CMC omits dividend despite return to profit

CMC chief executive Bill Lay.
CMC chief executive Bill Lay.  

CMC Holdings reported a net profit for the full year ended September from a loss in the previous year, but the auto firm opted not to pay a dividend for the second year running.

The company posted a net profit of Sh105.3 million in the period compared to a loss of Sh181.1 million in 2011 as sales stagnated at Sh11.7 billion.

The profit was driven by lower costs and foreign exchange gains which softened the impact of the Nairobi bourse listed firm’s market share drop.

“The group’s performance was impacted by the huge increase in bank interest rates which resulted in borrowing costs increasing to Sh909 million from Sh438 million in 2011,” CMC said in a statement.

“The directors do not recommend a dividend in respect of the financial year 2012.”

This is a blow to investors whose share remains suspended from trading at the bourse since last September following shareholder and boardroom wrangles that have led to an exit of several directors.

CMC has been in the eye of a storm since late 2011 when Peter Muthoka, its leading shareholder, was ousted as chairman in a boardroom coup.

Bill Lay, the CEO of the auto firm, stoked the wars further after he accused Andy Forwarders, a logistics firm owned by Mr Muthoka, of overcharging the auto dealer to the tune of Sh1.5 billion over a period of five years.

He also accused his predecessor Martin Forster, and long-serving directors Jeremiah Kiereini and Charles Njonjo, of illegally funnelling the company’s funds to secret New Jersey accounts.

The allegations intensified boardroom wars culminating in a series of legal suits and the suspension of CMC shares from trading at the Nairobi bourse.

The company said it was optimistic of good performance in the short term even as it fights to keep the key Jaguar Land Rover franchise. The firm is fighting a legal battle to retain the franchise whose owners intend to transfer it to rival RMA Group from February 3.

South Africa-based JLR threw CMC into a crisis last November with the announcement that it would transfer the rights to exclusively trade in Land Rover Defender, Jaguar, and Range Rover brands to rival RMA Group.

The auto dealer moved to court on December 7 seeking to stop JLR from severing links with it on grounds that the franchise owner was driven by malice.