Back to the complete issue
Tuesday, 17 April 2018

OC to pay dividends to shareholders despite retained losses

Orascom Construction shareholders asked to approve capital reduction make dividend payment possible: Orascom Construction (OC) will paying dividends to shareholders for the first time since its dual listing on the Nasdaq Dubai and the EGX. The move comes despite the company holding an accumulated loss of USD 281.3 mn since the company formed, largely as a result of now-delivered projects in the US. The company, which has returned to profitability, plans to pay USD 30 mn through an accounting mechanism called a capital reduction of the share premium account. The company’s extraordinary general assembly will meet on 9 May to vote on the plan, according to a company statement (pdf).

Why, Enterprise. How does this nifty capital reduction business you speak of allow you to pay a dividend a retained loss? Glad you asked, but please bear these basics with us. On a listed company’s balance sheet, equity is determined through its share capital (issued capital), the share premium — the additional amount investors paid for their shares in excess of the par value — and retained earnings. OC shareholders are being asked to effectively transfer USD 281.3 mn in share premium to retained earnings. By subtracting OC’s accumulated losses on its balance sheet from its share premium, the company ends up flipping negative retained earnings to a positive and thus to make it possible to pay a dividend to shareholders as well as provide liquidity to support future dividends.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.