TKC METALS Corp. is planning to undertake an equity restructuring, after the Philippine Stock Exchange (PSE) found the company’s stockholders’ equity has been in the red since 2016 — making it eligible for possible delisting.
In a disclosure to the stock exchange, TKC said the exchange has directed the company to submit a detailed plan to bring stockholders’ equity back to positive. TKC’s equity stood at negative P170.3 million at end-2016, negative P898.72 million at end-2017, and negative P574.8 million by end-March 2018.
The PSE’s listing and disclosure rules mandate that companies with negative equity for three consecutive years must be delisted.
The listed steel manufacturer attributed the negative equity to the drop in steel prices since 2014, which effectively weighed on the company’s financials.
“The company was therefore constrained to reduce its operations for the past years. Steel prices have only recently started recovering. Furthermore, the lack of sufficient electric power in the Mindanao area severely hampered the continuous production of our main product line,” the company said.
With this, the company plans to undertake an equity restructuring program to bring back shareholders’ value while waiting for the steel market to recover.
Part of the equity restructuring program is the movement of shareholders’ advances made to subsidiary Treasure Steelworks Corp. (TSC) amounting to P2.6 billion. The shareholders will then assign account receivables from TSC to TKC as payment for their subscription to additional shares in TKC.
“This conversion of asset (account receivable) to equity shall be undertaken with the objective of matching current deficit with equity. Unsaddled by a deficit, TKC is expected to be able to focus on its operations to bring a turnabout to its profitability,” the company said.
The company then targets to increase its authorized capital stock by P2 billion. This will accommodate the P2.6 billion in advances the company gave to TSC.
Once the company completes the conversion of the shareholders’ advances to equity, TKC will be able to reverse its negative equity to P1.71 billion.
TKC targets to assign the shareholders’ accounts receivables to TKC by Sept. 3. The increase in authorized capital stock is expected to be approved by shareholders by Oct. 23, while the filing for registration at the Securities and Exchange Commission (SEC) is scheduled for Nov. 15.
The company then looks to list the shares following the increase in capital at the PSE after securing a nod from the SEC.
“Company management is hopeful that with its plan of equity restructuring, the diversification into Nickel Concentrate and the continuing improvement of the metals market worldwide, TKC will be able to recover and bring its stockholders’ equity back to positive,” the company said.
Shares in TKC dropped two centavos or 1.89% to close at P1.04 each on Wednesday. — Arra B. Francia
