Nornickel may not sell all output if coronavirus crisis drags

Image courtesy of Norilsk Nickel 

Russian nickel and palladium producer Norilsk Nickel (Nornickel) may find it hard to sell all of its output, as it normally can, if the coronavirus crisis persists, the company’s largest shareholder and president told a daily newspaper.

The spread of the coronavirus has halted production among many consumers of the metals, including makers of electric and other vehicles, Vladimir Potanin told Komsomolskaya Pravda.

“If the quarantine drags on, it may not even be possible to sell all the goods we produce,” he said in the interview published on Friday, although he did not give any specific timeline.

The spread of the coronavirus has halted production among many consumers of the metals, including makers of electric and other vehicles

The company, the world’s largest producer of palladium and one of the top nickel producers, conducted stress tests to see how the firm would cope if prices of the metals fell 10%-30% and if 10%-20% of output was unsold, he said.

Potanin said the tests showed no significant risks to the company in 2020-2021, although he said it could impact dividends.

Potanin, who owns a 34.6% stake of the firm, has had several rows in the past about Nornickel’s dividend payments with Rusal , which holds 27.8% of Nornickel.

Rusal, the world’s largest aluminium producer outside China, relies on Nornickel’s dividend payments in tough years. Rusal posted an adjusted net loss here for 2019 and warned that the coronavirus could hit global demand for aluminium.

“I have always been in favour of directing part of the profit not to dividends, but to Norilsk Nickel’s investment programme,” Potanin said, adding it was better to build reserves than “irritate people with high dividends” in a crisis.

He previously proposed that Nornickel’s major shareholders consider postponing the dividend payment until the coronavirus situation was resolved but he did not win Rusal’s support.

Rusal declined to comment when asked by Reuters.

Potanin said that, based on a shareholder agreement, there was a minimum dividend the firm was obliged to pay and “we will pay them.” Nornickel’s dividend payments depend on its net debt to EBITDA ratio.

Nornickel president said the company was secure with its level of liquidity and available credit lines until 2023.

(By Polina Devitt and Anastasia Lyrchikova; Editing by Edmund Blair)

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