AXELUM Resources Corp. is redirecting P1 billion from the proceeds of its initial public offering (IPO) for debt repayment as the coronavirus disease 2019 (COVID-19) pandemic made its acquisition and expansion plans ill-timed and risky.
The coconut products manufacturer, which raised P4 billion from its IPO in October, told the exchange Thursday its board of directors had approved the reallocation of some of the proceeds.
The involved funds total P1 billion, consisting of P820 million originally meant to fund strategic acquisitions until 2022, and P180 million that was intended to fund the expansion of domestic and international distribution networks until next year.
“The board decided on the…reallocation due to the effect of the COVID-19 pandemic on the global economy, which makes it untimely and risky to pursue the original intended use of proceeds,” it said.
By using the fund to repay loans, Axelum said it would be able to save on interest expenses it might otherwise incur.
Axelum has not yet reported its earnings for the first quarter. But for 2019, it posted a 113% surge in net income to P775.6 million due to improved gross margins. Its topline was however 10% lower at P5.3 billion due to a global decline in vegetable oil prices.
While it is reallocating funds that were supposed to go to strategic acquisitions and network expansion in the coming years, Axelum said it was “seriously pursuing opportunistic acquisitions that may be available.”
It said it was confident bankers would be more accommodating to finance acquisition opportunities once it had retired its current debt.
Axelum has earlier announced setting aside P600 million for capital expenditures this year, which it will allocate to expanding its distribution channels, upgrading its production equipment and introducing new products.
The company likewise said in March, before the lockdowns started, that it was in preliminary discussions for potential acquisitions.
Axelum has an ongoing share buyback program of up to P500-million worth of common shares. The move began on March 16 and will end on Sept. 16, but may be extended until March 16, 2021. As of June 10, the company has repurchased P105.48-million worth of shares.
Shares in Axelum at the stock exchange shed six centavos or 2.25% to P2.61 each on Thursday. — Denise A. Valdez
