Zambia Sugar CEO Rebecca Katowa is scheduled to meet with shareholders of the LuSE listed company on the 28th November 2019 with her Board of Director`s recommendation that a dividend of K0.08 per share be paid for the financial year ending 31 August 2019.
The announcement of a dividend comes over 4 years since the company last declared dividend. “It’s a nice turnaround”, said Company Secretary Mwansa Mutimushi who shared a copy of the SENS announcement with the Founder of Financial Insight on 5th of November 2019 via an email.
Rebecca’s dividend comes at a time when the microenvironment and climate change have not been the best enablers to the sugar businesses. Furthermore, the company has been grappling with K1.6 billion debt which was acquired as a result of Project PAAR. In 2016, Zambia Sugar invested $80 million in a sugar product alignment and refinery project (PAAR) at its Nakambala estate in Mazabuka Zambia.
The Project PAAR was a major investment for the company. Shareholders were reminded following a scheduled visit to the estate after the completion of the project what the significance of the investment was for the company going forward. Companies that seek to position themselves in an uncertain future must invest in resources and capabilities. This was the strategic intent of project PAAR.
However, the cries for a dividend were echoed at the last 2 annual general meetings (2017 and 2018). Shareholders had longed for a return on their investment. Their patience has now paid off with the 8 ngwee per share dividend that has been declared. The total dividend to be paid to holders of the 316 million issued shares is K25.33 million.
Project PAAR helped improved the operational performance of the company. “For the financial year (2019) showed an improvement from previous years”, read a statement issued by the Mwansa Mutimushi on SENS. “Cane supply increased by 15% to 3,356,000 tons, and resultant sugar production increased to 399,000 tons, from 351,000 tons in the previous year”.
Debt reduction remains the company’s biggest strategic imperative in their quest for improved return on investment for shareholders. The management team at Zambia Sugar are determined to address the company’s heavily indebtedness. “Associated finance costs amounted to K299 million during the financial year”. Therefore, this means that despite shareholders wait for a dividend, “all debt commitments were met during the year and the external syndicated loan repayments of K140 million were made”.
The financial prudence, the company targets to liquidate the external loan in full by July 2020. Furthermore, they target to pay off intercompany loans repayment by 2023. This will greatly improve cash flow and will strengthen the sugar company’s commitment to paying a dividend to shareholders in the coming financial years.