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The world's biggest drink refrigerator equipment maker Frigoglass will return capital to shareholders instead of paying a dividend to lower its tax burden, the company's CEO said on Wednesday.
Like other Greek companies, Frigoglass seeks alternative ways to reward stockholders after the debt-laden country hiked its dividend tax last year, as part of measures to plug its fiscal holes and avoid bankruptcy.
"The board of directors will be proposing… a capital return to the shareholders through the capitalisation of tax free reserves," Chief Executive Officer Petros Diamantides told Reuters in an interview.
The payment will be "in line with our current dividend policy, which is a profit payout ratio of 1/3," he said. This implies a return of about 6.5 mln euros to shareholders, based on 2010 net profit, he added.
Frigoglass is a world-wide supplier of equipment to Coca-Cola bottlers and breweries such as Heineken. It runs plants in Greece, Russia, Romania, Turkey, India, Indonesia, China, Nigeria, South Africa and South Carolina, as well as two glass bottle units in Nigeria.
The firm posted a huge jump in net profit last year, thanks to an impressive recovery in its Eastern European markets and cost cutting efforts undertaken since 2008.
Last year's positive revenue trends were continuing in 2011, said Diamantides. Rising input costs would not erode 2011 profit margins, thanks to hedging and cost saving initiatives, he added.
Raw materials such as steel, copper and aluminium account for about 55% of the company's sales costs.
"We believe that we are in a position to manage the negative trends in commodities so that margins won't narrow," Diamantides said. "2011 will be another year of a double-digit sales growth."
In 2009, Frigoglass set foot in the United States, a business which has not generated any profit so far.
"Our target is to be EBITDA-positive in 2011," Diamantides said, estimating that the American operation would contribute to net profit from 2012.
Boosting organic growth in Asia was a priority, while the firm is also interested in entering Latin America and expanding its glass-making business in Africa and the Middle East.
"A priority are markets where we do not have a presence but believe are attractive, or markets where we do have a presence but are not satisfied with our market share," he said.
Frigoglass trades 13 times its estimated 2011 earnings versus a multiple of 8 for Japan's Sanden, its biggest rival.
