June 24, 2019, 00:14 / Updated June 24, 2019, 13:33 / Business

Gazprom promises to allocate 50% of consolidated net profit to dividends

The company promises to adopt a new dividend policy by the end of the year Artur Toporkov

The company’s goal is to allocate 50% of net profit under IFRS to dividends in three years / Evgeniy Razumny / Vedomosti

“ Gazprom ’s goal is to formulate a dividend policy of such quality that investors themselves can calculate the expected income on shares,” Interfax reported the words of the deputy chairman of the board of Gazprom, Famil Sadigov. It is expected that the gas holding's updated dividend policy will be ready and approved before the end of the year, so that dividends for 2019 will be calculated based on it, the top manager said. “Thus, we plan to share our achievements with both majority and minority shareholders. And make them transparent enough so that they can calculate them in advance without us,” Sadigov concluded.

Gazprom's current dividend policy was adopted in 2010. It provides that from 17.5 to 35% of net profit under RAS can be allocated for dividends. The concept of the new document involves “reaching the target level of 50% of the Gazprom group’s net profit under IFRS within three years,” taking into account adjustments for non-cash items, according to the company’s materials.

The idea of increasing the dividend payment rate for state-owned companies to 50% of net profit under IFRS has been discussed in the government since 2016, and in 2017 it was publicly supported by Russian President Vladimir Putin. However, over the past three years, Gazprom has repeatedly found itself on the list of exceptions. In 2016–2018 the company paid dividends in the range of 187–190 billion rubles. (24, 20 and 27% of net profit under IFRS for the previous year, respectively). At the same time, for two years in a row, in 2017–2018, the state, which controls 50.2% of Gazprom, raised the mineral extraction tax for the company in the last quarter. This made it possible to compensate for the budget revenues lost from low dividends.

took the first step towards shareholders Gazprom in April. The company's board unexpectedly revised its recommendation on dividends for last year, proposing to increase them by 1.5 times. The Board of Directors accepted this proposal, and now it must be approved by the shareholders meeting on June 28. It is expected that Gazprom will pay about 393.2 billion rubles over the past year. dividends. In response, the Ministry of Finance announced that it had decided to abandon the practice of one-time withdrawals of funds not received from Gazprom through an increase in the mineral extraction tax.

In the dividend policy being developed, payments will not be tied to the absolute values of the previous year, according to the company’s materials. Moreover, it is also not intended to remain linked to the investment program, a source at Gazprom explained to Vedomosti. Since 2013, the monopoly’s investment program has only once been less than 1 trillion rubles. (853 billion rubles in 2015), and this happened against the backdrop of the forced closure of the South Stream project, in which Bulgaria refused to participate. In 2018, on the contrary, it broke all records and, after adjustments, was approved in the amount of almost 1.5 trillion rubles. (plan for 2019 – just under 1.3 trillion rubles).

A predictable dividend policy and tighter control over the capital investment program are what investors have long wanted from Gazprom, says Dmitry Marinchenko, senior director of Fitch's corporate department: “The changes that management is talking about could improve the perception of the company, but some there are few intentions - reputation is earned over years and must be confirmed by numbers. “In addition, Gazprom will likely remain a conduit for Moscow’s energy interests and will not have complete independence in making strategic decisions.”

The opinion of investors may also be influenced by how effectively Moscow will be able to get out of the seemingly deadlock with the extension of the agreement on gas transit through Ukraine, he continues. “The early signing of a long-term agreement with conditions more or less satisfactory to both parties without arm-twisting would be a pleasant surprise, but here everything depends more on the general vector of relations with Kiev than on Gazprom,” he concludes.

Corrected version. In the second paragraph, the date of approval of the dividend policy has been corrected.