PARIS (Reuters) - French supermarket retailer Casino (CASP.PA), which is battling investor concerns over debts and its ability to generate cash, scrapped its dividend as it targeted net debts below 1.5 billion euros ($1.7 billion) in France by the end of next year.
Analysts welcomed the decision to cancel the dividend, saying it would help the financial position of Casino, whose difficulties have led to it being targeted by hedge funds.
Casino, which has been selling assets to reduce its debt and which also controls Brazil’s Grupo Pao de Acucar (PCAR4.SA), said first-half group operating profit reached 347 million euros against 337 million euros last year.
However, it posted an underlying first-half group net loss of 16 million euros compared to a 46 million euro profit last year, impacted by tax charges and expenses.
An increase in French corporate income taxes dented Casino’s results while tax credits in Brazil were not as high as those registered last year.
Casino said it would be scrapping the dividend for its 2019 fiscal year, which was due to be paid out in 2020. It would also cancel its 2020 interim dividend.
Casino said these dividend cancellations would represent savings of around 500 million euros at the end of 2020, with Casino’s net debts standing at 4.7 billion euros as of end-June.
Casino shares were up 0.5% in early session trading, although the stock remains down nearly 10% in 2019.
In March, Casino had raised its goal for disposing of assets to at least 2.5 billion euros to cut debts, seeking to achieve that by the first quarter of 2020. It has so far disposed of 2.1 billion euros worth of assets.
“We lack full cashflow details and await more disclosure before passing judgment on seemingly solid progress on net debt reduction,” wrote brokerage Jefferies, keeping a “hold” rating on Casino shares.
“News of a cancellation of the 2020 dividends would be welcome as an enabler for accelerated deleverage in the coming year,” added Jefferies.
Casino has been struggling to improve its profits amid a tough business climate in France, raising concerns over its ability to generate enough cash to also pay off the debt of its parent company Rallye (GENC.PA) through dividends.
In May, Casino Chairman and Chief Executive Jean-Charles Naouri placed Casino’s parent companies, including Rallye, under protection from creditors.
While Casino itself was not placed under bankruptcy protection, it was hit with downgrades that left its credit rating deeper in junk territory, with rating agencies Moody’s and S&P citing concerns over debts at Casino’s parent companies.
Casino confirmed its 2019 financial goals, namely for a 10% rise in current operating profits for its French retail arm, and cash generation of 500 million euros, excluding divestitures.
Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and Keith Weir