MOSCOW Feb 15 MMK, one of Russia's
largest steel makers, plans to lift its dividend payment for the
second half of 2016 to 60 percent of free cash flow, rewarding
shareholders for the company's improved margins and lower debt
MMK said its earnings before interest, taxation,
depreciation and amortisation (EBITDA) totalled $1.6 billion in
2016, taking into account the sale of part of its stake in
Australian iron ore company Fortescue.
The company's EBITDA margin -- a measure of profitability --
jumped to 34.7 percent from 28.6 percent, its highest level
since 2007, MMK said. Free cash flow for the year totalled $728
million and net debt fell 83 percent to $192 million.
MMK, the third largest steel producer in Russia, said the
combination of strong free cash flow and a lower debt burden had
helped it to pay out more to investors.
"This growth will not only increase the shareholders'
participation in the company's results, but also share part of
the profit from the sale of (Fortescue) shares with the
shareholders," the company said in a statement.
MMK said it now planned to submit a board proposal to
increase its standard annual dividend payout ratio to at least
50 percent of free cash flow. That compares to a current policy
of paying out no less than 30 percent of free cash flow.
MMK's fourth-quarter EBITDA fell 6 percent
quarter-on-quarter to $456 million, the company said. Revenue
increased 5 percent to $1.6 billion, while net profit fell 50
percent to $208 million.
Russian steelmakers have suffered over the past two years as
world steel prices plumbed 11-year lows and the country's
economic crisis sapped domestic demand.
But the companies now expect a stronger 2017 as Russia's
economy improves, buoyed by a rise in oil prices, and as higher
steel prices support profits.
Efforts to raise money by some of MMK's competitors point to
increased confidence in the sector.
Russia's biggest steel producer, NLMK, is
currently drawing up a new expansion strategy and said in
December it could issue Eurobonds this year.
Russia's No.2 steelmaker EVRAZ is also considering
a convertible bond issue while TMK, Russia's largest
maker of steel pipes for the oil and gas industry, sold a 13
percent stake through a secondary public offering in February.
"We reiterate our 'Buy' rating on MMK on its valuation and
dividend growth potential," Aton said in a note, adding that the
company's stock has been supported by market speculation that
MMK shares may be included in the MSCI index.
(Reporting by Jack Stubbs; Editing by Keith Weir)