THE BOTTOM LINE
When caution starts to sound suspiciously like being snoep
Why is African Rainbow Minerals being so coy about committing to a dividend policy?
There was concerted effort at Friday’s annual results presentation from African Rainbow Minerals (Arm) for the board to communicate a dividend policy, something executive chairperson Patrice Motsepe skirted around and sort-of answered.
At least three analysts put pressure on Motsepe and his team to put in place a dividend policy as the company generated strong cash, swinging to a net cash position of R995m from net debt of R1.3bn. It paid a total dividend of R10 a share for the year.
But with the failed $400m investment in Lubambe in Zambia with its Brazilian partner Vale behind it, and eyes on potential merger and acquisitions in the copper space, analysts are a little jittery about how the company will determine rewards for shareholders if there is demand on capital.
Arm has also triggered the R2.7bn modernisation project at the Gloria manganese mine held jointly in Assmang by Arm and Assore. Johann Pretorius from Renaissance Capital wanted an assurance that the company would not waste money on a “value destructive project or acquisition”.
Tim Clark from Standard Bank and Derryn Maade from HSBC both grilled management on the lack of such a policy.
Clark said the share is trading at a discount to its peers because of “capital allocation uncertainty” and it should put a policy in place. Motsepe said Arm didn’t want to commit to a dividend policy in which it didn’t have “significant confidence”, but that it had a clear policy of being a “dividend paying company.” While Motsepe might have listened he wasn’t hearing the anxiety around this issue.