Evraz Shares Fall After Dividend Announcement

Shares in Evraz Group fell Wednesday after the company said stockholders could receive part of their interim dividend in discounted shares to enable the steelmaker to preserve cash.

London-listed Global Depositary Receipts were off 6.4 percent at $10.2 after having fallen as much as 18.9 percent as analysts voiced concerns about Evraz's cash flow.

The new shares will be issued at $22.50 each, or $7.50 per GDR, about 31.2 percent below the Tuesday close.

Michael Kavanagh, a metals and mining analyst at UralSib, calculated that if all investors accepted the shares, the total number of GDRs could increase by 10 percent.

"On one hand, the part shares offer, saving $276 million in cash, could imply that cash is in short supply and raise some concerns," Kavanagh said.

"On the other, the fact that the company is paying a $750 million cash dividend in this environment is a very positive sign regarding the health of the balance sheet and cash position of the company."

The original first half dividend, announced Aug. 26, proposed a cash payout of $8.25 per share or $2.25 per GDR.

Under the new proposal, shareholders will still receive $6 per share or $2 per GDR in cash by Thursday with the remaining $2.25 per share or 75 cents per GDR available in the new shares.

"The board believes that the proposal offers shareholders an attractive partial scrip dividend alternative," Evraz said in a statement. "Any resultant cash saving will further strengthen the company's financial position."