ALROSA’s Supervisory Board, in a recently held meeting, approved a new Dividend Policy for the Company.

The Board also put up a recommendation to the General Body Meeting of Shareholders to pay an interim dividend for the first six months of 2018.

The changes in the dividend policy include recalibration of payment frequency. “In line with the new dividend policy, dividends will be paid twice a year (for the first six months and for twelve months of the year, net of dividends for the first six months paid previously),” ALROSA said in a statement making the announcement. “Previously, dividends were paid once a year based on the Company’s annual results.”

The basis of calculation has also been modified. “The Company has decided to use free cash flow (FCF) representing the operating cash flow net of capital expenditure as a new basis for calculating dividend payments,” ALROSA explained.

Further, it was decided that the Supervisory Board, when recommending dividend payout, will be guided by the level of Net Debt to EBITDA ratio. For this, several formulations have been worked out. In ALROSA’s words, these are:

• If the Net Debt/EBITDA ratio is below 0x, the recommended amount of annual dividends will be above 100% of free cash flow for the reporting period;
• If Net Debt/EBITDA ratio is in the range from 0.0x to 1.0x, the recommended amount of annual dividends will amount to 70–100% of free cash flow for the reporting period;
• If Net Debt/EBITDA ratio is in the range from 1.0x to 1.5x, the recommended amount of annual dividends will amount to 50–70% of free cash flow for the reporting period.

“The Supervisory Board also decided to set a minimum dividend payout ratio at 50% of IFRS net income for the respective period paid in case the actual and target Net Debt / EBITDA ratio is below 1.5x,” ALROSA noted.

On the basis of the new policy, ALROSA’s Supervisory Board made a preliminary recommendation for the General Meeting of Shareholders to pay dividends based on the Company’s 6M 2018 results of at least RUB 5.93 per share, or 70% of free cash flow based on the IFRS financials planned to be published on 24 August 2018.

The Company also made some observations on its Financial Policy. It stated that ALROSA’s Financial Policy outlines “key approaches to short-, medium- and long-term liquidity management”.

Keeping this in mind, the Company said, “Pursuant to the Financial Policy, the Company plans to keep the target Net Debt / EBITDA ratio between 0.5x and 1.0x in the medium- and long term.”