Japan's Robot Maker Fanuc doubles payout ratio after investor Loeb demands higher returns

Tuesday, Apr 28, 2015

Japanese industrial robot maker Fanuc Corp said it was doubling its dividend payout ratio, signalling an apparent win for activist U.S. investor Daniel Loeb in calls on the debt-free firm to return more of its growing cash pile to shareholders.

Reporting net profit jumped 87 percent in the 12 months ended March on strong global demand for machine tools, Fanuc said on Monday it plans to pay around 60 percent of consolidated net income as dividend to shareholders. The previous target was 30 percent.

Fanuc, renowned for both its lucrative automation technology and a previously secretive corporate culture, had been expected by analysts to raise the payout ratio in response to pressure for bigger payouts and a share buyback from Loeb, whose Third Point hedge fund disclosed in February that it held an unspecified stake in Fanuc.

But the scale of the increase was unexpected and will be welcomed by most shareholders, who have been attracted to Fanuc's earnings power but frustrated by its cash-hoarding habits and reluctance to communicate with shareholders.

It also chimes with Prime Minister Shinzo Abe's calls on Japanese companies to boost governance and in so doing enhance the Tokyo stock market's attractiveness to foreign investors.

To meet the surprise new target, Fanuc on Monday proposed a dividend payment of 636.62 yen per share for the year that ended in March, up from 170.06 yen in the previous year. With an overall market value of about $53 billion, Fanuc ended the latest fiscal year with cash and equivalents of 991.24 billion yen ($8.32 billion).

It also said in a statement that it plans to regularly cancel shares it holds in treasury in excess of 5 percent of outstanding common stock. Including share buybacks, it said it would target an average rate of return on investment of up to 80 percent.

Change has been afoot at Fanuc since Loeb announced his entry into the company, and shares have risen by about a third so far this year. Loeb wasn't immediately available for comment.

Fanuc recently set up a shareholder relations department and announced that it would consider how to make the best use of its cash, which investors took as a sign it was becoming more shareholder-friendly. It plans to meet investors on Tuesday.

For the fiscal year ended March, Fanuc said its net profit nearly doubled to 207.6 billion yen, reflecting a surge in capital spending in the machine tools industry in Japan and the rest of Asia, as well as the U.S. automotive industry.

But it forecast a 7.9 percent fall net profit in the current year due to softer demand from the technology industry.

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