Mechel not promising dividends to subsidiaries' shareholders, wants to invest profit
MOSCOW. July 3 (Interfax) - Mechel , a Russian coal and steel group, is not promising dividends to the shareholders of its subsidiaries Beloretsk Metallurgical Plant (BMK) , Southern Kuzbass Coal Company and Korshunov Mining Plant in the next few years, because profits will be used to finance the investment programs of these companies.
"We believe that Korshunov Mining and Southern Kuzbass currently require fairly substantial investment. I think that in the near future we will probably invest the profit of these companies, foremost in developing and restoring the volume of mining at these enterprises," Mechel CEO Oleg Korzhov said at the company's annual general meeting when asked about dividends by minority shareholders.
He said production at Southern Kuzbass and Korshunov Mining has fallen due to underinvestment in machinery and stripping operations. In order to restore production at Southern Kuzbass, the company plans to hire a contractor to transport coal on an outsourcing basis, using their own machinery.
BMK, in turn, has fairly obsolete technology for production of metalware, while Mechel competitors such as Severstal are investing heavily in this business. Due to the need to modernize the plant, there are also no plans to pay dividends on BMK common shareholders, Korzhov said.