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Bamburi signals dividend from Sh12bn Uganda deal

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Group Chief Executive Officer of Bamburi Cement PLC Mohit Kapoor during an interview on November 03, 2023, at Capital Club in Nairobi. PHOTO | BILLY OGADA | NMG

Bamburi Cement has signalled that it expects to pay its shareholders a special dividend from the sale of its 70 percent stake in its Uganda subsidiary Hima Cement for $84 million (Sh12.86 billion), backing investor expectations of a payout that has spurred its shares to a gain of 55 percent in the last two weeks.

The Nairobi Securities Exchange (NSE)- listed cement maker told shareholders in a circular that the proceeds of the sale could either be reinvested in the Kenyan unit or distributed to its owners, subject to capital allocation plans by its board and management.

Read: Bamburi Cement profit plunges 87pc to Sh181 million

Bamburi announced on November 15 that it would team up with its sister company Cementia Holding AG to sell their entire ownership in Hima Cement to a consortium of Sarrai Group and Rwimi Holdings for $120 million (Sh18.4 billion). From the proceeds, Bamburi is entitled to a 70 percent share, while Cementia will bank 30 percent.

The deal is part of a strategy by Bamburi’s parent firm Holcim to divest from fragmented markets and concentrate in countries where it is among the biggest players.

“The proceeds received from this transaction… (provide) ability for Bamburi to pay a special dividend to its shareholders, subject to Bamburi’s dividend strategy and receipt of relevant approvals,” said the company in the circular.

“Historically, there has been a limited dividend distribution record from Hima (the last two dividend distributions were in 2023 and 2016), and this transaction presents an opportunity for Bamburi to get a distribution from Hima.”

Companies sometimes pay special dividends from the proceeds of the sale of major assets or subsidiaries.

Recently, Jubilee Holdings paid two special dividends following the sale of majority stakes in its general insurance businesses to Allianz SE, while WPP Scangroup also paid a special dividend of Sh8 per share after the sale of its subsidiary Kantar Africa.

Anticipation of such dividends tends to boost the share price of the concerned company.

For Bamburi, the share price has gone up by 55.6 percent to Sh35 a unit since the announcement of the deal on November 15, having traded at Sh22.50 on the day before the disclosure.

The market capitalisation of the company has thus gone up by Sh4.54 billion to Sh12.7 billion in the period.

The traded volumes on the counter have also risen significantly since the deal was announced.

Read: Bamburi sells Sh12bn stake in Uganda

On average, the volume of shares traded per session has stood at 188,863 since November 15, compared to an average of 53,042 per session in the two months leading up to the disclosure date.

The total volume of shares traded in the last two weeks stands at 2.08 million, which is more than the 1.86 million units traded in the previous two months.

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