Ferrexpo concerned about uncertainty regarding dividends, Poltava Mining litigation

MOSCOW. March 21 (Interfax) - Ferrexpo, a producer of iron ore pellets with operations in Ukraine, does not plan to pay additional dividends for 2022, despite having available distributable reserves, Ukrainian media reported, citing the group's financial statement for last year.

"Considering the continued unpredictable situation in Ukraine, no further dividends are proposed for the financial year 2022 as at the date of the approval of these consolidated financial statements," Ferrexpo said in its financial statement, adding that its total available distributable reserves stood at $118.624 million as of December 31, 2022, compared to $170.800 million a year earlier.

Dividends paid in the 2022 calendar year fell 75% to 26.4 cents per share from 105.6 cents in 2021.

"Future distributable reserves at the Ferrexpo plc level are also dependent on the payment of dividends by the subsidiaries to the respective parent companies within the Group and certain Group companies are currently restricted from paying dividends outside of Ukraine as a result of Ukrainian currency control measures...," the statement said.

The recorded impairment loss as of December 31, 2022 and uncertainties related to the conflict in Ukraine, the political environment and the independence of the legal system and other circumstances facing the group "could have a negative impact on the potential for future dividend payments," the company warned.

Ferrexpo is also concerning about the ongoing litigation with the former shareholders of its main operating subsidiary in Ukraine, Poltava Mining, in which the claimants are seeking to invalidate a 2002 sale and purchase agreement relating to the acquisition of a 40.19% stake.

In the course of the legal dispute, all old claims were completely dismissed in 2015 by the High Commercial Court of Ukraine, but in January 2021 Ferrexpo AG was hit by new claims from four companies. The Kiev commercial court ruled in favor of Ferrexpo, but an appeals court ruled the contract invalid.

The shares in Poltava Mining claimed by the claimants, which in 2002 amounted to 40.19%, now represent 8.5% of Poltava Mining's share capital, "taking into account the dilutive effect from the numerous share capital increases made by" Ferrexpo since 2002, the statement said.

The litigation continues. A negative decision "would result in the loss of a significant proportion of the Group's main operating subsidiary in Ukraine and have a material adverse impact on the shareholders'equity attributable to the shareholders of Ferrexpo plc," the company said.

A negative decision could also have an impact on potential future dividends from Poltava Mining to Ferrexpo AG and, as result, on the distributable reserves of Ferrexpo plc, the statement said.

Ferrexpo also said it hopes that the freeze on Poltava Mining's accounts in a case regarding nonpayment of royalties for iron ore mining in 2018-2021 will be lifted completely in March.