Financial Struggles Mount as Russian Firms Halt Dividends Amid Economic Strain

The boards of directors from at least 24 publicly traded Russian firms have recommended against distributing dividends from their 2024 earnings to shareholders this spring, as the impact of high interest rates, declining revenues, and sanctions becomes increasingly apparent, according to a report from the Vedomosti business daily on Monday.

Data from the state statistics agency Rosstat indicates that Russian companies amassed total revenues of 30.4 trillion rubles ($381.1 billion) in 2024, marking a 6.9% decline from the previous year, 2023.

When adjusted for inflation, which was recorded at 9.4%, the actual earnings experienced a drop of approximately 15%.

The overall financial results for profitable companies remained relatively stable at 37.6 trillion rubles ($471.5 billion), showing a slight decrease of 0.8%. In contrast, losses for various firms surged, rising 37.7% to reach 7.2 trillion rubles ($90.2 billion).

Among those opting not to issue dividends are major players in the mining and energy sectors, such as Gazprom, Norilsk Nickel, NLMK, and Severstal, which have decided against dividend payouts for both the fourth quarter of 2024 and the first quarter of 2025. Other companies taking similar measures include En+ Group, Rusal, and Rosseti.

Several of these firms are grappling with financial challenges. Gazprom’s decline in export earnings has led to negative cash flow, while NLMK has reported financial losses for the year.

Challenges are affecting various sectors, encompassing retail, real estate, agriculture, logistics, machinery, and healthcare.

Among the companies withholding dividends from their shareholders are Magnit, Lenta, M.Video, United Wagon Company, CIAN, PIK, Samolyot, Promomed, Rusagro, Artgen, Sovcomflot, Globaltruck, Nizhnekamskshina, and Yakovlev Aircraft Corporation.

Market analysts predict that this list may grow, with potential dividend suspensions expected at RusHydro, Alrosa, Aeroflot, and the retailer Vse Instrumenty.

Vladimir Chernov, an analyst at Freedom Finance Global, informed Vedomosti that the reduced income for Gazprom, NLMK, Norilsk Nickel, Rusagro, and Sovcomflot is primarily due to declining export revenues and the ramifications of sanctions.

Igor Danilenko, investment director at Renaissance Capital, indicated that the widespread suspension of dividends is tied not only to worsening market conditions but also to soaring borrowing costs.

With interest rates surpassing 21%, retaining liquidity and directing profits toward fundamental operational needs seems to be a sensible choice, he added.

Export-driven companies are also facing the ramifications of a robust ruble. Yaroslav Kabakov, strategy director at Finam, highlighted that a stronger ruble diminishes revenues for metallurgical firms, oil producers, fertilizer makers, and agricultural businesses.