Ivaco shareholders riled over dividend suspension
CEO says preferred share payouts will be made eventually
By ALLAN SWIFT
00:00 EDT Wednesday, May 28, 2003
MONTREAL -- Ivaco Inc.'s chief executive officer came under fire from disgruntled shareholders yesterday about the steel company's decision last month to suspend all dividend payments on its popular preferred shares.
Paul Ivanier faced many shareholder questions about the cash-saving move and blamed the rapid rise in the value of the Canadian dollar for the company's decision. However, he promised shareholders the dividends will be paid up in due time.
Mr. Ivanier said that because of the higher dollar in this year's first quarter, Ivaco received 15 per cent less revenue on its exports to the United States, which accounts for about 70 per cent of the company's total sales.
In addition, scrap steel prices jumped 40 per cent year over year -- forcing up production costs -- although scrap costs have recently dropped. Mr. Ivanier said the company had to act quickly to protect itself.
"If it wasn't for the Canadian dollar's surge, we would not have suspended dividends," he told the annual meeting in Montreal. "You have to be careful."
The dollar closed at 72.62 cents (U.S.) yesterday, down 0.21 cents. At the end of December the loonie was trading at 62.5 cents.
Ivaco common shares are depressed during a generally difficult time for the North American steel industry. The stock closed up 4 cents at 80 cents a share yesterday on the Toronto Stock Exchange, compared with a 52-week high of $5.69 set last June, 18.
The company's many classes of preferred shares were considered an attractive investment because of their dividends.
In a similarly difficult time in 1991 Ivaco suspended dividend payments and three years later repaid them in full.
Shareholder Gary Hergert of Ottawa said he wasn't very worried about not getting his dividends eventually, but the company would opt to redeem the preferred shares by paying with Ivaco common stock, as it did in March for one series of preferred shares.
The common shares have plunged more than half since then, and Mr. Hergert said the move hurt the value of all Ivaco shares.
"You seem to have the technical side under control but there are problems with the finances," he told Mr. Ivanier.
Mr. Ivanier later told a news conference: "If somebody cut off my dividend I'd be unhappy too, but sometimes it has to be done."
The CEO said he could not do anything about the common share value. But he insisted that despite the difficulty in the steel industry, which he blamed on the weak U.S. economy and cheap steel imports, Ivaco did well to report a net profit of $7.6-million in 2002 on sales of $937.5-million.
He said the company's three main businesses, which produce steel rods, fasteners such as bolts and wire, are efficient after investments of more than $400-million during the past eight years.
Ivaco's 14 manufacturing and processing plants are at L'Orignal, Ingersoll and Mississauga in Ontario, Marieville and Beloeil, Que., and in the states of Vermont, New York and Georgia |
