The offering, which will run from Nov. 20 to 24, involves 306.12 million to 384.62 million new shares, representing 22.46 percent to 26.68 percent of ChemTech’s capital after the stock sale. The shares will be sold at a price ranging from P3.90 to P4.90 per share.
Listing for the additional shares has been set on Dec. 5. The company’s listing application is pending the approval of the Philippine Stock Exchange.
Net proceeds of the offer, amounting to P1.43 billion, will be used to retire the company’s obligations to parent company D&L Industries (P667 million for the acquisition of the biodiesel project), to fully settle some bank loans, and to partially finance its working capital requirements.
ChemTech, Asia-Pacific’s largest premium coco-biodiesel firm, expects its biodiesel business to account for half of its sales and over two-thirds of its profits by next year on the back of anticipated strong demand for the alternative fuel in the domestic and export markets.
ChemTech used to be known as powder coating firm Corro-Coat before it acquired its much bigger affiliate Chemrez Inc. which manufactures resins and oleo-chemicals, including international-grade coco-biodiesel under the BioActiv brand.
Studies have shown that coco-biodiesel is a cleaner fuel that reduces harmful emissions and boosts mileage because it promotes more efficient combustion. Its use also reduces dependence on imported oil.
ChemTech currently exports its premium coco-biodiesel BioActiv to rapidly expanding export markets, such as Europe and Japan, which are seeking alternatives to petrodiesel but have limited capacity to produce crops for the manufacture of biodiesel.
Europe is a fast-growing diesel market which currently mandates a 2.75 percent biodiesel blend, to be gradually increased to 5.75 percent by 2010. Japan is also a growing market but has little capacity to produce biodiesel.
ChemTech currently sells its premium coco-biodiesel BioActiv in the domestic market through a nationwide network of distributors in drums and bottles, and through local oil firms which sell them as bottled or pre-blended additive to regular petro-diesel.
The domestic demand for coco-biodiesel is estimated at 70 million liters a year based on the seven billion liters of petrodiesel consumed by the country last year. The figure is seen to more than double to 160 million liters of biodiesel if the biofuel bill is enacted into law since it mandates a one percent blend of biodiesel for all petrodiesel sold in the country and up to a two-percent blend two years after the law’s implementation.
ChemTech is seen to post a net income of P131.62 million this year and P536.67 million in 2007 on revenues of P2.67 billion in 2006 and P4.72 billion next year.
The increase in sales and earnings will be due to the consolidation of earnings from powder coating, resins and oleo-chemicals as well as the full operation of the new ChemTech biodiesel plant.