Central Iron Ore approves 96% dividend payout

Central Iron Ore (CGOK UK) shareholders, at an AGM yesterday, voted to pay out 96% of net income from 2011 as dividends (DPS of USD 0.27/share, dividend yield of 26%, as of yesterday’s closing price), in line with our expectations. The ex-dividend date is set for today. Shareholders OKed a significant deals item; shareholders that voted against this item received a put option to sell their shares back the company at USD 1.02/share (according to our estimates). Shareholders also approved 2011 financial statements: revenue rose by 44% yoy to USD 805 mln, EBITDA grew 66% yoy to USD 498 mln (EBITDA margin of 62%), and net income increased 101% yoy to USD 325 mln.

Roman Topolyuk: By setting its ex-dividend date one day after its AGM, the company will allow minority shareholders to receive dividends and execute their put option, providing an incentive for minority shareholders to exit their positions. The reported financials were somewhat stronger than we expected: revenue by 2% and EBITDA by 5%. Though we expect a decline in financial performance in 2012 due to falling price (the average price of iron ore products is already down 8-15% YTD from the average price in 2011), the company will maintain strong profitability (EBITDA margin of more than 50%).