Namdeb u-turns on dividends to shareholders

A LACK of cash support from Government and De Beers has forced Namdeb to retain the N$51 million in dividends it planned to pay-out to its two shareholders for 2008.

This, coupled with the recently requested royalty waiver, will help the company, ‘which is still experiencing challenges’, Namdeb said in a statement yesterday.Roughly calculated, this waiver is worth about N$565 million.’In the absence of (a) cash injection by its shareholders, we believe that retention of dividends and a temporary waiver of royalty for a company that holds immense future value for shareholders are justifiable in order to preserve the core fabric of the business,’ Hilifa Mbako, Group Manager for External Affairs and Corporate Communications, said.He could not be reached for more details on the lack of a cash injection.Namdeb asked Government and De Beers for ‘letters of comfort’ for N$650 million to back up overdrafts at the local commercial banks earlier this year.Namdeb’s statement follows a report in The Namibian on Friday, saying that the company paid out N$51 million in dividends to Government and De Beers.The money was, in fact, ‘retained as part of the cash preservation strategy and has not been paid out’, Mbako said.However, it was not mentioned anywhere in the one-page report on Namdeb’s financial performance for the year ended December 31 last year, issued to the media and advertised in the local press, that these dividends were retained.Mbako said Namdeb’s contribution through taxes year to date exceeds the budgeted amount, and that the company ‘still holds immense potential to deliver more value to Namibia post the economic downturn’.’We hope that our stakeholders will therefore not take short-term decisions that could compromise future earnings from the diamond industry,’ he said.Mbako said Namdeb’s November sight was cancelled and its December sight was ‘severely reduced’ due to the global financial crisis. The latter is usually the largest sight.’We ended the year with a large unsold stock. Our response was to curtail production with a view to sell the stock and preserve cash hence the production interruptions,’ he said.The budget put forward for 2009 assumed significant reduction in production, revenue and operating activities hence the need to scale down on staff and other non-core activities. According to Mbako, Namdeb’s performance for the first six months of this year is slightly better than anticipated despite the shrink in revenue, but is still materially lower than 2008. ‘The outlook for the remaining six months remains cautious. We have seen a steady increase for rough demand, but we believe it is too early to know if this will be sustained,’ he said. There has also been a marked improvement in sentiments and draw down on rough inventory and improved liquidity in the manufacturing part of the pipeline, he continued. ‘However, demand for diamond jewelleries at the retail end remains subdued and trading taking place on account of discounts,’ Mbako said.This has been exacerbated by the strengthening of the Namibia dollar, affecting most export-oriented industries negatively, as well as increased fuel and power prices, the Namdeb spokesperson said.’Therefore, Namdeb’s application for a royalty waiver must be seen in the light of the current global economic environment and the unique circumstances of the diamond industry which is affected more severely than the other sectors of the economy,’ he said.jo-mare@namibian.com.na