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Coronavirus disruption cuts into corporate dividends

Chip machine makers, auto part companies and fashion brands to hold onto their cash as uncertainty grows

 Listed companies are taking a continued beating from the novel coronavirus outbreak. (Photo by Shihoko Nakaoka) 

TOKYO -- Listed companies across Asia are cutting or delaying dividend payouts as the spread of the novel coronavirus continues to batter business in the region.

Companies in a wide range of sectors have already been grappling with extensive disruptions to their day-to-day operations, and share prices have been correspondingly volatile. The fact that many are now adjusting dividend payments -- a weighty decision that involves top management, the board and shareholders -- indicates that concerns over the longer-term impact of the virus are growing.

"We decided not to payout full dividend," CEO Lee Wai Kwong of ASM Pacific Technology said in an earnings conference call on Wednesday. The Hong Kong-listed semiconductor equipment maker said it will propose at its annual shareholders meeting on May 12 a per-share payout of 0.7 Hong Kong dollars ($0.09), just half of what it originally planned. Lee said the virus is creating a "highly uncertain, rapidly evolving situation" that has caused the company to be "wary on how this would develop."

The listed subsidiary of a Dutch group has been promoting a "sustainable and gradually increasing" dividend policy since 2017. Its annual dividend payment per share rose from HK$2.5 that year to HK$2.7 in 2018, but it will drop to HK$2.0 for 2019. At this point, the management expects a net loss for the first quarter of this year, as Lee revealed that the company has lost one-third of its production capacity in China due to the contagion.

Even though Lee reiterated that the dividend cut will be temporary, and the company is committed to paying the remaining half "as soon as the economic condition improves," its share price dropped 7.6% to HK$89 immediately after the announcement on Wednesday, falling below HK$90 for the first time since last September.

The wave of dividend cuts as the result of the contagion has reached down under as well.

Blackmores, an Australian natural health company, confirmed on Tuesday it will not pay interim dividends this year, citing uncertainty over the coronavirus. After reporting revenue for the six months through December fell 5% to 303 million Australian dollars ($199 million) while after-tax profit fell 47% to A$18 million, Blackmores CEO Alastair Symington said in a letter to investors that he expects "significantly higher costs associated with manufacturing and other factors including Coronavirus will have a material impact" for the remainder of the financial year, which ends in June. The company paid A$1.5 per share in interim dividend last March.

Mosaic Brands, a major specialty fashion retailer in the country, has pushed back its decision on dividend payments due to the virus.

"In view of this uncertainty, the board has decided to take a prudent approach and postpone its decision on declaration of an interim dividend until the impact of the COVID-19 has been clarified," the company said in its disclosure on Tuesday.

Mosaic, which operates over 1,300 stores under various brands including Noni B and Rockmans, was already grappling with the impact from brush fires on its sales and local consumer confidence. Now, the company said, it "faces a further challenge, with potential disruption to its China supply chain, caused by manufacturing and shipping delays" because of the virus outbreak.

The impact at this point remains "minor." However, there is a potential to cut into the important early winter season sales, "including the key Mother's Day period [which] could be affected." The company also decided to refrain from indicating a full-year earnings guidance for the financial year which ends in June "until there is greater clarity."

Japanese fashion brand Samantha Thavasa has also been hit. The Tokyo-listed company said on Friday that it will not be paying a dividend for the financial year ending in February, reversing its original plan to maintain a 10 yen per share annual payout, as the company now expects a 1.917 billion yen ($17.4 million) net loss, instead of a profit. On top of the sales tax hike last October and catastrophic typhoons that affected consumer behavior, the fashion brand owner blamed the "novel coronavirus infection which is causing delay in production and arrival of the merchandise from its partnered factories in China," in its official filing to the local stock exchange. A sharp drop in inbound visitors, many of whom shop for clothes at Japanese department stores and malls, is also taking a toll on its earnings and hence on dividend payment.

Staying in Japan, Yokohama-based auto suspension system maker Thein on Wednesday cut its earnings outlook and dividend payment. For Thein, the coronavirus comes on top of an already slowing Chinese economy due to the ongoing trade war with the U.S. The company slightly cut its net profit forecast for the financial year ending in March and trimmed its expected dividend payment to 17 yen per share from 18 yen.

Carpenter Tan Holdings, a mainland Chinese manufacturer and distributor of wooden accessories, has been forced to delay a special dividend payment for practical reasons. The company promised to pay HK$0.6715 per share to commemorate the 10th anniversary of its listing in Hong Kong by the end of February, but the transaction has been postponed until the end of March. According to the company's disclosure on Tuesday, due to the prolonged Lunar New Year break and a subsequent service suspension as a result of the virus outbreak, "additional time is required by the Company for arranging remittance from the PRC to Hong Kong."

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