penrice hopes for AUD 80 million from stock market listing

Australia“s Penrice Soda Holdings Ltd, the country“s sole producer of soda ash and sodium bicarbonate, hopes to raise up to AUD 80.5 million through the issue of 41.75 million shares at AUD 1.93 eac…

Australia“s Penrice Soda Holdings Ltd, the country“s sole producer of soda ash and sodium bicarbonate, hopes to raise up to AUD 80.5 million through the issue of 41.75 million shares at AUD 1.93 each. The firm has applied to list on the ASX and expects to start trading on 4 July 2005 at a market capitalisation of AUD 86.9 million, based on the offer price. According to the IPO prospectus, the company had 74% of Australia““s soda ash market in 2004. On the export front, Penrice has risen to become the largest foreign supplier of sodium bicarbonate to Japan, with a market share of 16% in 2003-04 from minimal sales in 2000. For the three years to 30 June 2004, Penrice achieved an EBITDA compound annual growth rate of 21%. Directors see continued earnings growth for the years ending 30 June 2005 and 2006. A large proportion of forecast revenues and costs is subject to contract. For the year to 30 June 2006, 79% of domestic soda ash volume and 91% of forecast raw material expenses are subject to contract. Over the next few years, the firm expects to support its growth through the expansion of the Osborne plant and mine and a global soda ash shortage that is forecast to result in significant price increases in the medium term. The proceeds of the share offer will be used to pay down debt and will enable some shareholders to sell out. Management and director shareholders are retaining a combined stake of about 7.2% after the IPO and all have agreed to an escrow until Penrice releases its results in August 2006. None of the management and director shareholders is selling into the offer. For the year to 30 June 2006 directors forecast sales of AUD 140.1 million, EBITDA of AUD 22.2 million, EBIT of USD 17.5 million and net profit after tax AUD 10.2 million. The price/earnings ratio is 8.5 times and the fully franked dividend yield is 7.6%. The dividend policy is to distribute 60-70% of the net profit after tax and to frank dividends to the greatest extent possible.