Shareholders of chemical manufacturer D and L Industries Inc. (DNL) have approved the company’s plan to sell some P5 billion in fixed-rate bonds in September.
DNL said the company’s first debt paper issuance involved some P3 billion in principal amount and P2 billion in over-subscription option. The bonds will be listed for trading on the Philippine Dealing and Exchange Corp.
Alvin Lao, the company’s president and CEO, said the company is still deciding on the final tenor of the bonds, but it will only choose between 3 and 5 years, depending on the interest rate environment at the time of the float.
“In the meantime we have been working with the lawyers and the banks. We hope to submit it soon to the SEC [Securities and Exchange Commission]. I believe we’re targeting to issue it during the first or second week of September,” Lao said during an online briefing after the company’s annual stockholders’ meeting.
“It’s more conservative to have some debt long term considering we have some long term assets that we have to finance like the construction of the Batangas plant. So that’s why issuing the bond seems to make more sense [than doing a preferred share sale or private placement].”
Proceeds from the bond issuance will be used to finance the company’s new plant in Batangas which involves a total estimated capital expenditure (capex) of P8 billion and other working capital requirements.
Construction for the expanded factory of the company, which started in late 2018, is scheduled to be completed this year.
Lao said, however, there may be delays partly as a result of the stricter lockdowns that the government implemented when coronavirus cases surged in March to April.
“There are possible delays due to supply chain [constraints] around the world and also in shipments [of cargo]. We’re still assessing the full impact. In the next couple of weeks we will have more information and when we do, we’ll have the disclosure.” Remaining capex to be deployed for the project is about P4 billion, the company said earlier.
DNL during its stockholders’ meeting declared cash dividends amounting to P1.36 billion as it was able to post growth despite the reimposition of tougher quarantine measures.
The company declared a regular cash dividend of P0.141 per share plus a special cash dividend of P0.05 per share to shareholders of record as of June 21. This year’s dividend translates to a dividend yield of 2.4 percent based on the stock’s last closing price of P7.94. The P1.36 billion to be paid out is equivalent to 68 percent of last year’s net income.
Including this year’s payment, the company has returned a total of P11.5 billion in cash to shareholders through dividends since its initial public offering in 2012. The company also paid a 100 percent stock dividend in September 2015.
“Management remains highly committed to its dividend policy of a 50-percent payout ratio based on prior year’s net income. In addition, the company has resumed payment of a special dividend after it was paused last year due to the uncertainty brought about by the Covid-19 pandemic,” it said.
“While challenges brought about by the pandemic remain, management believes that with appropriate adjustments and operational contingencies already in place, DNL is in a far better position to thrive in an adverse environment and a potentially protracted economic recovery period.”