Hon Hai Precision Industry Co (鴻海精密) yesterday announced plans to reduce its capital by 20 percent to improve its cash dividend yield for shareholders.
The board has approved plans to cut the company’s capitalization by NT$34.66 billion (US$1.16 billion) for the first time since it was listed on the local bourse in 1991.
About 3.47 billion shares would be annulled, with each lot of 1,000 shares reduced to 800 shares, while shareholders participating in the capital reduction are expected to receive NT$2 for each share annulled.
The capital reduction is part of efforts by the company to re-evaluat its profit sharing arrangements with shareholders, Hon Hai senior director Gong Wen-lin (龔文霖) said at a news conference.
Gong also announced plans to distribute a cash dividend of NT$2 per share, which would translate into a total cash windfall of NT$4 per share for shareholders.
Capital restructuring is part of the firm’s strategy as it has grown into a multinational corporation vying for markets and resources across the globe, while maintaining a sound cash flow and funding for investments, Gong said.
The plan has no links to the high-profile listings of promising Hon Hai subsidiaries in overseas markets, such as Foxconn Industrial Internet Co’s (FII, 富士康工業互聯網) upcoming debut on the Shanghai Stock Exchange, he added.
Hon Hai’s valuation is determined by the market and it does not aim to affect its share price through capital restructuring efforts, he said.
“Precedents in the technology sector show that capital reduction plans do not produce immediate share price rallies,” Gong said.
Market observers have said that the move would likely improve Hon Hai’s return on equity performance.
Hon Hai shares yesterday gained 2.53 percent to NT$85 after posting better-than-expected sales for last month of NT$343.99 billion. The figure was 1.48 percent lower than the previous month, but 6.57 percent higher than the previous year.
In the first four months, cumulative sales totaled NT$1.37 trillion, up 5.55 percent year-on-year.
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