Linde Bangladesh has declared a record 4,100 per cent interim cash dividend for January-July this year based on audited financial reports for the period.
This is the highest ever cash dividend declared by any company listed in Bangladesh's stock market, market operators said.
The dividend will be paid out of capital gains from divestment of the company's subsidiary Linde Industries Pvt Ltd, said the company in a stock exchange filing on Thursday.
Following the disclosure, Linde surged almost 18 per cent to Tk 1,547.3 per share on the Dhaka bourse on Thursday, whereas the broad index continued to be on a downward spiral. The 10 per cent upper and lower circuit breakers were not applicable to the stock of Linde for the day.
Linde shareholders will get Tk 410 against each share while the company has reported earnings of Tk 415.08 per share in January-July this year.
At present, Linde's total number of shares is 15.218 million.
That means Linde will disburse Tk 6.24 billion in dividends against income of nearly Tk 6.32 billion.
The company's sponsor-directors would get most of the dividend amount as they jointly hold a 60 per cent stake in Linde as of August this year.
The company's earnings per share (EPS) stood at Tk 415.08 for January-July this year, which is 47 times higher that the income in the corresponding period last year. The excess income largely came from selling off a subsidiary business.
Linde explained that it secured capital gains from selling the subsidiary business and that the board of the company decided to distribute the gain among shareholders as cash dividends.
The company did not mention how much money it received from selling the subsidiary business. However, market analysts say the high dividend is a one-off payment.
In July this year, Linde Bangladesh sold its welding electrode business to ESAB Group, an American-Swedish industrial company.
Akramul Alam, head of research at Royal Capital, said Linde would disburse the record dividends from the fund coming from the sale of its welding business unit. "It would be a one-off payment, not normal dividend payout, which companies usually pay based on profit from regular business operations."
Mr Alam also said investors should not consider such a one-off hefty return while making investment decisions as "there is no material impact on the company's valuation".
Another fund manager, wishing not to be named, said that since Linde did not have significant loans to pay back it would have huge cash sitting idle after the sale of the welding business.
"With the availability of dollars, the company has decided to pay good dividends. However, I will not judge the stock by this dividend because the company will not sell part of its business every year," he added.
In June this year, Linde paid a 1,540 per cent cash dividend for the 10 months through October 2023.
Shareholders received Tk 154 against each share while the company reported earnings of Tk 17.25 per share. The company at the time disbursed Tk 2.34 billion in dividends, nearly nine times the profit earned during the period of January-October last year.
Therefore, as much as Tk 2.08 billion came from retained earnings.
Why did Linde sell hard business?
Linde was involved in manufacturing and supplying industrial and medical gases as well as in welding electrode anaesthesia and ancillary equipment business.
The key player in Bangladesh's industrial gas sector for more than 50 years operates through 18 selling centres across the country.
Linde sold its welding electrode business as it stumbled upon extreme volatility in recent times amid higher input costs due to fluctuations in international raw material prices, said an official of the company, requesting not to be named.
The business unit used to generate more than half of the revenue until 2022. It faced tough competition from both domestic and Chinese players. The country has also witnessed a severe headwind in shipbuilding, infrastructure and real estate projects, which resulted in subdued demand for welding electrodes.
Annual business performance
Linde did good business in 2021, particularly in the medical segment, as the need for medical oxygen shot up for Covid patients dealing with breathing distress in hospitals.
As the pandemic waned and raw material prices skyrocketed due to the outbreak of the Russia-Ukraine war, revenue from the segment kept falling.
Subsequently, Linde saw a six-year low profit of Tk 883 million in 2022. The shrinking profit compelled the company to cut down annual cash dividends to 420 per cent for 2022 from 550 per cent paid for 2021.
The decline in profit continued in 2023, leading to a 40 per cent less income year-on-year to Tk 525.68 million in 2023. Despite the lower income, the company paid 1,540 per cent cash dividends for 2023 from retained earnings.
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