Bizerte Cement Financials: A Deeply Negative Result, but a Glimmer of Hope
As we indicated last week, Bizerte Cement's financial statements were expected to show a deeply negative result. The accounts have been published, and the losses amount to -26,802 Mtnd. However, what we didn't know was that the company had revalued its assets, allowing it to record a revaluation reserve of 173,584 Mtnd in its equity. As a result, the company's equity stands at 161,366 Mtnd as of June 30, 2024.
From an accounting perspective, the company has managed to avoid the obligation of a recapitalization. However, from a going concern perspective, the auditors have drawn attention to the fact that since October 15, 2023, the cement manufacturer has been at a standstill and lacks certain information about the resumption of its normal activity. This shutdown is caused by a supply disruption of consumable materials, mainly petroleum coke and refractory bricks, due to a lack of financing means. This event, added to the facts described, indicates the existence of uncertainty that may cast doubt on the company's ability to continue producing clinker. The cost of under-activity is estimated at 11,348 Mtnd for sold production and 0,377 Mtnd for inventory.
To try to ensure business continuity and preserve its customers and market share, Bizerte Cement has resorted to purchasing 81,397 tons of clinker during the first half of 2024 and has decided to purchase an additional 100,000 tons during the second half of 2024. This explains the negative gross margin of -1,843 Mtnd for the period. Nevertheless, these purchased quantities remain insufficient for the company to honor its commitments and face the difficulties encountered. Purchasing or producing a quantity close to the normal production capacity of 900,000 tons of clinker could enable the company to generate profits.
In our opinion, the State must intervene with cash to save the company. Fresh funds need to be injected to rebalance the company's accounts and restore its creditworthiness with foreign suppliers. Otherwise, the cement manufacturer risks disappearing.
