Lufthansa stuns market by axing dividend
FRANKFURT Feb 20 (Reuters) - Lufthansa stunned markets on Wednesday by witholding a dividend for the second time in three years, choosing instead to bolster its fleet and fund future restructuring, despite net profits that beat the most optimistic analyst forecasts.
Lufthansa did not pay dividends for business year 2009, but resumed paying them for 2010 and 2011.
The stock was down 4.7 percent to 15.24 euros at 1236 GMT, the worst performer on the German blue-chip index, after Lufthansa disclosed key financial figures late on Tuesday, two weeks earlier than scheduled.
Europe's biggest airline by sales said full-year net profit came in at 990 million euros from a loss of 13 million the year earlier, flattered by sale of equity investments. The highest analyst estimate was 464 million euros with an average of 236 million, according to Thomson Reuters I/B/E/S.
Lufthansa did not provide details on the divestments that inflated earnings but last November it announced the sale of its shares in Spanish travel technology company Amadeus with gross proceeds of 307 million euros.
The analyst consensus was also for a dividend of 27 cents per share for 2012, up from the previous year's payment of 25 cents.
Gerald Khoo, an analyst at Espirito Santo, said net profit was not reflective of the underlying performance given it was boosted by one-offs.
"We are inclined to ignore (this). Harder to ignore is the suspension of the dividend," Khoo said in his note.
Bank of America analyst Mark Manduca wrote that the scale of Lufthansa's planned order of 108 aircraft worth 9 billion euros surprised some investors.
"The feedback so far from buy-side investors is that the magnitude/scale of the order has surprised to the upside, particularly given the recent focus by management on exercising capacity discipline," Manduca said.
Some interpreted the suspended payout to shareholders as a harbinger of possibly more restructuring charges as a result of tougher cost cuts.
Liberum Capital analyst Alexis Dogani said the scrapped dividend indicated the airline could widen its cost-cutting programme as it grapples with cut-throat competition from low cost airlines, higher fuel jet costs and slow growth in its main markets.
"They are doing this restructuring and they're naturally cautious. They'd have to have some cushion, meaning more money in reserve in case things become more difficult," Dogani said.
The company launched a savings programme - dubbed Score - last year to boost annual earnings by 1.5 billion euros by the end 2014, compared with 2011. ($1 = 0.7487 euros) (Reporting by Marilyn Gerlach; editing by Keiron Henderson)
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