CMC omits dividend for third year ahead of Dubai buyout deal

CMC’s showroom in Nairobi. Photo/File 

By VICTOR JUMA

In Summary

• The firm’s net profit stood at Sh110 million in the period compared to Sh105.3 million a year earlier, helped by lower loan costs.
• CMC last declared a dividend of Sh0.2 per share for the year ended September 2010 when it made a net profit of Sh406.6 million.

Motor dealer CMC has reported a 4.4 per cent growth in full-year profits and opted not to pay a dividend for the third year running in line with conditions set Dubai-based Al Futtaim Group.

The firm’s net profit stood at Sh110 million in the period compared to Sh105.3 million a year earlier, helped by lower loan costs.

This came as the firm’s finance costs dropped to Sh603.1 million from Sh909.3 million, saving it Sh306 million that helped offset a rise in costs that saw its operating profit drop 3.1 per cent to Sh2.4 billion.

Al Futtaim Group will acquire CMC Motors by March and had agreed in September with the top owners of the auto firm to put a tight lid on costs, including a freeze on the payment of dividends to current shareholders.

The agreement signed by the two companies on September 6 means that CMC shareholders, who have not earned from their ownership in the past three years, will not get financial benefits from their investment save for the ultimate payout from Al Futtaim.

“The directors do not recommend a dividend in respect of the financial year 2013,” the firm said in a statement.

This means that the buyout price of Sh13 a share will be the last financial benefit CMC shareholders will derive from the company whose shares remain suspended from the Nairobi bourse since September 2011.

CMC last declared a dividend of Sh0.2 per share for the year ended September 2010 when it made a net profit of Sh406.6 million.

The motor dealer made its first net loss of Sh181.1 million the following year, when the dividend drought started.

CMC sales grew 4.1 per cent to Sh12.2 billion despite its share of Kenya’s auto market having dropped to 7.4 per cent last year compared to 9.8 per cent in 2012 and 12 per cent in 2011.

READ: CMC’s market share falls for the third year

Analysts reckon that the lower market share reflects the loss of the JLR franchise which involved the exclusive sale of cars like Land Rover Defender, Jaguar and Range Rover brands.

These brands accounted for about 26 per cent of CMC sales and they were transferred to rival RMA early last year.  CMC’s remaining brands are Suzuki, Maruti, Nissan Diesel, Iveco, Eicher, Ford and Volkswagen.

The agreement inked by Al Futtaim Group on cost-cutting is aimed at ensuring the Dubai firm inherits a financially strong CMC with a viable long-term business model.

READ: CMC starts job cuts ahead of Dubai firm buyout in March