Ansa doubles down on 2x agenda

Ansa McAl has been steadily moving towards its 2x agenda, announced in 2023, which would see the regional and international conglomerate double its size, scale, impact and capacity by 2027.

The conglomerate’s recent financial results reflect its plans to double in size are on the right track.

For the year ending December 31, 2024, the group reported growth in the majority of its sectors.

So it came as a surprise to many when the group announced it would be suspending its dividend payments for a three-year period.

But Ansa McAl's CEO Anthony N Sabga III, speaking at the group's release of its 2024 financial results on March 24, said it was part of the group’s overall growth plan.

Sabga III explained that while the company is well on its way to doubling its size, the next phase of acquisitions and growth initiatives would require that all stakeholders, shareholders included, bet their dividends on the company.

"They could not only see double the growth, but double the dividends," Sabga III said.

Ansa McAl courting billions in acquisitions

Sabga III said Ansa McAl has been deliberately endeavouring on its journey to grow its company.

"With that comes the strengthening of our core businesses, beverage, chemicals, banking and insurance, as well as expanding our business into high-growth sectors regionally and internationally," he said.

"Additionally we are continuing to invest in technology, automation and AI-driven endeavours to drive efficiency and seek to optimise a supply chain distribution network, all toward bolstering and increasing and improving margins."

He said to achieve this vision, the board has determined that one of the best strategies is capital reallocation – the temporary suspension of dividends for three years.

"Why we suspended dividends is because this allows us to fund high-return growth initiatives as opposed to paying dividends.

"What this affords the group is the financial flexibility – reduce the debt reliance and strengthens the forward balance sheet – allowing us to drive the investments that are in front of us."

Sabga III said the group’s acquisitions team is courting more than a few billion dollars in acquisitions in areas where it has the expertise.

One example of this is the acquisition of Bleachtech LLC, completed in November last year.

That acquisition was US$327 million, the single largest acquisition in the company’s 143-year history.

Bleachtech, based in the US, manufactures chemicals for water treatment and sanitation.

"As a result of retaining these dividends and redeploying them toward the 2x agenda we will have a far larger delivered competitive position and significant market expansion.

"What that comes with is fundamental share price appreciation, so there are some substantial capital gains that would take place and what that entails is longer-term shareholder value. When the dividends post in 2027 and we have realised our 2x agenda, we will be talking about a far larger dividend."

The best strategy

Group chief financial officer Nicholas Jackman said the 2024 results had several watermark points that were met.

Revenue went up five per cent or $254 million to $7.04 billion.

"This is the second consecutive year the company reported north of $7 billion in revenue," Jackman said.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at $1.5 billion, $150 million more than the last year.

"Profit before tax (PBT) went up eight per cent to $906 million and our earnings per share up 32 cents or 11 per cent to $3.32 per share."

But the acquisition of Bleachtech has taken a short-term toll on the company’s standings, Jackman revealed.

He said the company’s gearing ratio – which is used to measure how much of a company’s operations are funded by equity as compared to financing from creditors – shot upward from 7.5 per cent to 28.4 per cent.

The threshold of the gearing ratio, which gives insights into a company’s financial risk and stability, is 30 per cent.

Jackman noted that bank financiers also look at a company’s debt-to-EBITDA ratio, which is rated at 1.8 – indicating a healthy ability to service its debt. He added that the group is also a $20 billion company in terms of its assets.

"So there is still capacity to grow in terms of our ambitions," Jackman said.

Responding to questions from the media, Sabga III said the retention of the dividends was the best strategy, given the agenda and capacity of the company.

"Given the very aggressive agenda that is 2x, it stands to reason that if we want to deliver that growth, there are certain short-term constraints that are available.

"The management and the board of directors looked at quite a few combinations given what is in front of us.

"The best use of our capital is toward the realisation of our agenda," he said.

The dividends, when calculated at $1.80 per share, would amount to around $318 million for 2024.