Nornickel Prioritizes Financial Stability Over Dividends

Nornickel Prioritizes Financial Stability Over Dividends

Russian metals giant Nornickel has underscored that maintaining the company’s financial stability is of greater importance than dividend distribution, although the ultimate decision rests with its shareholders. This stance comes against the backdrop of Nornickel’s decision to halt dividends for 2022—the first such instance in 14 years—attributed to “negative geopolitics”, even though it resumed payouts for the first nine months of 2023, disbursing $1.5 billion to shareholders in January.

As the world’s leading palladium producer and a significant nickel supplier, Nornickel has navigated through a decline in net profit and revenue in 2023, impacted by falling metal prices and a challenging geopolitical landscape. Despite not being directly targeted by sanctions, the company has contended with tax increases and geopolitical risks that have impeded its development.

Vladimir Zhukov, Nornickel’s vice president for investor relations, highlighted the company’s ongoing commitment to fulfilling its investment, environmental, and social obligations, which entail considerable costs. “Maintaining financial sustainability in the current conditions is an undoubted priority,” Zhukov stated, emphasizing management’s perspective on dividend payments amidst prevailing uncertainties.

Nornickel’s 2023 financial performance revealed a free cash flow of $2.7 billion. However, after adjusting for debt servicing and other expenses, only $1.4 billion remains available for potential dividends—a sum that exceeds its January interim payments.

The future of Nornickel’s dividend strategy remains uncertain following the expiration of a shareholder agreement at the end of 2022 that safeguarded dividend payouts for a decade. This development has reignited discussions and potential disputes among its principal owners, including chief executive Vladimir Potanin, aluminium giant Rusal, and other stakeholders like Roman Abramovich.

The company’s approach to dividends, amidst financial pressures and shareholder dynamics, underscores the intricate balance Nornickel seeks to achieve between financial prudence and rewarding its investors in a volatile global market landscape. icon

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