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Banking & Finance

German fund invests in TTC Sugar

Released at: 17:04, 29/07/2019

German fund invests in TTC Sugar

Photo: TTC Sugar

German fund buys $28 million of convertible prefered dividend stocks in local sugar producer.

by Hung Cao

The Thanh Thanh Cong - Bien Hoa JSC (Stock code: SBT) has announced an investment of $28 million from DEG, under KFW Bank, one of Europe’s best-known financial institutions and owned by the German Government. The investment is in the form of convertible preferred dividend stocks, with a price of $1.3 per share; 84 per cent higher than SBT’s market price on July 25.

These preferred stocks will be subject to transfer restrictions for at least one year from the day of issuance. The preferred dividend period will be six and a half years, with a fixed dividend of 5.5 per cent per year for the first one and a half years and then dependent upon agreement between SBT and DEG in subsequent years. All preferred stocks do not come with voting rights but can be converted into common stocks upon agreement from DEG and SBT.

The conversion price will be decided by SBT and DEG at the time of conversion and will not exceed $1.64 per share. This investment is expected to be disbursed in September and SBT’s capital will reach over $261.8 million, increasing 3.7 per cent. This international capital raising proves the sugar industry’s prospects and SBT’s development.

This disbursement will be used to make strategic investments in the sugar business of Hoang Anh Gia Lai in Laos that SBT bought in 2017 and changed its name to TTC Attapeu, along with investment costs for mechanization to expand organic sugar production. TTC Attapeu has a capacity of sugarcane crushing of 7,500 tons per day, produces 700 tons of sugar per day, and boasts a raw material area of some 7,000 ha in Attapeu province.

The investment from DEG will greatly contribute to long-term capital restructuring and ensure stable resources for SBT’s sustainable development. SBT also invested in Cambodia this year, to affirm its initiative in expanding material areas in Indochina to 70,000 ha.

SBT’s sugarcane segment in Laos possesses a lot of advantages, such as concentrated material areas, high commercial cane sugar (CCS), and clean soil that can develop organic sugar for the high-end customer segment, as well as earn better profit margins than other products, and is in line with the firm’s strategy to focus on developing organic sugar areas in the 2018-2021 period. The deal creates an important link in completing SBT’s value chain, reducing costs and diversifying products to compete with Thai sugar.

TTC Attapeu has successfully developed the first organic sugar refinery in Laos, with large-scale fields on nearly 2,640 ha. Last December, organic sugar products were produced and officially exported to Europe - one of the most rigorous markets in the world in terms of quality standards. The company has contracted to export 4,500 tons organic sugar to the continent. In the future, it will continue to increase organic sugar production to serve the domestic market as well as exports, to maximize revenue and profit.

Besides the financial commitment in capital structure, liquidity, dividend payments, and profitability, SBT must also meet and comply with other non-financial standards. During the negotiation process, DEG conducted due diligence on all non-financial information relating to corporate governance, information disclosure standards, the environment, and society, as well as an independent assessment from a third party in terms of the social environment to meet the requirements of DEG.

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