Tarmac raises pounds 60m in sale of bitumen refiner

Click to follow
The Independent Online
TARMAC, the construction and building products group, has made further progress in cutting its debt with the sale of its bitumen refining and distribution business for about pounds 60m.

Briggs Oil, which has refineries at Dundee and at Eastham, Merseyside, is to be acquired by the Swedish firm AB Nynas Petroleum for pounds 70m, subject to adjustment for working capital when the deal is completed. Briggs has a joint venture with Shell at its Eastham refinery. Tarmac will have to pay about pounds 10m to Shell to enable Nynas to take over its share in the venture.

The disposal is Tarmac's second since Neville Simms, chief executive, said it planned to raise between pounds 200m and pounds 250m this year by selling non-core businesses. Last month, it disposed of its Californian contracting and operating business for dollars 42.5m (pounds 22.9m). The proceeds of both sales will be used to reduce borrowings.

Mr Simms said: 'Tarmac's short-term strategy is to reduce debt and to focus on its core businesses in order to ensure that we are in a position to exploit the opportunities which will be presented to the group when the economic recovery takes hold.'

At the end of 1991, Tarmac's net debt stood at pounds 456.9m, with gearing of 51 per cent. Mr Simms aims to cut that to 25 per cent, mainly through disposals. At the annual meeting last month, the group warned that it would make a loss in the first half of the year. Last year, taxable profits collapsed from pounds 190.7m to pounds 21m and the dividend was cut from 11.2p to 5.5p.

Briggs has been part of the Tarmac group for 28 years and has 225 employees, who will transfer to Nynas. Last year, it made pounds 10.9m profit before interest and tax, down from pounds 10.9m, and has net assets of about pounds 30.6m. It supplies a significant proportion of Tarmac's bitumen. These arrangements will continue. Tarmac's shares fell 2.5p to 78.5p.

(Photograph omitted)