Norilsk to Make Dividend Payments Linked to Debt and Earnings

  • Miner's management proposes new plan of dividend payout
  • Fedorov says payments to be linked to net debt-to-Ebitda ratio

GMK Norilsk Nickel PJSC, Russia’s largest miner, plans to link its dividend to its debt and earnings so that payments can change according to market conditions.

The company’s management has asked the board to consider the new plan, First Deputy Chief Executive Officer Pavel Fedorov told reporters in Moscow on Monday. Norilsk currently has a fixed payout ratio, with half of earnings before interest, taxes, depreciation and amortization offered in annual dividends, or no less than $2 billion.

Mining companies globally have cut dividends to cope with an ongoing slump in commodity prices and reduced profits. Anglo American Plc, Rio Tinto Group and Vedanta Plc have scrapped shareholder payments after industrial-metal prices fell to a six-year low. Nickel has dropped 36 percent in the past year, more than any other main contract on the London Metal Exchange.

"The decision to review the dividend targets amidst, probably, the most challenging market conditions in a decade demonstrates the commitment of our core shareholders to keep Norilsk as one of the highest-yielding stocks among mining industry majors," Fedorov said.

Planned Policy

Norilsk’s future payments will depend on its debt-to-earnings ratio, Fedorov said. It will pay 60 percent of Ebitda as an annual dividend when the net debt-to-Ebitda ratio falls below 1.8, while payments will be curbed to 30 percent of Ebitda when the ratio is higher than 2.2, the company said on Monday.

The payout for 2015 won’t be affected by the new policy. Norilsk will also set the minimum dividend per year at $1.3 billion for 2016 and then $1 billion through 2021. The 2016 minimum amount will be higher because the company expects to close the sale of its Nkomati nickel mine in Africa soon, Fedorov said.

The Moscow-based miner approved 227 billion rubles ($3.3 billion) in payments for 2014 and 99.2 billion rubles for the first three quarters of 2015.

Norilsk’s net debt-to-Ebitda ratio was at 1 at the end of 2015, though it could rise to 1.8 or higher this year after final payments for 2015 and if market conditions remain weak, Fedorov said.

"The new dividend policy will allow the company to be more flexible to the market situation and also sends the signal to the rating agencies that the company sees keeping its debt at a relatively low level as a strategic priority," he said.

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