Comalco Plans To Increase Its Profit, Loans And Capacity

Press, Volume CIX, Issue 32274, 17 April 1970, Page 16

Comalco Plans To Increase Its Profit, Loans And Capacity

(N.Z. Press Association—Copyright)

SYDNEY, April 16. Comalco, Ltd, expects a 20 per cent lift in profit in 1970, a further s4om is to be realised in loans, and the projected alumina refinery at Weipa is to be enlarged from 600,000 to one million tons.

These points emerge from the issue today of the prospectus for the public flotation of Comalco, Australia’s largest integrated aluminium group. A million of the 50c shares will be offered in New Zealand.

In addition, Australian shareholders, who will hold just under 10 per cent equity, will elect one director to the Comalco board at the next

annual meeting. Comalco is issuing 13 million shares at a premium of 225 c a share, making 275 c, but subscribers can elect to pay 140 c on application and the balance of 135 c on March 31 next year. If Comalco achieves the forecast 20 per cent lift in earnings, net profit would come out at $17.1 million in 1970. The directors said they would pay dividends amounting to about 45 per cent of net profit. In the current year, fully paid shares will get half the dividend rate and partly-paid shares will get one quarter. C.R.A. and Kaiser Aluminium hold 45 per cent each of the Comalco share capital. Of this further $4O million of funds required for expansion, it is understood that $3O

million will be sought from a private issue of unsecured notes to institutions “tied”

to offerings of equity on the basis of a $4 debt for every $1

invested in equity. The remaining $lO million sought will be raised later, but before the end of 1972.

Reputation

The “Financial Review” said today that: “Comalco, the largest, most vertical integrated and most profitable of Australia’s three aluminium producers, and the first to float publicly, makes its move with an offer priced at round 21 times projected 1970 earnings and showing a proposed dividend yield of 2.2 per cent. “Both price and yield point

to heavy market reliance on Comalco’s established reputation as a growth company. “As announced earlier, it will raise nearly $35.8 million

in Australia and New Zealand, to give the public a 10 per cent share of its $65 million equity capital. “A sizable portion of the public issue will go to institutions, who will collectively be looked to to provide about $4O million in loan finance by the end of 1972. “Unlike that of its C.R.A. stablemate, Hamersley Holdings, the Comalco prospectus makes no specific projections of its expected profits and dividends,” the “Review” said. “It does state, however, that consolidated net profit for the 1970 financial year should be ‘of the order of 20 per cent above that earned in 1969’ and that, for the time being, Comalco’s annual dividend payout will be about 45 per cent of consolidated net profit.

Profit $14.2m “In its 1969 financial year

to December 31, Comalco earned a consolidated net pro-

fit of $14.2 million. “A 20 per cent improvement from this would suggest 1970 net earnings of about $l7 million, of which the 45 per cent payout ratio would amount to $7.65 million. “Related to post-issue capital of $65 million, the payment of $7.65 million suggests a first dividend payment of about 12 per cent—of which the public shares will receive a half or a quarter, depending on whether they are fully or partly-paid. “The payment will be exempt from tax in the hands

“The Comalco technique of acquiring part interest in undertakings which provide it both with captive markets for its basic Weipa bauxite and with, a share of the production of those undertakings also shows through clearly in the prospectus.” N.Z. Smelter On New Zealand Aluminium Smelters, Ltd, the writer said: “Comalco has a 50 per cent interest in this company, which is now building an aluminium smelter at Bluff.

“Comalco will supply the whole of the alumina for the smelter and is entitled and obliged to take half of its aluminium metal output. “The smelter will come on stream in mid-1971 with an initial annual capacity of about 73,000 tons. It is planned to enlarge the capacity to 110,000 tons in 1972 and to move eventually to 220,000 tons.” The “Financial Review” reported that the public’s 10 per cent equity in Comalco would entitle it to one director on the Comalco board, which will also be made up of five Conzinc Riotinto of Australia representatives (and the right to appoint

Comalco’s chairman) and five Kaiser Aluminium and Chemical Corporation representatives.

Asset Backing

Based on December 31 balance-sheet values, the net tangible asset backing for each 50c share of the postissue capital is 82.83 c. Lists for the public issue will open at 10 a.m. on May 11 and will close on or before May 18. They will probably join the lists of Australian exchanges in June, according to the “Financial Review.”

The whole of the public issue has been underwritten by lan Potter and Company, of Melbourne, and associated brokers to the issue In New Zealand, where a million of the shares will be issued, are Daysh Renouf and Company, of Wellington.

of Australian shareholders,” the “Review” writer said.