Dvorkovich doesn't expect RZD problems with RAS balance sheet if dividends paid to IFRS
MOSCOW. April 26 (Interfax) - Deputy Prime Minister Arkady Dvorkovich said he does not expect problems with Russian Railways' (RZD) balance sheet to Russian Accounting Standards if the company pays dividends based on its financial statement to International Financial Reporting Standards.
"[Everything] depends on the policy of provisioning for the obligations that the state has to RZD. There is the subject of various social benefits that RZD carries out but does not get full payment from the state. Provisions are now being created for these obligations and this has the most influence on the total estimate of profit to IFRS. Definitely no holes will arise [in the budget to RAS]," Dvorkovich said in an interview with Interfax.
At a meeting with First Deputy Prime Minister Igor Shuvalov last December, it was decided that state companies should pay out dividends equivalent to at least 25% of net profit to RAS or IFRS, whichever was greater. Following an audit of the specific company, including investment program, debt level and ability to service debt, the final dividend figure could be higher. The Finance Ministry, however, insisted on extending the payout ratio of 50% that was in effect in 2016, though far from all companies met this threshold.
This level of dividends is factored into the federal budget, and in a letter written in mid-March for a meeting with Shuvalov, the Federal Property Agency also recommends that companies in which the government holds a stake pay out dividends equivalent to at least 50% of profit, before income from revaluation of financial investments.
Officials want to apply the standard of a 50% payout ratio to as many state companies as possible, but there will not be a firm rule for all without exception, Shuvalov said in April.
"We are now working out approaches. There are currently proposals that we should take 50% from as many as possible. And there, where this can't be done, there should be compelling reasons and it should be a complicated procedure for making such a decision," Shuvalov said.
"For dividends, we have not yet made a general decision. We're guiding companies to the fact that maximum dividends should be paid. This is good for investors and for actually demonstrating some investment appeal, so that they buy these shares. And in general, we believe that now is a time when it's possible to pay dividends of up to 50%. For some companies, on the contrary, from 50% and lower," Shuvalov said.
A decision on payment of 50% of IFRS profit has already been made for a number of companies, such as shipper Sovcomflot and diamond miner Alrosa , but a 35% payout ratio was approved for Rosneft , like the oil major itself proposed.
Another company whose dividends make up a considerable share of this revenue item, Gazprom wants to keep dividends at 7.89 rubles per share, like for 2015. The 2017 federal budget, however, assumes the gas giant will pay out 18.86 rubles per share, based on the ratio of 50% of IFRS net profit. Based on analysts' preliminary estimates for Gazprom's 2016 results, the proposal of company management amounts to even less than 25% of IFRS profit - to about 20%.
Government officials have still not announced a general decision on dividend payments.
However, the government's economic team has also discussed the dividend base for RZD. The Economic Development Ministry has proposed calculating dividends taking into account the "nonmonetary component of net profit arising due to the specifics of IFRS calculation of capital repairs, depreciation of assets and other similar factors." The ministry drafted changes to regulations specifying the designation of the calculating base for dividends within the context of a government instruction. The ministry said there was "interdepartmental correspondence" with the Finance Ministry "on the issue of calculating the dividend base taking into account RZD's investment projects," but it did not provide details.
RZD president Oleg Belozerov said in January that the company was "waiting for a government decision that should clearly define by what method dividends must be paid," and also proposed linking it to taxation.
"There's a huge difference between IFRS and RAS. We pay taxes according to RAS. Withdrawal of money from turnover [takes place] according to one system, then it turns out that we switch to a different system. If we pay [dividends] according to IFRS, then let's also pay taxes according to IFRS. Mixing different concepts is impossible, this leads to unplanned, incorrect results," Belozerov said.
"The Finance Ministry, as far as we know, prepared new standards. We are also actively engaged in this work right now. We want to assess for ourselves what this will affect. Our financial plan must add up," Belozerov said.
At about that time, information appeared on the government procurements website that RZD planned to commission the development of a concept for group financial planning to IFRS, "taking into account the fullest perimeter of consolidation and principles of generating reporting," as well as the methodology for transforming the financial plan to RAS "on the basis of a unified budget classifier" into IFRS, determining sources of data about actual budget execution.
RZD closed 2015 with a net profit of 8.2 billion rubles to IFRS and 318 million rubles to RAS. However, the company paid dividends based on the RAS figure. For 2016, RZD had a net profit of 6.5 billion rubles to RAS and 10.29 billion rubles to IFRS.