Russian Companies Halt Dividends as Economic Pressures Mount

The boards of directors for at least two dozen publicly listed Russian firms have recommended withholding dividend payouts from their 2024 earnings to shareholders this spring. This decision is influenced by high interest rates, declining revenues, and the pressure of sanctions, as reported by Vedomosti, a Russian business daily, on Monday.

As per data from the state statistics agency Rosstat, Russian businesses reported a total income of 30.4 trillion rubles ($381.1 billion) in 2024, marking a 6.9% decrease compared to the previous year.

When adjusted for inflation, which was calculated at 9.4%, the real earnings dropped by about 15%.

The overall financial performance of profitable companies remained fairly steady at 37.6 trillion rubles ($471.5 billion), showing a marginal decrease of 0.8%. However, losses among companies surged dramatically, climbing by 37.7% to reach 7.2 trillion rubles ($90.2 billion).

Prominent corporations in the mining and energy sectors, such as Gazprom, Norilsk Nickel, NLMK, and Severstal, are among those choosing not to distribute dividends. These firms will forgo dividends for the fourth quarter of 2024 and the first quarter of 2025, along with En+ Group, Rusal, and Rosseti.

Many of these companies are experiencing significant financial strain. Gazprom has faced a reduction in export revenues leading to negative cash flow, while NLMK has reported losses this year.

Challenges have emerged in various sectors, including retail, real estate, agriculture, logistics, machinery, and healthcare.

Firms that are opting to withhold dividends from their shareholders include Magnit, Lenta, M.Video, United Wagon Company, CIAN, PIK, Samolyot, Promomed, Rusagro, Artgen, Sovcomflot, Globaltruck, Nizhnekamskshina, and Yakovlev Aircraft Corporation.

Market analysts predict that this list may continue to grow, with potential dividend suspensions expected from RusHydro, Alrosa, Aeroflot, and the retailer Vse Instrumenty.

Vladimir Chernov, an analyst with Freedom Finance Global, informed Vedomosti that the decline in export revenues and the effects of sanctions are significant contributors to the reduced income experienced by Gazprom, NLMK, Norilsk Nickel, Rusagro, and Sovcomflot.

Igor Danilenko, investment director at Renaissance Capital, mentioned that the widespread deferral of dividends is attributed not only to worsening market conditions but also to elevated borrowing costs.

As interest rates surpass 21%, the choice to maintain liquidity and dedicate profits to operational necessities seems to be a logical one, he noted.

Additionally, companies focused on exports are grappling with the implications of a strong ruble. Yaroslav Kabakov, strategy director at Finam, pointed out that a stronger ruble diminishes revenue for metallurgical firms, oil producers, fertilizer companies, and agricultural businesses.