Korado Bulgaria to stick to dividend policy amid ongoing support from Czech parent

Korado Bulgaria to stick to dividend policy amid ongoing support from Czech parent

(30.03.2021)

SOFIA (Bulgaria), March 30 (SeeNews) - Steel radiator manufacturer Korado Bulgaria [BUL:KBG] will stick to its dividend payment policy, following a robust performance through the crisis-ridden 2020 thanks to support from its Czech parent Korado Group, the group's CEO told SeeNews.

"In difficult times a good manager knows the importance of a steady stream of income for those who invest in his business. Therefore, our investors can be sure that we will always keep their trust and we will fulfill our obligation," Vojtech Chamek told SeeNews in a recent interview. "For us, it is a matter of principles, a matter of honour."

Korado Bulgaria's management will propose the distribution of a total gross dividend of 0.29 levs ($0.17/0.15 euro) per share for 2020, same as the payout for 2019 and 2018. Ultimately, the size of the dividend payout is in the hands of the shareholders meeting, Chamek noted.

The proposed 0.29 levs per share dividend payout for the full year is equal to a dividend yield of 4.39% on the company's closing price on the Bulgarian Stock Exchange (BSE) on Monday, of 6.60 levs per share.

Korado Bulgaria's net profit increased to 4.6 million levs in 2020 from 4.4 million levs in 2019, according to audited data. A dividend payout of 0.29 levs per share would see Korado Bulgaria distribute some 3.8 million levs of its profit for the year.

The radiator manufacturer's financial performance was substantially backed by its parent company, which accounted for roughly 70% of Korado Bulgaria's sales last year.

As markets across Southeast Europe felt the blow of the pandemic, Korado Bulgaria leaned on Korado Group's vast distribution network, transferring part of its sales to the more robust Western European markets, and starting to serve other new markets, such as Greece and Tunisia.

Thanks to the strong foothold of its parent company, Korado Bulgaria can wait out the storm in SEE with minimal damage, Chamek said.

Maintaining production levels amid government measures to curb the Covid pandemic was among the major challenges which Korado Bulgaria faced in 2020.

"The major challenge was to keep our production running. Not just because of Covid itself but due to government or EU restrictions which in some instances have not supported business environment," Chamek said. "The overall business including our segment was heavily influenced. There were huge drops in sales at SEE markets," he added.

However, Korado Bulgaria managed to organise its activities in a way which left production levels almost unscathed.

The company produced 428,337 panel radiators in 2020, down from 455,025 in 2019. The lower steel panel radiator production volume was largely due to a drop in output in the second quarter of the year when Bulgaria entered a state of emergency over the coronavirus pandemic. Towel rail radiators output rose to 97,415 units last year from 87,390 in 2019, following strong performance in the second half of 2020.

Korado Bulgaria's consistent dividend policy and solid financial performance did not go unnoticed by investors. In a year which saw the major SOFIX index of the BSE suffer its worst loss since the 2008 financial crisis, Korado Bulgaria's shares gained 3.2%, making an inclusion in the blue-chip SOFIX index a feasible goal.

In the past few years, the company appointed local brokerage Elana Trading as a market maker and completed several bonus share issues in an attempt to boost its liquidity. Chamek did not rule out the possibility of issuing more bonus shares in the near future.

"You know that we realized bonus shares distribution already twice. It is definitely not excluded that for boosting the liquidity and to show our support for local investment community we will do it again," Chamek said. "Definitely not at May's AGM but we could consider it for the second half of this year," he added.

Korado Bulgaria had a free float of 17.85% as of March 1 and its most recent free float market capitalisation amounted to 15.5 million levs. In comparison, the SOFIX member with the lowest free float market capitalisation by the same date was software group Sirma Group Holding with 16.3 million levs.

Looking forward, the company will work to restore its market position in Southeast Europe, while remaining wary of inflationary risks.

"All prices of all raw materials and services are currently going up, not just steel. So do our selling prices. We can only hope it will not translate into inflationary pressures that may be difficult to contain," Chamek commented.

Investment is expected to remain subdued by the pandemic but the company will not hold back if the right opportunity comes along, he added.

"Fortunately our (including the whole Group) financial position is quite robust so we could wait for potential investments or acquisitions," Chamek said.

(1 euro = 1.95583 levs

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