Based on the dividend policy of the company, MMC Norilsk Nickel must pay 60% of EBITDA on dividends. In the first half of the year they earned $1.74 billion. When calculating, we came up with about 390 rubles per share.

But today the board of directors decided a little differently:

“To recommend that the Extraordinary General Meeting of Shareholders decide to pay dividends on the Company’s ordinary registered shares based on the results of the first half of 2017 in the amount of 224.20 rubles per ordinary share. Propose to the Extraordinary General Meeting of Shareholders to set October 19, 2017 as the date on which persons entitled to receive dividends are determined.”

As a result, the expectations of many investors were NOT justified. We'll get "everything" 224 rubles. I think the hysteria is unnecessary here. The difference between what they pay and what they have to pay must be compensated either with additional dividends for 9 months, or added to the annual ones. The company now needs money to avoid exceeding its maximum net debt to EBITDA ratio of 1.8. Now this ratio is already 1.5 - and this is close to starting to reduce the size of dividends.

Management will do everything necessary to ensure that we receive the maximum possible payments. Now the main thing is not to get hysterical and calmly wait for the additional payment.

The Russian company MMC Norilsk Nickel produces nickel, palladium, copper and other non-ferrous metals. Norilsk Nickel is a public company, you can become a shareholder of the company together with Oleg Deripaska and Vladimir Potanin.

On March 6, Norilsk Nickel published financial results for 2017. I took the statements in dollars, because Norilsk Nickel receives most of the money from foreign buyers, almost all the money and loans are in foreign currency.

Sergey Shabolkin

private investor

Shareholder conflict

Norilsk Nickel has two major shareholders - Deripaska's Rusal and Potanin's Interros, both of which own Norilsk Nickel through subsidiaries. The guys have been conflicting since 2008 because of different visions: Rusal wants more dividends, Interros wants to invest in the company.

Everything was so complicated that they had to call Abramovich: he bought part of the shares under an agreement until 2017. It’s 2018: Potanin’s Interros sent a letter to Abramovich’s company with an offer to buy the shares, but Deripaska’s Rusal filed a lawsuit in a London court - the letter has no legal force.

But buying back Abramovich's shares is not the only problem. According to the agreement, if the conflict continues, the shareholders can buy each other's shares. Here is the key problem: they will buy out the entire share - according to Vedomosti, Rusal needs at least 14 billion dollars, Interros - at least 10 billion. That's a lot.

What will happen next is unknown; a hearing on the buyout of shares from Abramovich’s company is scheduled for May 14-17. For now, both companies can buy out a 2% stake from Abramovich's company. They want to do this: first they will close the sale deal, and then check it in the London court.

Revenue, sales and raw material prices

Norilsk Nickel earned $9.1 billion in 2017 - 10.7% more than in 2016. At the same time, sales volumes fell for almost all metals sold - saved only by rising prices for raw materials.

The company generates most of its revenue from nickel, copper and palladium. Management explains the decline: the company reduced nickel production from third parties and modernized part of the production - they produced less, sold less. Because of this, Norilsk Nickel sold off its nickel reserves for 2016.

Profit fell

To evaluate the company's performance, calculate the operating margin - an indicator of profitability from core activities. Formula: operating profit / revenue. More is better.

Operating margin of Norilsk Nickel

Operating profit

Revenue

Operating margin

Revenue increased, and along with it, operating expenses. It got better, but not much.

Debts and dividends

Unraveling investor charades: dividend payments at Norilsk Nickel depend on the Net Debt / EBITDA multiplier. Less value means more dividends will be paid. Net debt is the sum of all loans and borrowings minus the company's cash, and EBITDA is earnings before taxes, interest payments to creditors and depreciation.

In 2017, Norilsk Nickel gained loans, there was less money due to dividend payments, and EBITDA increased by 2.4%. As a result, the Net Debt / EBITDA multiplier for the year increased from 1.2 to 2.1 - the value falls into the zone of floating calculation of the dividend payout ratio.

But for the final dividends for 2017, the adjusted figure was calculated - it was 1.88. This means that Norilsk Nickel shareholders will receive slightly more dividends than with the standard calculation. The final dividends will be paid in April-May 2018, so stay tuned for company news.

Management promises to reduce the Net Debt / EBITDA multiple to 1.5 in 2018 - potentially the maximum dividend payment awaits us.

Electric Vehicle Market Potential

The management of Norilsk Nickel paid special attention to the growing electric vehicle market in the presentation. The company produces copper and nickel, and the company estimates that an electric vehicle's electric motor and battery require these metals.

It looks nice, but while the electric vehicle market is the story of the future, you shouldn’t delude yourself. It might be worth taking a closer look at companies producing cobalt - it is used in lithium-ion batteries (like Tesla's) and its price has doubled in the last year.

We calculate multipliers

I took the market capitalization from Investfunds.ru for March 6. Capitalization is indicated in rubles, company reporting is in dollars. I converted the capitalization into dollars, taking the dollar to ruble exchange rate on March 6 from the Bank of Russia website - 57.1 rubles. We will still need the data from the press release. We transfer the data to the table.

Norilsk Nickel results

Index

million $

Operating profit

Impairment loss

Net profit

Interest paid

Cash and cash equivalents

Short-term loans and borrowings

Long-term loans and borrowings

Depreciation

Capitalization

P/E is the ratio of market capitalization to earnings. Shows how many years the company will pay for itself. If the result is from 0 to 5, then the company is probably undervalued.

P/S is the ratio of market capitalization to revenue. Less than 2 is good, less than 1 means the company may be undervalued. Calculation formula: capitalization / revenue.

P/BV is the ratio of market capitalization to the company's capital. Helps to understand how much money an investor will have to pay in case of bankruptcy. If the indicator is greater than one, there will not be enough for everyone.

EV is the value of the company taking into account all sources of financing - from investors and creditors. Reduced by cash, because it can help reduce debt.

EBITDA - shows how much the company earns net money without taking into account taxes, interest on loans and depreciation. Norilsk Nickel calculates EBITDA as follows: operating profit + loss from revaluation of non-financial assets + depreciation.

MMC Norilsk Nickel in 2017 increased copper production by 11%, palladium by 4%, and platinum by 6%. Such data is contained in the results of the group’s production activities for the 4th quarter and 2017 as a whole, published on Wednesday.

In general, at the end of 2017, palladium production amounted to 2,780 thousand ounces, platinum - 670 thousand ounces.

The increase in PGM production in 2017 compared to 2016 is due to the processing of copper-containing concentrate purchased from Rostec Group of Companies, the production of work in progress accumulated in the Polar Division and a decrease in transport work in progress due to the completion of the reconfiguration of production, MMC notes. Palladium production from own raw materials at the end of 2017 amounted to 2,728 thousand ounces, which is 8% higher than the level of 2016 and corresponds to forecast expectations, platinum - 650 thousand ounces, which exceeds not only the level of 2016 (+7%), but and forecast expectations (previously, the mining and metals industry noted that it expects 581-645 thousand ounces of platinum by the end of the year).

At the same time, the group’s nickel production amounted to 217,112 thousand tons of nickel, which is 8% less than the 2016 level.

The main reason for the decrease in nickel output in 2017 in the mining and metallurgical complex is said to be the reduction in low-profit processing of third-party raw materials (at the Norilsk Nickel Harjavalta plant in Finland - editor's note), due to the reconfiguration of production facilities.

At the same time, the volume of nickel production from its own raw materials increased by 7% - to 210 thousand tons, which corresponds to the previously published production forecast for 2017 in the amount of 206-211 thousand tons. The greatest growth was noted in the fourth quarter, when the group produced 60,032 thousand tons of nickel, which is 11% more than the previous period.

The fourth quarter was also a breakthrough for the mining and metals industry's production of other metals: copper reached 110 thousand tons (an increase of 15% compared to the 3rd quarter), palladium - 753 thousand ounces (an increase of 9%), platinum - 177 thousand ounces (an increase 2%), mainly due to production from our own Russian raw materials.

“Thanks to the completion of the main stage of reconfiguration of production facilities, which was marked by the bringing of the Talnakh concentrator to its design capacity and recovery levels, as well as the normalization of work-in-progress inventories, we have fully fulfilled the production plan for 2017,” said Sergei, First Vice President, Chief Operating Officer of MMC Dyachenko.

“Volumes of production of base metals from own raw materials increased by 7-15% compared to 2016, and the growth of copper and platinum production exceeded targets,” he added.

In general, the production results of MMC Norilsk Nickel are good, somewhat better than what experts predicted and what the market expected, notes Aton senior analyst for the metallurgical sector Andrey Lobazov. “Revenue for the year may be $150-200 million higher than expected,” he added.

For 2018, Norilsk Nickel plans an active phase of modernization and expansion of refining capacities at the Kola MMC with the transition to a new chlorine leaching technology. It is also planned to further increase copper production both at existing facilities and through the launch of the Bystrinsky GOK.

Nickel production this year is expected to be 210-215 thousand tons, copper - 400-420 thousand tons, palladium - 2,630 - 2,725 thousand ounces, platinum - 600-650 thousand ounces. It is also expected that Bystrinkiy GOK will reach production levels - in 2018, about 35-40 thousand tons of copper and 150-200 thousand ounces of gold in concentrate should be produced there.

“We, in general, confirm the previously published production forecast for 2018 for all metals, with a small risk for platinum group metals, which is associated with the possible accumulation of metals at the Kola MMC due to the modernization of refining capacities,” Dyachenko emphasized.

According to Lobazov, the situation with prices on the metals market is now quite positive: nickel is trading at the highest values ​​since 2015, the cost of palladium is also growing, which in general allows us to be optimistic about the growth of mining and metals industry indicators in 2018.

The Norilsk Nickel group of companies is the world's largest producer and supplier of rare and valuable metals. In 2017, Norilsk Nickel allocates 70.6 billion rubles to pay income to shareholders. based on the results of 2016 at the rate of 446.1 rubles. per share. Payments began on June 23, 2017.

PJSC MMC Norilsk Nickel is a global industrial leader in the production of rare and precious metals. The main share of production is occupied by nickel, palladium, as well as gold, platinum and silver. From the point of view of profitable attractiveness for shareholders, the metallurgical giant consistently holds a leading position among global corporations.

The history of the oldest mining and processing enterprise in this video:

How much dividends will Norilsk Nickel pay for 2016?

The Norilsk Nickel group of companies regularly pays not only annual dividends, but also interim income based on the results of work for six months and 9 months. In accordance with the “Regulations on Dividend Policy”, the amount of annual dividends cannot be less than 30% of the group’s consolidated net profit.

On June 9, 2017, the General Meeting of Shareholders of PJSC MMC Norilsk Nickel was held. Taking into account the recommendations of the board of directors, the meeting decided to announce the payment of dividend income on the company's ordinary shares.

Table 1. Terms and amount of payments

By the way, taking into account the payment of interim income on shares in 2016 based on the results of 9 months, the total amount of dividends per share amounted to 890.4 rubles.

How to receive dividends?

Cash (dividend income) can be received in the following order:

• To owners whose rights to shares are reflected in the register of shareholders of the company, payments are made through post offices or by bank transfer to the settlement accounts specified in the questionnaires of registered persons available to the registrar.
• If the rights to own shares are registered with a nominee shareholder, funds are paid through the nominee holder with whom the shareholder has entered into a corresponding agreement.

If for some reason the shareholder has not received the funds due to him, the right to claim payment is retained for three years from the date of declaration of dividends.

For your information: the registrar and registrar of PJSC MMC Norilsk Nickel is JSC Independent Registration Company. Shareholders are recommended to promptly notify the registrar of changes in details and personal data.

How to become a shareholder of Norilsk Nickel?

• Where to buy shares: PJSC Moscow Exchange MICEX - RTS.
• Security code: GMKN.
• How to buy: open a brokerage account with a broker (FINAM, BKS broker, ATON, Uralsib).

Dividend history of PJSC MMC Norilsk Nickel

Table 2. Dynamics of dividends on ordinary shares of PJSC MMC Norilsk Nickel (2012 – 2016)

Thus, 35.3% of half-year EBITDA can be used for payments. Since 2013, Norilsk Nickel has paid half of its EBITDA in dividends. In the spring of 2016, after the fall in copper and nickel prices at the end of 2015, the company approved a new dividend policy. Now payments depend on the debt load, but must be at least $1 billion. The company gives 60% of EBITDA to shareholders if the ratio of net debt to EBITDA is less than 1.8. If the indicator is equal to or higher than 2.2, then the amount of dividends paid may be reduced to 30% of EBITDA. The payout ratio is calculated based on the debt load as of December 31 of each year. Norilsk Nickel clarified that dividends will be divided into interim and final payments. Interim payments will amount to about 30% of the total dividends.

For 2016, dividends were $2.36 billion, or 60.5% of EBITDA.

"Norilsk Nickel"

Mining and metallurgical company
The main owners are Interros (30.4%), UC Rusal (27.8%), Crispian Investments Ltd. (5.7%).
Capitalization – $24.6 billion.
Revenue (IFRS, 1st half of 2017) – $4.2 billion,
Net profit – $915 million.

In the first half of the year, Norilsk Nickel's EBITDA decreased by 3% year-on-year to $1.7 billion due to the strengthening of the ruble and a one-time increase in social expenses, the company reported in a press release accompanying its financial results for the first half of the year. The ratio of net debt to EBITDA, according to the company as of June 30, was 1.5. By the end of 2017, Norilsk Nickel's debt burden may exceed 1.8 EBITDA if the price of metals and the ruble exchange rate remain at the level of August 1, according to the company's presentation. On August 1, according to Thomson Reuters, nickel cost $10,290 per 1 ton, copper – $6345, palladium – $892, platinum – $943.7. The dollar exchange rate, according to the Central Bank of Russia, was 60.06 rubles. “The share of EBITDA paid out as dividends declines when the 1.8 threshold is reached. However, the final decision on the amount of dividends remains with the company’s shareholders,” Norilsk Nickel quoted Sergei Malyshev, senior vice president of the company, in a press release on the results of the first half of the year.

Now everything depends on metal prices, experts are sure. “Nickel prices have not yet risen sufficiently, but the dynamics of recent weeks for the company have been extremely positive,” says ACRA analyst Maxim Khudalov. In August, prices for nickel, copper, platinum and palladium rose between 9.0% and 37.48%, according to Thomson Reuters data. A dollar costs 59.13 rubles. at the Central Bank rate. “The question is how long will prices stay at these levels,” adds Aton analyst Andrey Lobazov. “If not for long, then the consensus forecast for Norilsk Nickel’s EBITDA for 2017 of $3.9 billion does not look conservative, and the ratio of net debt to EBITDA at the end of the year could be 1.95,” he explains.