Petra Foods to break free from debt threats with cocoa business sale

Estimated gain will be US$106m.

According to OCBC, in an unexpected move, Petra Foods announced a sale of its Cocoa Ingredients division to Barry Callebaut for a consideration of US$950m.

Here's more from OCBC:

The proposed sale will include Petra’s seven factories – located in Malaysia, Indonesia, Thailand, Brazil, Mexico, Germany and France – as well as the sales offices in Singapore, Netherlands and the United States.

Petra is expected to realize an approximate gain of US$106m on disposal (~20 S cents per share).

Management intends to use the bulk of the proceeds to reduce all debt facilities associated with the Cocoa Ingredientsdivis ion (~US$620m).

This will essentially wipe out almost all of Petra’s borrowings on its balance sheet, save for a small amount associated with its Branded Consumer division.

Petra will funnel the remaining balance of ~US$300m into the future growth of its Branded Consumer division.

With conglomerate consumer players eyeing a piece of the pie – emerging Asia consumer demand – this amount will be extremely useful in ensuring Petra's continued dominance in its key markets of Indonesia and Philippines.

The loss of the Cocoa Ingredients division will lower Petra’s top-line by about 70%.

However, the absence of associated costs and operating expenses will see gross profit and operating margins improve to an estimated 36% and 17% respectively for FY13F (group level FY12F 15.8% and 7.0% respectively).