IDCZ seeks $100m for Chemplex

NDAMU SANDU

Chemplex Corporation requires a recapitalisation of $100 million to operate optimally and meet the national fertiliser requirements as it emerged this week that a Russian fertiliser giant, Uralchem is tipped to acquire a stake in the group.

National demand for fertiliser is around 600 000 tonnes per year with 50% of this being NPK fertilisers and 50% top dressing ammonium nitrate and urea fertilisers.

Last year, Industrial Development Corporation (IDCZ) appointed EY Zimbabwe as financial advisors to assist with the privatisation process at it is wholly-owned unit, Chemplex.

IDCZ general manager Benjamin Kumalo told Business Times the financial advisors have received a “substantial number of expressions of interest” which are under consideration from local and foreign suitors.

“We expect to conclude this transaction within this year. Chemplex requires recapitalisation in the order of US$70 million to $100 million in order to operate optimally,” Kumalo said. The transaction would be concluded by year end, he said.

Among the suitors are Uralchem and Egyptian giant Polyserve.

The Russians are tipped to snap up Chemplex after it said it would not accept an offer below 50 percent shareholding. Uralchem also signed a memorandum of agreement with government during President Emmerson Mnangagwa’s trip to Moscow a fortnight ago.

According to the agreement, the largest national corporations involved in the production of mineral fertilisers and agrochemicals, including the leading state-owned company, Chemplex, aim to establish business relationships with Russian partners in order to enhance the economy of Zimbabwe and develop local businesses. In turn, for Uralchem and Uralkali companies, the supply of mineral fertilisers to African countries is among the strategic development areas they are focusing on.

Uralchem (individually or jointly with PJSC Uralkali)– intends to invest in one or more Zimbabwean agricultural companies especially in Chemplex. Investments will be made by purchasing of shares in the authorised capital of various companies or via investments in their fixed assets, Uralchem said in a notice published on its website. It said the agreement provided for the supply of nitrogen, potash and complex fertilisers to the markets of Zimbabwe and other African countries.

Zimbabwe pledged to support Uralchem and Uralkali in implementing its objectives. Uralchem has said it will not agree to less than a 50 percent stake.

Polyserve’s Sherif El Gabaly told Business Times his company was interested in Chemplex.

“Yes we are interested but we still have no response from Chemplex,” he said.

Kumalo said all expressions of interest were being handled by financial advisors who “have responded to all expressions of interest received”.

The coming on board of a new investor will reduce IDCZ’s stranglehold on Chemplex. Kumalo said the extent of dilution the IDCZ will take in Chemplex will be “dictated by the business needs of Chemplex Corporation and the national interest”

. Kumalo said a new capital injection would result in Chemplex fully meeting national fertiliser demand if it is recapitalised.

Chemplex wholly owns Dorowa Mine and ZimPhos. It also own 50% of ZFC and 36% of Sable Chemicals.

“Dorowa Mine has enough phosphate rock for the manufacture of fertiliser to meet the national fertiliser requirements for the foreseeable future,” Kumalo said.

“The new investor is expected to contribute capital to acquire new and modern equipment and to infuse technical knowhow and enable regional market access and product diversification.” Dorowa Mine and ZimPhos are the only producers of phosphates for fertilisers in the country. ZFC produces between 25 to 35% of the country’s NPK compound fertilisers such as compound D for maize, compound C, L and many others as well as blended NPK compounds.

Sable is the country’s sole producer of Ammonium Nitrate (AN) fertiliser which is used mainly as a top Dressing fertiliser and also in the NPK formulations.

The country has more than enough capacity for NPK compound fertiliser production which is well in excess of 1 million tonnes per year, according to Zimbabwe Fertiliser Manufacturer’s association chairman Tapuwa Mashingaidze.

Forex is required to import some raw materials such as potash and additional AN and some phosphates to fully utilise the capacity.

“Sable’s capacity for AN was 240 000 tonnes per year before the electrolysis plant was shut down 2 years ago as it used too much power and was too expensive. Based on imported ammonia Sable can produce 120 000 tonnes per year but given extra ammonia imports this can be increased to over 200 000 tonnes per annum,” Mashingaidze said. “Capacity utilisation for local production depends on the level of forex allocated for the required raw materials and this has been the major challenge in the past few years.”