Eveready Nakuru land sale to end dividend drought

Shareholders of battery-maker Eveready East Africa are set to receive a special dividend payout from the sale of the company’s land in Nakuru.

The Nairobi Securities Exchange-listed manufacturer says the payout is based on anticipation of a significant gain from the disposal of the 18.5-acre land on which its closed factory sits.

“The net proceeds will enable the company to proceed with a proposed capital return to eligible shareholders subject to all approvals being obtained,” the portable power solutions provider said in a circular to shareholders.

The payout, expected next year or in 2018, will end the dividend drought that started in the year ended September 2008.

Eveready last paid a dividend of Sh0.45 per share for the year ended September 2007, with losses in most of the subsequent years leaving shareholders without dividends.

The dividend drought has been compounded by a long-term decline in the firm’s share price to the current Sh2.05, representing a capital loss of 78.4 per cent compared to the listing price of Sh9.5.

Chief executive Jackson Mutua declined to give the estimated sales proceeds, only observing that the cash “will be enough to reduce the firm’s debts and leave a surplus for the special distribution.”

READ: Eveready to sell Nakuru land as it shelves real estate plan

Sale of the land came after plans to venture into real estate development with strategic partners collapsed, with the company saying the idle land is incurring maintenance costs at a time when it has a heavy debt burden.

“The company’s levels of borrowing at Sh509 million is unsustainable and the persistent high interest rate regime continues to hurt the business and erode shareholder value,” Eveready said in the circular.

It said the land does not meet “the threshold of investment for a mixed-use development as anticipated for the area.” Besides, retiring the loans, cash from the land sale is also earmarked for investment in the company’s distribution business which has been diversified to include sale of car batteries and light bulbs.

Sale of the land, which accounts for 46 per cent of Eveready’s total assets, is expected to be completed in the current financial year that ends in September 2017.

The transaction will boost Eveready’s performance in the period which had already showed a loss of Sh58.9 million in the half year ended March compared to a net loss of Sh12.4 million the year before.

This came as sales halved to Sh300 million from Sh602.8 million which the company attributed to disruptions in supply of carbon zinc and alkaline batteries.