Norilsk Nickel shares have upside potential


The Krasnoyarsk court ruled to recover from Norilsk Nickel a record-breaking fine in modern history in the amount of 146 billion rubles for an emergency in Norilsk in May 2020. It follows from the IFRS reporting that in order to pay off the state, Norilsk Nickel will have to give almost half of all the money that the company has in its accounts.

How will this affect the activities of Norilsk Nickel, the price of its shares and the amount of dividends? Nikolay Dudchenko, an independent financial analyst, answered a question from Fortrader magazine.

– The news about the collection of a fine of 146 billion rubles from MMC Norilsk Nickel should have a limited negative impact on the shares. There are two main reasons:

  1. This news has already been incorporated into the stock price. After all, initially, after the accident at CHPP-3 in Norilsk, it was a question of a claim for 148 billion. This means that the shareholders were notified in advance of this outcome of events.
  2. The company pre-created a provision of $ 2.1 billion.

In addition, one should also remember about a number of other features of the case, namely, the possibility of the company appealing against the court decision (very unlikely) and the possibility of additional claims against the company, which the Krasnoyarsk Governor has already announced (high probability). Both can affect capitalization. Nevertheless, analysts do not see any reason for Norilsk Nickel to completely abandon dividend payments, although they do not exclude a slight decrease in their size.

Fundamentally, the company continues to demonstrate strong financial results. Norilsk Nickel’s revenue for the first half of 2020 slightly decreased compared to the previous reporting period (down 0.9%). The creation of the reserve led to a significant increase in OPEX and to the fact that the net profit for 6 months of 2020 was negative. However, the financial results for the second half of the year may offset this. As we can see from the behavior of market participants, the event related to the accident at the CHP plant is perceived now, rather, as force majeure, i.e. globally for now is simply ignored.

Nornickel shares today
Nornickel shares today

From a technical point of view, traders seem to be aiming at the level of 30,000 rubles. per share of Norilsk Nickel. For the time being, I would regard this scenario as highly probable.

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