Tenneco to Halve Payout, Sell Off $1 Billion of Assets
Tenneco Inc. said Wednesday that it will chop its common stock dividend in half and sell more than $1 billion in assets to maintain financial health.
The actions are designed to shore up Tenneco’s balance sheet as it incurs the costs of a restructuring of its JI Case farm and construction equipment subsidiary.
The Houston-based company will cut the dividend on common stock to 40 cents from 80 cents a share beginning in the fourth quarter, for an annualized savings of $200 million.
The $2-billion program outlined Wednesday was designed by Chairman James L. Ketelsen and new President Michael H. Walsh. On Tuesday, the company said Walsh will start work immediately rather than wait until Oct. 1 as previously announced.
The company expects to collect another $500 million by selling its Viscosity Oil Co., which makes lubricants; an unfinished gasoline additive plant in LaPorte, Tex.; three short line railroads; certain timberlands, and its gold mining operations.
Another $550 million would be raised through the sale of other, unspecified assets by the end of the year.
The company will also reduce next year’s capital spending plans by 25%, cut other costs by at least $250 million annually and raise an additional $300 million of equity.
Tenneco said it would show “a substantial loss from operations for the second half” as well as a loss for the year because of the expected deterioration of Case’s operating results and the restructuring.
Tenneco lost $13 million in the first half on revenue of $6.8 billion, down from earnings of $340 million on revenue of $7.2 billion in the same period last year.
Tenneco stock closed down $2.25 a share at $40.375 on volume of 2.3 million shares, making it the fourth most active issue on the New York Stock Exchange.
In addition to JI Case, Tenneco has interests in natural gas pipelines, shipbuilding, automotive parts, packaging, chemicals and minerals. It shed its oil and gas operations in 1988.
JI Case, which makes farm and construction equipment, had operating losses “substantially greater than previously anticipated” because of depressed market conditions.
The subsidiary will cut its 1991 production schedule and take other cost-saving steps but is expected to generate a positive cash flow for the year, the company said.
No layoffs are planned at this time, Tenneco spokeswoman Christine LeLaurin said.