Tropical's management has indicated that 100 per cent of the funds raised from the APO will be used to fund debt repayments.
Tropical plans APO launch by April
Tropical Battery is gearing up to launch its much-anticipated additional public offer (APO) with plans to bring it to market by April.
CEO Alexander Melville, responding to queries from shareholders at the company’s annual general meeting held on Thursday, said that the final stages of regulatory approval are currently underway and once approved, the prospectus document will be shared with the public.
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“It has taken longer than anticipated. I was hoping for it to happen sooner as we were trying to do it on our nine-month numbers but there were some issues pointed out by the Financial Services Commission (FSC), our regulators, when we submitted it first, so they said we can’t go on the nine-month numbers, especially since our 12-month numbers are almost due, so we’re going to have to do re-do the prospectus,” he told shareholders in an update during the virtually held meeting marred by a host of technical issues.
Following some 10 pages of comments on the first review of the prospectus by the FSC, Melville said the company, having made the necessary corrections, has since submitted a second draft to which it got back a one-page review having only some minor things recommended for change.
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Under Section 3.1 of the FSC’s Guidelines for Issuers of Securities, companies, when making public offers, are required by law to have their prospectus and registration statement filed with the financial services regulator, both of which must meet specific legal and content requirements. After this process, the prospectus can then be published after a “no objection” letter is received from the FSC.
“We’ve gotten approval from the Jamaica Stock Exchange (JSE) as well, so I think we should be submitting the third round of proposals to the FSC to seek final approval, which should take place sometime this week or next week. We should be going into market by the end of this month or early April and should also be closing shortly thereafter,” Melville said.
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The decision to launch an APO five years after Tropical listed on the junior market of the JSE, stems from a rise in debt which the company accumulated on its recent purchase of US specialty battery maker Rose Electronics Distributing Company or Rose Batteries.
Founded in 1963, Rose Batteries is a manufacturer of specialised batteries for high-value industries requiring critical power, including healthcare, robotics, aerospace, and telecommunications. The California-based Silicon Valley products provider was acquired by Tropical Battery for approximately US$20 million through its US subsidiary, Tropical Battery USA LLC.
“Most of it will be underwritten so we’re not too concerned. Before the end of April we’re looking to open and close our APO and use 100 per cent of that money to pay down on debt and use any remaining working capital to deal with growth projects we think could be viable,” the CEO further said.
Listed on the JSE in 2020, Tropical Battery has diversified beyond its core car battery business into automotive care products, renewable energy, and electric mobility as part of its transformation into a diversified energy group. During its 2024 financial year, revenues for the company more than doubled to total a record $5.6 billion, up from $2.8 billion in 2023, despite significantly reduced net profit outturns of $19.9 million dragged by higher finance costs and strategic investments.
Fuelled by strong performances in all three markets in which it operates, the company continues to earn the bulk of its revenues locally, securing $2.9 billion as its US business follows closely at $2.3 billion and the Dominican Republic with $354 million. At the end of the first quarter ended December 31, 2024, revenues for the company reached $1.6 billion, 99.5 per cent above the same period the prior year, while profit continued to slide, closing at $35.5 million, down from $72.2 million for the corresponding period in 2023.
“Completing our secondary offering in the coming months will reinforce our financial position by significantly reducing interest expenses and enhancing profitability. Our continued focus on operational efficiency, disciplined capital allocation, and strategic market expansion will drive sustainable growth. We remain committed to executing our long-term vision, strengthening our industry leadership in energy storage, renewable solutions, and mobility while delivering enhanced value to our shareholders, customers and employees,” the directors said in the interim report affixed to the last published financials.
Excited about the road ahead, Melville told shareholders during the meeting, “In just four years we’ve grown from $1.9 billion to $5.6 billion in revenue. Our next goal is $10 billion over the next three to four years, and we want more of that growth to translate into profit.”
“As companies go through high growth there is some high cost associated, but as we ease up on that, a lot of it will fall to the bottom line once we garner all the efficiencies in putting these three companies together,” he further told shareholders, while also noting the company’s intention to resume paying dividends before the end of 2025.
