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Diamond Trust 2008 AGM
Diamond Trust (DTB) held their AGM at KICC on Friday, May 30. It was quite routine and the Chairman rapidly breezed through the vote items – annual accounts, re-election of directors, auditors’ yada, yada.
Extraordinary items were:
Expansion into East Africa: shareholders voted for the company to take up rights in DTB Uganda (probably cross 51% and making that a subsidiary) and to set up in Burundi. Questions were asked on if more capital would be called upon from Kenyan shareholders and the difficulty of expanding into an unstable, war-torn, francophone country. The Chairman answered that the funds from the last rights issued (2007) were being utilized for the expansion and they have researched and visited the country which is now a stable part of the East African community. He added that the new CEO identified for Burundi is multi-lingual as are some Kenyan staff that may join the Burundi office.
The hot button issue of the day was the various amendments to the companies’ act that would enable the company to sell shares of dormant investors. The motions targeted shareholders who have ceased to be active; i.e. forwarding address, no dividends banked or bonuses taken up, mail returned etc. for over six (6) consecutive years. The company loses a lot of money in a bid to ‘serve’ these shareholders and was making moves to clean up their share register.
Steps followed would be to:
- Identify the shareholders dormant for six years.
- Publish their names in the east African media, calling on these individuals/their relatives to step forward.
- For those who have not responded the company will then apply for permission to sell these shares at market rates.
- Proceeds of the sale will be held in trust for another three years.
- After this (nine dormant years) such funds not claimed will revert back to the company’s shareholders funds.
The directors stressed that they were reluctantly making these moves in a bid to be on par with other companies (including yet to list Safaricom) and it would also keep them a step ahead of the government who have already made into law that dividends unclaimed seven years will revert to the Government (CMA investor compensation fund)
Several shareholders expressed their concerns and objections, saying this was a dangerous precedent, and citing (among other reasons);
- shareholders who were out of the county – directors said they should just forward their correct address to the registrars.
- shareholders who had died their – dependents should contact the company.
- shareholders whose shares had been lost to ‘rogue’ brokers – that was a matter for the regulators.
- shareholders who had not disclosed holdings to their families, and perhaps died
– company should only focus on unclaimed dividends, not selling shares. - shareholders with no bank accounts
They also came up with suggestions including DTB to:
- provide a beneficiary form for investors to fill out beforehand (directors’ answered that it was a company’s act matter)
- DTB to buy more shares with unclaimed dividends for dormant shareholders (an investment decision that was very risky to the company)
- DTB not to sell the shares which may bring lawsuits in future, but instead ring-fencing the dormant shareholders and treating them differently (the laws of Kenya require all shareholders to be served equally (Mobitelea, anyone??)
DTB’s legal adviser, lawyer George Oraro explained that shareholders had ample time (nine years) to sort out any dormant share matters and that DTB would even exceptionally consider cases where investors with were not able to sort out their affairs in time. He added that in future the CDSC (not company registrars) would be the custodians of all share accounts.
The motion was eventually passed
Goodies: Tote bag (with DTB cap, spiral notebook) lunch box (juice, water, apple, samosa, drumstick, chicken pie)
Hat tip: Coldtusker was in the house and asked some pertinent questions.
Total 2008 AGM
Excerpts
Total Kenya’s Managing Director Bertrand Fontanges follows in the footsteps of previous Chairman Momar Nguer (or is it a French company thing?) to AGM to educate shareholders on the state of their company and the industry in an hour-long presentation on Wednesday.
Oil sector grew at 6.5% last year which coincided with the country’s economic growth. The market share of the companies at the end of 2007 was Kenol/Kobil 22.4%, Shell 21.8%, Total 21.2%, Chevron 13%, Oil Libya 7.3%, NOCK 2.4% and independents 11.5%.
Challenges include;
The Government; makes all oil companies tender for oil together, for which they have to pay upfront. He referred to the process as they pre-finance the government – on top of which they pay Kshs. 30 per litre of petrol (~$0.48) and 20 per diesel litre. They also pay upfront taxes for fuel they export (i.e. to other African countries) – but don’t get refunded for at least six months after the claim. As such they have reduced their export amounts as it is not viable. He’s the second CEO in a month to put the government on blast after Eveready also went after KRA and KEBS.
The Pipeline: the oil pipeline which has capacity constraints. At least expansion of the Nairobi-Mombasa pipeline expansion should be completed by year-end which should double capacity and end the constraint problem.
The Mombasa refinery; given the opportunity, none of the companies would use the refinery which is outdated, inefficient and makes products expensive – yet they have to refine about 50% of their products there. He added that independents don’t process at the refinery which gives them an ‘unfair; advantage.
LPG i.e. cooking gas. He expressed concern and they have cautioned the Government about the proliferation of illegal re-fillers in the market. These are companies who refill gas cylinders – saying there are safety issues (they can explode) and consumers cannot ascertain the quantity of gas in the tanks from these shops.
Aviation Gas margins in aviation have become so low that they have reduced their sales there and will wait till the market improves before they go back in.
Despite all, the company’s performance improved (EPS of Kshs. 2.99 from 2.7 – out of which a dividend of 2.5 will be paid) thanks to asset sales, Kengen and reduced financial costs. Of the 623KMT of sales, 21% (134KMT) are through their petrol station network while 78% (498KMT) is though bulk, general trade, big companies etc.
Finance charges: Have been an albatross at Total for years. The price of oil (Murban crude) has doubled over the last year to about $120 per barrel (even though some OPEC officials say it should be $60 – $70) and the cost of holding inventory has likewise doubled. So Total has resorted to carrying only as much inventory as is needed and requiring customers to pay upfront.
Kengen awarded a contract to Total which runs for almost another two years. It is not part of the government tender process so they are able to get supplier credit for the oil which has reduced their borrowing charges significantly. (2006 Q3 had financial costs of Kshs. 415m compared to Kshs. 287m in Q3 of 2007).
IPO daylight
IPO hangover: Went to visit stockbroker today in an unsuccessful search for the elusive Housing Finance prospectus – and instead found several notices on the wall:
– no mas they have suspended opening new CDS or receiving transfers from other stockbrokers for a month to 30/6( until they sort out their applications post-Safaricom IPO applications)
– investor awareness they advise how investors can watch rogue trades in their accounts and how to report them including getting correct address in the system. They also assure customers they are with a solid stockbroking firm that has over 40 billion shillings in assets
– cost increases – nominee accounts will now attract quarterly fee and transaction fees over and above commissions costs
– 1/2 way to DRIP: they will no longer en-cash dividend cheques, but they can be endorsed towards new purchases of shares.
Oil and manufacturing: Looking at the price warning from Sameer Africa, makes one wonder about the impact that the escalating price of oil will have on manufacturing based company shares (e.g. cement is up about 40%) – and whether it is wiser to invest in ‘service’ companies like Safaricom whose impact from oil prices will less direct (share of wallet)
Full year results
– Safaricom revenue to 61.4 billion [$990 million] (up 29%)
– Safaricom pre tax profit 19.9 billion [$321 million] (up 16%)
Petro Politics & Policy: Reading Thomas Freidman’s columns can scare any one cares about the future of America, foreign policy relations and other manufacturing industries.
Writing recently, he notes:
– The failure of Mr. Bush to fully mobilize the most powerful innovation engine in the world — the U.S. economy — to produce a scalable alternative to oil has helped to fuel the rise of a collection of petro-authoritarian states — from Russia to Venezuela to Iran — that are reshaping global politics in their own image.
– If this huge transfer of wealth to the petro-authoritarians continues, power will follow. According to Congressional testimony Wednesday by the energy expert Gal Luft, with oil at $200 a barrel, OPEC could “potentially buy Bank of America in one month worth of production, Apple computers in a week and General Motors in just three days.”
– America has taken its many natural assets — its research universities, free markets and diversity of human talent — and assumed that they will always compensate for our low savings rate or absence of a health care system or any strategic plan to improve our competitiveness.
– “Call it the triple deficit,” said Mr. Rothkopf. “A fiscal deficit that will soon have us choosing between rationed health care, sufficient education, adequate infrastructure and traditional levels of defense spending, a trade deficit that has us borrowing from our rivals to the point of real vulnerability, and a geopolitical deficit that is a legacy of Iraq, which may result in hesitancy to take strong stands where we must.”
Business Briefs – May 24
most from the papers this week
Strathmore to train entrepreneurs: Strathmore University has launched an Enterprise Development Centre (SEDC) to train entrepreneurs in management of SME’s. This will be done through a six month certificate program in entreprenual management that covers, among other aspects, taxation & law, financial recordkeeping, managing HR, business planning, risk management, diversification, capital budgeting and excellence in customer service. It will use locally developed case studies and also provide networking opportunities and access to service providers through a business club.
ARM split: Athi River Mining intends to spin off its cement, and mineral & chemical operations into two wholly owned subsidiaries;
– ARM Cement Limited – who will continue with the manufacture and sell cement and limestone – (the new Kaloleini factory will be transferred to the subsidiary)
– ARM Minerals & Chemicals Limited – who will produce minerals and sodium silicate building products – (the Athi River factory will be transferred to the subsidiary)
Invest in Uchumi: Gearing up for a revival is Uchumi Supermarkets whose Receiver Manager has places an international tender for financial firms who will assist in the for (i) pre-qualification of financial bidders and (ii) selection of winning bids to become strategic equity partners (new investors in Uchumi). D/L is 6/6
Milky at NSE?: Preparing for a possible listing at the Nairobi Stock Exchange is New KCC who published their financial accounts this week for the year ended June 2007, which showed that they had exceeded the performance over the previous 18 month period; New KCC had assets of 4.7 billion shillings (up from 4.0b in 18 months to 06/2006), turnover of 4.5 billion (compared to 4.9b) and a pre-tax profit of 284 million (compared to 350 m) – after paying over 2 billion shillings to dairy farmers. Meanwhile Sameer is making dairy waves in Uganda
Derailment?: Rift Valley Railways in trouble with the Governments of Kenya and Uganda over the performance of the railway concession. Last year it appeared they had turned the corner in terms of performance.
FYI: You can track NSE shares in real time for free at Rich.co.ke