Polymetal International postpones dividend decision

Management has had a rethink about its latest dividend payment given the war in Ukraine is stretching its finances.

With Russia’s invasion of Ukraine now almost seven weeks old, few were surprised this morning to hear that Russia-focused miner Polymetal International (LSE:POLY) has decided not to pay its final dividend.

“The board has reviewed significant changes in operating conditions that the group has encountered in the last few weeks,” it said in a brief statement Wednesday.

Management concluded that it is “no longer appropriate to recommend or declare the 2021 final dividend payment”.

Shareholders had been due to approve the $246 million payout worth $0.52 per share, at the Annual General Meeting on 25 April. Instead, the decision will be reassessed in August, along with the possible payment or otherwise of the interim dividend covering the first half of 2022.

The decision is a sensible one given the company’s assets in Russia and Kazakhstan make it vulnerable to further fallout from sanctions against Moscow. Polymetal’s share price crashed over 90% when Russia’s invasion began, but subsequent volatility – the shares rose from 92p to over 400p in just a few weeks – has made the shares a favourite of speculative investors. The gamble is that a peace deal will at least mark the beginning of some return to normality.

Last month, index compiler FTSE Russell removed Polymetal from the FTSE 100 and all other indices. It did the same for EVRAZ (LSE:EVR), Petropavlovsk (LSE:POG) and Raven Property Group Ltd (LSE:RAVP).

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Polymetal's management blamed the dividend decision on “mounting uncertainty” about the availability of funds because of sanctions imposed on Russian banks and the economy by the West. Many multinational corporations have either pulled out of Russia or suspended operations there since the war began on 24 February.

It also pointed to higher working capital needs due to what it called a “liquidity crunch”, or a shortage of cash. The company also highlighted supply chain problems.

Finally, the London-listed firm talked about “Balance sheet constraints imposed by lower credit availability as well as significantly higher cost of funding.”

Polymetal published annual results less than a week after the conflict in Ukraine began. While chief executive Vitaly Nesis acknowledged a “wide range of uncertainties” in 2022, he did also say that “significant free cash flow” could finance “substantial dividends”.

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Now, new chairman Riccardo Orcel, the Italian banker appointed after the war began, says the dividend postponement is required to “sustain the stability and liquidity of the business.”

“We will continue to monitor the operating, funding and regulatory conditions in which the business operates, hoping that stability is restored, improving visibility which would allow us to return to our cash distribution policy.”