Rea Vipingo puts shareholders on notice over dividend

Listed agricultural firm Rea Vipingo has put shareholders on notice of the likelihood of slow dividend growth owing to volatility in the global economy and climatic changes.

The company board has held its dividend payout at Sh1.10 per share, which will see it retain 82.6 per cent of its Sh380 million profits after tax earned in 2012.

“The volatility of the global economy is having some impact upon certain of our markets and it is difficult to predict how this will evolve during 2013.

Given this uncertainty and the climatic and other risks that are inherent in all agricultural businesses, the directors believe that it would be imprudent to increase further the dividend level,” said Oliver Fowler, chairman of Rea Vipingo.

The high retention of profits saw the company’s retained earnings rise to Sh1.45 billion up from Sh1.13 billion a year earlier.

Last year Rea Vipingo had increased its dividend payout to Sh1.10 from Sh0.30 after recording a jump in profits.

Though the firm’s profits dropped by 18.6 per cent in the year ended September compared to Sh467 reported in the previous period, the payout was expected to rise given increased production and no announcements made on new investment ventures.

The management attributed the drop in profits to inflationary pressures, expensive credit lines and higher importation costs at the port of Mombasa and higher labour costs in Tanzania.

Mr Fowler said the company had to deploy more resources in recruitment from Western Tanzania and increase wages so as to retain staff.

“Labour is to a large degree nomadic in Tanzania and the availability of adequate labour is likely to remain a challenge to us in the future” said Mr Fowler.

The increased production resulted in growth in gross profit which was, however, wiped off by increase in operational costs that included maintenance of generators as a complement to inconsistent power supply.

The company recently disclosed plans to set up a wind power station with a capacity of 48 megawatts of electricity as it seeks solution to frequent outages in its area of operations.

READ: Rea Vipingo set to build 48MW Coast wind farm

A 50-megawatt project to be set up in Ngong is estimated to cost Sh11 billion.

Monday the company’s stock traded at Sh19.65 at the Nairobi Securities Exchange with 1,800 shares changing hands.

The dividend will be payable to shareholders on the company register on March 27, the same day that the firm will be holding its annual general meeting.