Bamburi Cement, a pivotal player in the construction industry, has witnessed a remarkable surge in its share price, marking an impressive gain of 17.7%. This significant upswing is directly linked to their recent announcement—the proposed sale of their Ugandan subsidiary—for a substantial sum totaling Sh12.7 billion. Investors are eagerly anticipating potential dividend distributions from this windfall, poised to significantly bolster shareholder returns.
On Thursday, November 17, 2023, Bamburi Cement’s stock closed at Sh26.5, with an above-average trading volume of 79,000 shares changing hands, signifying positive momentum. This ascent began in the prior Thursday’s trade, where it stood as low as Sh22.5, further rising to Sh24.1 by Wednesday—a clear demonstration of robust growth in recent transactions.
In a strategic move, Bamburi Cement has disclosed its partnership with sister company Cementia Holding AG, planning to divest their complete ownership of Hima Cement. A consortium, comprising Sarrai Group and Rwimi Holdings, will acquire the Ugandan subsidiary for $120 million (Sh18.2 billion); Bamburi stands to gain $84 million (Sh12.7 billion) from relinquishing its 70% stake, while Cementia anticipates earning $36 million (Sh5.4 billion) for giving up its 30% interest.
Bamburi’s profitability stands to receive a significant boost from this infusion of funds, surpassing its current borrowings. Furthermore, it not only amplifies Bamburi’s ability to distribute dividends but also introduces the likelihood of a special distribution.
Following the sale of major assets or subsidiaries, companies often resort to distributing special dividends, as seen with recent instances like Jubilee Holdings and WPP Scangroup. Both entities divested significant stakes in their respective businesses and subsequently rewarded shareholders with special dividends.
Bamburi not only anticipates financial gains from selling Hima Cement, but this transaction also aligns with their strategic focus on the Kenyan business. With a concentrated effort towards the Kenyan market—a market that has shown higher profit margins—Bamburi aims to boost and enhance its overall profitability.
In its fiscal year ending December 2022, Bamburi strategically reported a net profit of Sh258 million in Kenya, accompanied by an impressive revenue figure of Sh20.5 billion. This active move denotes the company’s calculated effort to streamline operations, capitalizing on lucrative opportunities within its core market.