Portland Cement dividend uncertainty hits minority investors

East African Portland Cement Company (EAPCC) shareholders have Monday been denied a chance to pocket dividends from a firm that has lost nearly a fifth of its value since mid-December when boardroom wrangles hit the firm.

The shareholders were to be paid a dividend of Sh0.75 a share on Monday, but it has been frozen following the shareholder fights that have sucked in the courts and the Capital Markets Authority (CMA).

The payout was put on ice following the suspension of resolutions reached at the firm’s annual general meeting (AGM) on December 17 following protests from the government, which owns 52 per cent of the cement marker, on the manner in which the AGM was conducted.

This sparked a standoff between the State and Lafarge, which owns 41.7 per cent of the firm, in a dispute that has seen the minority shareholders emerge the biggest losers.

Investors at the Nairobi Securities Exchange (NSE) have taken notice of the boardroom wrangles and the uncertainty over the dividend pay.

The share is now trading at Sh68.50 compared to Sh85 on the day of the AGM, shedding 19. 4 per cent in a drop that has made Portland the worst performing counter at the Nairobi bourse over the period.

This means that the owners of Kenya’s second-largest cement firm have seen the value of the investment in company drop by Sh1.6 billion.

Before the AGM, the share had been on the upswing after the firm swung back profit of Sh1.77 billion in the year to June from a loss of Sh972 million, a recovery that saw it declare the dividend after missing out in 2012.

The share had appreciated 47 per cent between in the three months to mid- December.

Governance

“The shareholder fights has reduced interest in the counter. The share will continue to come under pressure until the matter is settled,” said Standard Investment Bank in a statement.

The government teamed up with National Social Security Fund (NSSF), which has a 27 per cent stake in the firm, to try to take control of the Nairobi bourse-listed firm’s boardroom dominated by Lafarge-allied directors.

All the agenda items at the December 17 AGM were passed through acclamation — a process the NSSF and the State said was in breach of good corporate governance rules and the company’s Articles of Association.

READ: Lafarge spoils for a fight with State over Portland

The government was said to have preferred voting on the basis of shareholder strength, but Portland reckons that the State and NSSF did not demand a poll at the AGM.

The cement maker says that the government’s notice to have former CMC chief executive Bill Lay appointed to the board instead of Lafarge’s representative Didier Tresarrieu and that of increasing the number of directors to 11 from seven was time barred.