The Board of Directors of Bashneft recommended that shareholders not pay dividends on ordinary shares for 2016, only on preferred shares - 2.98 billion rubles, Bashneft reported. In addition, the board recommended that the agenda of the meeting of the board of directors, which will be held after the approval of the financial statements for the nine months of 2017, include the issue of recommendations for the payment of dividends at the end of 2017, taking into account the retained earnings of previous years and based on the results for January - September.
Bashneft's dividend policy before the transition to state ownership consisted of distributing at least 10% of net profit according to IFRS, but the company always paid more. For 2015, having already become a state-owned company, Bashneft, by order of the government, paid 50% of net profit according to IFRS - 29 billion rubles. (see inset). Now, after Rosneft bought control of the company, IFRS will remain the basis for calculating payments, but indicators such as EBITDA and net debt are also taken into account, a Bashneft representative said.
Bashneft’s net profit according to IFRS for 2016 was 52.7 billion rubles. The RAS reporting states that retained earnings from previous years amounted to 171.3 billion rubles. It turns out that if Bashneft had allocated half of its net profit under IFRS to pay dividends for 2016, the amount would have been 26.35 billion rubles. Rosneft's share would have accounted for 18.26 billion rubles. But Rosneft would have to pay 13% of this amount in the form of a tax, since on the day the decision on payment was made, Rosneft owned at least half of the shares of Bashneft for less than a year - 329.7 billion rubles. Rosneft transferred to the budget for the purchase of Bashneft shares on October 12. If the decision is made after a year from the date of acquisition of the package, then there will be no tax on dividends, explains Mikhail Alexandrov, partner at the A2 law office. Therefore, it is better not to rush and make a decision on paying dividends after October 13, 2017, agrees BGP Litigation partner Alexander Golikov.
Investors are ready to wait: Bashneft's ordinary shares rose by 2% on Friday, while the quotes of preferred shares did not change. Even the representative of Bashkiria, which previously expected to receive 5 billion rubles from Bashneft. dividends for 2016, stated that the republic supports the transfer of payments to the fourth quarter. “It is expected that total payments for the tax component, charity and dividends will remain at last year’s level,” Interfax quotes a representative of Bashkortostan.
A representative of Bashneft explained that the company decided to postpone the payment of dividends for 2016 to the end of 2017 due to increased capital costs. “To maintain the pace of development of the company, restore the economic potential of refining after an accident at a hydrocracking unit in the summer of 2016, as well as due to the need to improve the safety of oil refining facilities in 2017 (peak capital costs - summer - autumn) it is expected to increase significantly, by 15% , to increase investments in the context of net profit decreasing by 8.6% in 2016,” Bashneft said in a statement. According to the company, its capital expenditures in 2016 were 82 billion rubles. This year they will increase by 17 billion rubles, a Bashneft representative said.
At the end of last year, Rostekhnadzor issued an order to Bashneft to eliminate violations identified during the inspection. The program for eliminating violations is estimated at 39 billion rubles, and 45% of the necessary work is planned to be done this year, the representative clarifies. The measures planned for 2017 will allow Bashneft to eliminate the main violations at the refinery and improve the technological chain, which will increase profits and tax revenues, Vedomosti’s interlocutor emphasizes. If the instructions are not fulfilled in a timely manner, Rostechnadzor may prohibit the operation of about a third of the facilities at the Bashneft refinery, a Bashneft representative explains the need to increase capital expenditures.
Bashneft (controlled by Rosneft since October 2016) will not pay dividends on ordinary shares on time, but will pay at least 0.1 rubles on preferred shares. on paper (total symbolic 3 million rubles). The refusal to make timely payments is motivated by the urgent costs of repairing the refinery after an inspection by Rostechnadzor. The oil company may pay the deferred dividend at the end of this year, or rather at the beginning of 2018, adding it to the interim dividend for the nine months of 2017. Bashkiria, which owns 25% of the authorized capital of Bashneft, supported the decision, but minority shareholders are unlikely to be satisfied.
The board of directors of Bashneft recommends that the shareholders meeting, which will be held on June 30, not pay dividends on ordinary shares, the oil company reported. The reason for this decision was stated to be investments in the repair of the Bashneft refinery following an inspection by Rostechnadzor, which revealed many violations. By 2022, Rosneft will invest 22 billion rubles in the refinery, Rostechnadzor previously noted. Dividends on preferred shares will amount to 0.1 rubles. on paper - only about 3 million rubles, which corresponds to the minimum level according to the Bashneft charter. The net profit of the oil company in 2016 according to IFRS amounted to 52 billion rubles. For 2015, dividends from Bashneft, then controlled by the Federal Property Management Agency, amounted to about 30 billion rubles. (RUB 164 per preferred and ordinary share).
Despite the decision of the board of directors, Bashneft assures that payments will still be made in full. Thus, at the end of 2017, “the issue of paying dividends on ordinary and preferred shares will be considered, taking into account retained earnings from previous years and dividends based on the results of the nine months of 2017.” Bashneft’s decision was supported in Bashkiria (the region owns 25% of the authorized capital). “It is expected that total payments for the tax component, charity and dividends will remain at last year’s level,” notes the press service of the government of the republic. But the oil company's minority shareholders may be dissatisfied with Bashneft's decision. “Overall we believe this is poor corporate governance practice. A sharp change in approaches requires appropriate justification, including in terms of the planned return on capital on profits directed to investments instead of dividends,” Alexander Shevchuk, head of the Association of Professional Investors (protects the interests of minority shareholders), told Kommersant.
Dmitry Kozlov
How the takeover of Bashneft took place
KIT Finance analysts called Bashneft a “wallet” for Rosneft and the authorities of Bashkortostan. According to experts, large shareholders are pumping money out of the company through dividends. Growth is expected from the shares, reports the portal investfunds.ru.
The estimated dividend yield of Bashneft preferred shares is one of the highest not only in the oil and gas sector, but also in the entire Russian stock market. Analysts are confident of this, recommending buying these securities if they fall to around 1,800 rubles per share or below. Experts believe that in this case, investors will be able to get a 19% return. KIT Finance does not rule out that dividend payments for 2018 will again amount to 50% of net profit under IFRS. This already happened in 2017. If the dividend forecast is realized, the company's shares may rise in price to 2,200 rubles. during the first half of the year.
Bashneft remains the de facto “wallet” for Rosneft, which owns the company. Bashneft plays a similar role for the budget of the Republic of Bashkortostan, where the business is registered, experts say. Let us recall that in January 2019, through dividends and loans, “” already took two-thirds of the amount spent on the purchase of a controlling stake in Bashneft.
The joint-stock oil company Bashneft was formed on the basis of the largest enterprises of the fuel and energy complex of Bashkortostan. The company included factories specializing in oil production and refining, production and sale of petroleum products and petrochemical products. Currently, Bashneft has more than 180 fields in commercial operation.
According to the dividend policy, Bashneft must pay dividends based on 25% of net profit under IFRS. In fact, after the transfer of a controlling stake to Rosneft, it pays 50% of the profit with reservations. Dividends for 2016 were carried forward and paid formally as interim dividends for the nine months of 2017. However, the amount paid corresponds to 50% of net profit under IFRS for 2016.
The amount allocated for payments for 2017 is close to 50% of the total net profit for 2017, adjusted by 100 billion rubles received as a result of the won lawsuit with AFK Sistema. If dividend payments for 2018 again amount to 50% of net profit under IFRS, dividends per share will amount to 280 rubles, as calculated by Kit Finance. Analysts estimated the dividend yield on Bashneft preferred shares at 15.2%.
Sooner or later, the 100 billion rubles received by Bashneft in 2017 from AFK Sistema may be distributed in the form of dividends, which will double the payment to shareholders. However, the likelihood of such a development is not high, experts say. “Unlike Surgutneftegaz, Bashneft’s dividends are not supported by the charter, and the dividend policy does not provide for 50% payments. Payment of a smaller share of net profit is the main risk for owners of company shares,” KIT Finance pointed out.
The company's financial results under IFRS for the third quarter of 2018 were strong. Bashneft's net profit increased over the nine months by more than 1.7 times compared to last year, to 74.6 billion rubles, and revenue increased by 35%, to 643 billion rubles. The company will publish results for the fourth quarter and the entire year 2018 on March 18, 2019.
PJSC JSOC Bashneft is a large oil producing company whose shares have been bringing stable income to its owners in the form of dividends for many years. Based on the results of 2016, the company will most likely postpone the payment of dividends to the end of 2017. This is due to an increase in capital expenditures for repair work at the company's refineries.
PJSOC Bashneft is a large systemically important company for the development, production and refining of oil. According to Forbes magazine, the company has been among the world's top ten most profitable companies for shareholders for several years.
In 2016, the Russian government initiated a deal to sell a controlling stake in Bashneft to Rosneft PJSC. The deal had a wide public response and influenced the growth of the company's share price. The significance of the event can be assessed by watching this video:
The company's capital is represented by ordinary and preferred shares of type "A". Composition of shareholders of PJSOC Bashneft: PJSC NK Rosneft (50.08%), Republic of Bashkortostan (25%), minority shareholders (24.92%).
Bashneft: dividends in 2017, who makes the decision?
The Charter of PJSOC Bashneft gives the right to make a decision on the payment of income on shares to the General Meeting of Shareholders. The draft resolution is presented to the meeting by the Board of Directors. The decision of the company's Board of Directors contains recommendations on the amount, procedure and timing of dividend payments, and the closing date (cut-off) of the register of shareholders entitled to receive dividends. Interim income can be paid based on the results of the first quarter, half a year or nine months. Dividends are paid from the net profit received by the company after taxes.
PJSOC Bashneft
Dividend history of PJSOC Bashneft
Chart 1. Amount of dividends of the Joint Stock Oil Company for the period 2012 – 2015. Source: official website of PJSOC Bashneft
Payment of dividends in 2017
Based on the results of 2016, the board of directors decided to recommend to the General Meeting of Shareholders (date: 06/30/2017):
- not to declare dividends on ordinary shares;
- payment on preferred shares will be limited to a total amount of 3 million rubles. (RUB 0.10 per share);
- The closing of the register of shareholders (dividend cut-off) is scheduled for 07/12/2017;
- establish a payment schedule for preferred shares from July 12, 2017 to August 14, 2017;
- consider the issue of recommendations for the payment of dividends on shares at the end of 2017, taking into account retained earnings of previous years and based on the results of work for 9 months of 2017 after the board of directors approves the financial statements for the 1st - 3rd quarter. 2017
The decision to postpone the payment of dividends is due to an increase in the company's costs to improve safety and carry out major repairs at oil refineries at the request of Rostechnadzor.
How to receive dividends?
Information about dividends is published on the company's official website. Payments are made according to a schedule by the company itself or on its instructions by the registrar maintaining the register of shareholders of the company. Funds are transferred by bank transfer to the accounts specified by shareholders. The payment amount is calculated based on the type and number of shares owned by one shareholder. The register of Bashneft shareholders is maintained by Reestr-RN LLC.
For information: before the acquisition of a controlling stake in Bashneft by PJSC NK Rosneft in 2016, the register of shareholders was maintained by JSC Reestr.
How to become a shareholder of PJSOC Bashneft?
- Where to buy shares: PJSC Moscow Exchange MICEX - RTS.
- Security code: BANE.
- How to buy: open a brokerage account with a broker (FINAM, BKS broker, ATON, Uralsib).
Financial performance indicators of PJSOC Bashneft
Compared to the previous reporting period, the company's assets increased by 12%, capital by 8%, and revenue and net profit decreased by 2.8% and 12.7%, respectively.
Table 2. Main financial indicators of PJSOC Bashneft according to IFRS (2014 – 2016).
Higher education. Orenburg State University (specialization: economics and management of heavy engineering enterprises).
July 16, 2017.
