In the present circumstances, the building of a stronger more...

In the present circumstances, the building of a stronger more profitable existing operation might be the best strategy for management to pursue to deliver value to its shareholders. Hopefully, a stronger company would be better placed to pay regular and increasing dividends over time. Management could start by rewarding its loyal and supportive shareholder base with a decent size final dividend for 2010 (provided there are sufficient profits to do so). This action might restore to some extent shareholder confidence.

Originally,I invested in this company because I saw it principally as a relatively stable income earning opportunity via dividends. The companys established conglomerate structure with its diverse portfolio of solid well-known businesses appealed to me because it offered some protection from variability in earnings. I also did not expect any big variations in management quality. At the time of the Rinker demerger way back in 2003, management said ....'CSR (as distinct from Rinker) is expected to appeal to yield investors'..... They also mentioned they would pursue any low-risk growth opportunities. To me, this was the course set for the company after the Rinker spin-off.

After the recent legal result, there is now uncertainty for me about whether the company can deliver shareholder value through a demerger or an asset trade sale. There is no point appealing against the adverse legal finding, unless there are good grounds and chances for success. I wonder how much has already been spent on this attempted protracted demerger process, including payments to the various advisers and lawyers. How much does the company have to contribute to the legal costs of all the other parties involved in the hearing? There is also no use pursuing a trade sale of the sugar business, if there is no reasonable assurance that most, if not all, of the proceeds can be distributed to shareholders. The uncertainty created by the recent legal decision may have also diminished the attractiveness of the company as a takeover target to any prospective buyers.

I believe it is time for management (preferably a fresh team) to revert to earlier aims to maximise profitability from existing operations as well as pursue any low risk growth opportunities that may emerge. Given trends in the current operating environment, the retention of the sugar business should provide earnings growth prospects and improving sustained income flows through renewable energy. I personally would like to see the company cautiously expand into profitable consumer products businesses with increasing recurring income streams, rather than into cyclical businesses with one-off or irregular revenue flows. In the absence of any major external material event occurring, this path presently seems to me a safer direction for the company to follow to maximise its chances of paying stable (and even increased) dividends from profits generated over time. A strong profitable company is beneficial for all its stakeholders, including shareholders.


Disclaimer
Please note that I am not providing advice, information, recommendations or predictions. The above statements are merely my own comments and thoughts as an ordinary shareholder without any special skills or knowlege. I absolutely disclaim any responsibility or liability whatsoever for any consequences arising from the use of my comments or thoughts expressed. If you require advice or information, you should seek the services of an appropriately qualified independent expert professional person as well as do your own proper research.