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Teckwah emphasises need for sustainable growth in response to Quarz

PACKAGING printing and logistics firm Teckwah Industrial has stressed the need for a sound cash management policy, in response to calls from activist fund Quarz Capital Management to raise dividend payouts amid a downtrend in its earnings.

In a July 28 open letter to Teckwah, Quarz had urged the mainboard-listed firm to increase annual dividends to 80 per cent of net income, to address issues of cash discipline and operational efficiency. The firm paid out S$3.5 million or 32 per cent of net profit as dividends in 2019.

Quarz is the fourth largest shareholder of Teckwah, having built up a stake of over 6 per cent.

Responding to the letter, Teckwah said in its Tuesday filing that it seeks to pursue long-term, sustainable growth which is especially important in the current economic environment.

“Integral to our business success has been a sound cash management policy which has enabled us to weather financial crises over the years, the Covid-19 pandemic being the latest and most severe to date. Our sound balance sheet and net cash position have placed us in a stable position,” the company said.

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Teckwah said that its financial position allows it to invest in new plants and technology, as well as pursue its digital transformation and innovation programme. Quarz has estimated the firm's net cash holdings to be about S$40 million.

Teckwah added: “We will stay firm on our overarching strategic direction, corporate principles and risk management policies, and remain committed to our stakeholders to ensure value creation for the group.”

Addressing Teckwah's response, Quarz said in a statement on Tuesday evening: "We thank the company for their responses. Unfortunately the company has not appropriately addressed the points made in our previous letter. We are working on a list of proposals to unlock shareholder value at Teckwah, and will be sharing them with the public and fellow shareholders in due course."

Shares of Teckwah closed at S$0.555 on Tuesday, up 2.78 per cent, before the announcement.

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