Cherkizovo Will Pay Investors

September 30, 2014

The company announced that shareholders of Cherkizovo Group will decide whether to pay dividends for 2012 2013 at an extraordinary meeting on November 10. The Board of Directors has recommended dividends of 1.514 billion roubles. The company has no official dividend policy. A spokesman for Cherkizovo said that the company had decided to distribute “nearly all of the Group’s retained earnings according to RAS”. As of the end of 2013, Cherkizovo Group OJSC had retained earnings of 1.73 billion roubles, as stated in the company’s annual report based on RAS. According to the company spokesman, “these are the funds that will be paid out”. Retained earnings for Cherkizovo Group as a whole were $859.4 million (28.161 billion roubles) as of December 31, 2013, and $974.6 million (32.875 billion roubles) as of June 30, 2014, according to the Group’s consolidated statements based on US GAAP. Thus, Cherkizovo will direct 87.5% of retained earnings according to RAS, or 5.4% according to US GAAP, toward dividends.

Cherkizovo may pay dividends for the first time ever. “Keeping profits within the company to promote growth and strengthen its leading market positions may <…> be the best solution,” the company stated in its 2012 report as an explanation for its decision not to pay. Now Cherkizovo wants to support its shareholders due to the difficult market situation. A company spokesman explained that investors these days are sceptical about Russian securities.

Cherkizovo had previously announced that it might pay dividends only upon the results of 2014. “Rate of return and cash flows in 2014 so far favour dividend payments, and shareholders are discussing this question,” Cherkizovo CEO Sergei Mikhailov said in an interview with Vedomosti. According to Mr. Mikhailov, investors are not always confident of capitalization growth and have been looking at the Russian market in terms of dividend quality in the last year or two. The company spokesman did not say why the Group had decided to pay dividends for 2012 and 2013.

Aleksei Krivoshapko, Director at Prosperity Capital Management (a Cherkizovo shareholder), believes that the proposal of the Board of Directors will be approved: “Investors are pleased that the company has taken this step.”