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Ashakacem gives less money to investors


April 09, 2006



Despite Ashakacem’s good operating results for the financial year ended December 31, 2005, its shareholders will earn fewer dividends compared with what they earned in the preceding year. Directors of have recommended a dividend payout that is less by 18.6 per cent dividend for the period under review. Instead of N2.85 per share dividend paid in the financial year ended December 31, 2004, shareholders would get N2.32 this time around, which translates into a reduction of 53 kobo per share compared with the preceding year’s figure.

Turnover in the review period grew by 25.4 per cent to N15.8 billion from N12.6billion in 2004. The company’s profit after tax (PAT) was within the projected bracket of N4.0billion at N4.43 billion.

The decision of board of directors of the company to hold more cash in its reserves could be a reaction to experts’ advice that the company shops for funds to expand its business rather than depend on price movement in the industry.

Industry reports show that the company, on annual basis, has recorded decline in the volume of cement dispatched but this does not affect its earnings since it banks on price for gain. For instance, it recorded a decline of 14.6 per cent in product dispatched between 2000 and 2004 from 806 tonnes to 686 tonnes.

Experts had earlier expressed the fear that keen competition from other cement manufacturers, which include the Dangote-owned Benue Cement and the Obadjana factory and West Africa Portland Company (WAPCO) Plc would cut down the strength of Ashakacem. For instance, WAPCO, which was by all performance indicators far behind Ashakacem, is already having an upper hand in terms of cost control. In 2004, according to ARM, a firm of capital market analyst, Ashakacem recorded input costs per tonne of about N9, 100 compared with Ashakacem’s N6, 300. “Therefore, aggressive price competition will result in more rapidly shrinking margins for the less efficient Ashakacem, with negative impact on its bottom-line”, analysts said.

They believe that not even the plan to cut energy cost by investing a whopping $12 million in diversifying to coal in lieu of fuel would make any meaningful impact on the company’s earnings in the long run.

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