Nornickel Plans to Briefly Reduce Shareholder Dividends

As a part of a push for large-scale projects in the upcoming decade, Norilsk Nickel (MCX:GMKN) announced on Monday (November 18) its intention to decrease dividends for shareholders as the company focuses on investment.

Nornickel plans to reduce shareholder dividends between 2023 and 2025, using the additional capital to support large-scale projects to boost production. In particular, the company stressed its move toward supporting clean mobility as electric vehicles (EVs) take off in popularity. 

“Now it is time to make a next step and advance further with pursuing our long-term growth ambitions, but also take on more ambitious environmental targets,” said Vladimir Potanin, president of Nornickel.

“We firmly believe in the critical role that Norilsk Nickel will play in enabling the world to get greener and mobility to get cleaner. However, we also believe that in such world it will be not less important of how green we will be ourselves,” he added. 

Nornickel lists its targets for production growth in its release — the company is aiming to increase nickel production by 15 to 20 percent to 250,000 to 280,000 metric tons; copper production by 20 to 40 percent to 520,000 to 560,000 metric tons; and wants to see a combined increase of 30 to 95 percent to 160 to 205 metric tons of palladium and platinum.

During the first phase of the project, the company will increase capital expenditure from a range of US$2.5 billion to US$2.8 billion in 2020 to a range of US$3 billion to US$3.4 billion in 2021.

During the peak of the company’s planned investment period from 2022 to 2025, capital expenditure is expected to be around US$3.5 billion to US$4 billion each year. In 2026 to 2030, capital expenditure is expected to fall back to the historical average of under US$2 billion per year.

It is during the peak capital expenditure period of 2023 to 2025 that Nornickel will moderate dividends. The company has promised that dividends will recover, and has established a goal of regaining its laurel as an industry leader in shareholder returns through the 10 year cycle.

Nornickel’s push for higher output for nickel in particular comes from the company’s focus on supporting clean mobility. The company believes that, following the increase in investment, it will be able to produce 3.5 million to 5.5 million EV battery packs, which could fuel the expected increase in EVs that analysts have been forecasting. 

Since its announcement, Nornickel’s share price has dropped off. Last Friday (November 15), the company was trading for US$27.76, and when it opened the market on Monday (November 18) it was at US$27.10. Regardless, Nornickel has made massive gains so far this year, increasing by 47.35 percent since January. 

As of 10:26 a.m. on Monday, Nornickel’s shares were trading for US$27.76. Meanwhile, in London, nickel was changing hands at US$14,980 per metric ton as of Friday. 

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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.