UPDATE 2-Chemical maker Synthomer hikes dividend, shares rise

Mon Aug 11, 2014 7:02am EDT

Related Topics

* Raises interim dividend by 25 pct to 3 pence a share

* Says will consider returning excess cash to shareholders

* Shares rise as much as 9 pct (Adds analyst comment; updates shares)

By Karen Rebelo

Aug 11 (Reuters) - Chemical maker Synthomer Plc raised its interim dividend by 25 percent and said it would periodically consider returning excess cash to shareholders, sending its shares up as much as 9 percent.

The company, which supplies speciality emulsion polymers used in construction, textiles, paper and latex gloves, said it planned to move its regular dividend policy to 2.5 times earnings cover effective this year.

Synthomer, formerly known as Yule Catto & Co, raised its interim dividend to 3 pence per share from 2.4 pence per share a year earlier.

"It's been obvious for some time that the cash flow of the business would warrant a bigger dividend," Chief Financial Officer David Blackwood told Reuters.

Blackwood said the company would consider paying a special dividend when appropriate to keep Synthomer's leverage ratio from falling below one.

The updated dividend policy prompted investors to look beyond a largely expected 7 percent fall in first-half profit due to increased competition in Asia.

Underlying pretax profit fell to 45 million pounds ($75.5 million) for the six months ended June 30 as increased competition among glove makers in Asia hurt margins, while underlying revenue fell about 9 percent to 510 million pounds, the company said.

The company also reiterated that underlying pretax profit for the year would be similar to last year's.

"Synthomer has been one of the worst performers year-to-date, underperforming the sector," Morgan Stanley analyst Paul Walsh wrote in a note.

"However, the prospect of an end to the downgrade cycle and an improved dividend policy atop further cash return potential, we expect upside support to shares today."

Shares in the Harlow, UK-based company had fallen 18 percent since January to Friday's close.

The stock was up 7.8 percent at 224.3 pence, making it one of the top percentage gainers on the London Stock Exchange at 1059 GMT. (Reporting by Karen Rebelo in Bangalore; Editing by Gopakumar Warrier)

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