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Norilsk shares dive on rumors of plans to ditch dividend policy for market-linked payouts

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Norilsk shares dive on rumors of plans to ditch dividend policy for market-linked payouts

Shares in Russian base metals producer PJSC MMC Norilsk Nickel plunged by nearly 3% March 31, aftermedia reports suggested the company was preparing to ditch its generous dividendspolicy in favor of a market-linked approach that could cut payouts in times of lowcommodity prices.

The company's Moscow-traded stock closed at 8,700 Russian rublesapiece March 31 following news of the potential change.

Russian newswire Interfax reported that the company was consideringa move to a more "market-based" dividend policy as a reaction to the significantfall in commodity prices since the policy was agreed in 2013.

Nickel, which accounted for 38% of the company's sales in 2015,down from 43% the previous year, has been particularly hard-hit.

The value of the metal fell to US$7,561.50 per tonne Feb. 11,its lowest point since 2003, reviving market concerns that the miner would needto borrow heavily to fund dividend payouts.

Analysts have regularly speculated whether Norilsk's currentdividend policy was sustainable at such prices.

Under the current policy, Norilsk must pay out 50% of annualEBITDA, but no less than US$2 billion per year.

According to Interfax, a new market-based dividend policy isbeing discussed by Norilsk President Vladimir Potanin and Oleg Deripaska, presidentof United Co. RUSAL Plc,which holds a 27.89% stake in the nickel miner.

A change to a market-linked policy would insulate Norilsk fromfurther falls in the price of commodities, and provide shareholders with additionaldividend payouts during times of high prices, Interfax reported, citing a sourcefamiliar with the situation. But under such a scheme, payouts during periods oflow commodities prices, as now, would likely be lower.

Peter Likholitov, press spokesman for Norilsk, declined to commenton the matter when contacted by SNL Metals & Mining.

As of March 30, US$1 wasequivalent to 67.38 Russian rubles.