| MMK will pay shareholders half a billion dollars The Magnitogorsk Iron and Steel Works, still known for the lowest dividend payments among Russian metallurgists, will pay its shareholders a record amount for the industry in 2004 - $518 million. Thus, management led by Viktor Rashnikov will have the opportunity to repay part of the loans raised to obtain full control over the plant. The procedure for distributing profits based on the results of 2004 was determined by MMK's board of directors last Friday as a recommendation for the annual general meeting of shareholders. At the same time, MMK clarified that the closing date of the register is March 7, therefore, neither the state nor the Mechel Steel Group, which sold their shares to UFG structures in December last year, can count on dividends.
Before privatization, the Accounts Chamber conducted an audit of the effectiveness of management of the state stake in MMK in 2000-2002 and came to the conclusion that the state had not received more than $500 million in dividends since 2000. And three weeks before privatization, the Russian Federal Property Fund demanded that the board of directors of MMK pay interim dividends for nine months. “We have owned these shares for almost a whole year, and it would be a shame if the buyer receives dividends on them,” explained then Deputy Head of the Russian Federal Property Fund Kirill Tomashchuk. However, it turned out that MMK’s charter does not provide for interim payments, and the state was left without profit.
It is obvious that by taking such a significant amount from the plant in the form of dividends, the management - who is also the main shareholder of Magnitogorsk - will be able to pay off the creditors who financed the purchase of the state stake and the stake in Mechel. It is unknown who acted as creditors.
MMK does not hide that the decision on the size of dividends was made in the interests of management. However, such a sharp increase is explained by the fact that previously most of MMK’s profits were primarily directed to investment projects (modernization of facilities, social programs). “Now the needs for financing investment programs have been satisfied,” Elena Azovtseva, press secretary of the plant, told Vremya Novostei. In addition, according to her, last year's financial results were much more modest.
Until now, dividends based on the results of 2003 were considered a record for MMK - 430 million rubles. (about $15 million). These were the lowest dividend payments (dividend yield of shares never exceeded 0.5%) among the leading companies in the industry, despite the fact that Magnitogorsk is Russia's largest steel producer. NLMK and Severstal, for example, paid their owners 3.6 billion rubles in 2003. ($125 million) and 9.4 billion rubles. ($325 million).
In principle, experts say, after management gained control over MMK, an increase in dividend payments was predictable. However, few expected that MMK would outdo its more generous colleagues. According to calculations by UFG analyst Alexander Pukhaev, dividends from the companies of Vladimir Lisin and Alexey Mordashov for 2004 will not exceed $300 million (in nine months, NLMK and Severstal have already paid shareholders 6 billion and 5 billion rubles). Yana GODOVANAYA |
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