Illovo shareholders cry foul over dividends

Malawi Stock Exchange (MSE)–listed Illovo Sugar Malawi plc’s minority shareholders have faulted the company over a four-year dividend drought. 

Speaking on the sidelines of investors’ meeting held on Thursday in Nchalo, Chikwawa, minority shareholder Frank Harawa said though the company has done a good job in trying to improve its financial position, shareholders, concerns remain the four-year dividend drought and the fall in the company’s share price.

Participants to the investors’ meeting follow a presentation

“As shareholders, we put our money in a company to make money. Presently, our biggest problem with Illovo has been a loan which was to the tune of almost over K20 billion and now at K19 billion. With this loan, our company has been failing to pay us our dividends. Instead, they use our profit to repay that loan.

“We told Illovo to raise money from us as shareholders through a Rights Issue to settle that debt so that we get and share our profits, but they have been refusing to do this. We were shocked today when we learnt that the debt has been settled from another debt of K10 billion from two other companies. This remains a concern to us,” he said.

In its financial statement for the year ended August 2018, Illovo management said the business registered some improvements and continued strong free cash flow generation but disclosed that shareholders will have to wait a bit longer before they resume getting dividends.

According to the statement, headline earnings for the company totalled K16.4 billion compared to the preceding five month period of April to August 2017, where the company posted K7.7 billion.

But Illovo Sugar Malawi plc finance director Edward Namboya, without disclosing when the company is likely to resume paying out dividends, said the company is moving in the right direction to adhere to the concerns of the shareholders while repositioning the company to do better.

While admitting that the company has moved in a direction that has not been in favour of expectations of shareholders, Namboya said the company’s management has concentrated on returning the company to profitability, positive cash flow generation and repayment of loans.

 “If we had looked at a possibility of a rights issue and implement the same, the majority shareholder would have an option of considering conversion of those loans to equity and this would not have translated into cash; hence, our view to rather generate more cash and reduce our cost and make necessary investments,” he said.

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