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President of Russia Vladimir Putin: Mr Andreyev, I have a few regular questions regarding the current state of the company, the situation on the world markets, your social projects (I know that your company does a lot of work in that area) and the relationship with your shareholders, including the representatives of Yakutia.
ALROSA CEO Fedor Andreyev: Mr President, I have prepared some materials that I could use during our meeting. As you may remember from my report on ALROSA’s performance in 2012, the company has reached record levels both in production and revenues: we produced 34 million carats, and our revenue reached $4.5 billion, making us the undisputed leader in the diamond industry, ahead of our main competitors De Beers, Rio Tinto and BHP.
2012 was a crucial year for us, and in 2013 we will consolidate the achievements of that period. We have succeeded, and in 2012 we maintained company’s leadership in terms of production and revenues. You can see the company’s achievements: our revenues have reached 150 billion rubles [about $4.8 billion], and net profit exceeded $1 billion.
As regards profitability, I know that there is a big debate going on right now as to which form of ownership is more effective, private or state. I can only assert that the company’s performance depends on the quality of management, corporate governance and market situation more than on the form of ownership.
For example, the company’s operating margin in 2012 was 18%, and the net income margin rate was 27.
Since ALROSA is a public company and 9% of its shares are traded on the open market, the company’s dividend policy has always been an important issue for the state, which is a majority shareholder, and for investors. In 2011, the company paid 7.4 billion [rubles] in dividends to the Russian Federation and the Republic of Yakutia, and in 2012 the figure was 8 billion.
We believe the Government decision that the company should pay out 25% of its net profits in dividends is of fundamental importance for the ALROSA’s positioning in the international and Russian financial markets.
Thus, the company’s dividend yield for 2012 was 3.7%, which corresponds to the level of return on equity of companies such as BHP Billiton, Rio Tinto and Anglo American.
I would also like to inform you about that debate on privatisation that has been going on for the past two years. We have considered this issue in three dimensions, so to speak, discussing a package of privatised shares and the platform on which to carry out the company’s privatisation, and also considered various privatisation options. The options we considered were to place shares on the London Stock Exchange, to place them on the Russian stock exchange, and we also considered the convertible bonds option – let’s say, a complete list of financial instruments, and the discussion was quite heated at times.
After the meeting on the development of financial markets which you held on January 25, 2013, we have narrowed the discussion down, and on March 30 the Government issued a directive on the privatisation of 7% stake in ALROSA. Goldman Sachs was chosen as the agent bank. A similar decision has already been made by the Legislative Assembly of Yakutia and the head of Yakutia, and currently we have approached the implementation of those decisions.