UPDATE 2-Sistema plans to raise dividends while pursuing deals

Wed Nov 21, 2012 9:04am EST

* To recommend "substantially higher" dividends

* Eyes deals in transport, farming, chemicals, energy

* Q3 net profit rises 67 pct to $532 mln

By Anastasia Teterevleva

MOSCOW, Nov 21 (Reuters) - Russian oil-to-telecoms conglomerate Sistema plans to raise dividend payments even as it expands into new business lines, company managers said on Wednesday.

Sistema, whose biggest assets are MTS - Russia's top mobile phone operator - and mid-sized oil producer Bashneft , is making acquisitions to further diversify its portfolio.

It recently bought railway freight operator SG-Trans for $730 million, unveiled plans to acquire European petroleum product firm Argos and secured regulatory permission to take over Russian drugmaker Veropharm.

In a third-quarter results presentation, Sistema said management would ask the board to recommend "substantially higher" dividends for 2012, a week after its MTS unit pledged to raise its pay-outs by 25 percent.

"We are acting on the premise that investors want us ... to share not only future value but also our current cashflow with them," Mikhail Shamolin, Sistema's chief executive officer, told reporters.

However, the higher pay-out, which could be discussed in mid-December, was unlikely to be on a par with that of MTS, he said.

Last year, Sistema's dividend stood at 2.7 billion roubles ($86.26 million), or 0.28 rouble per share. Its locally traded shares were up 0.95 percent at 23.5 roubles on Wednesday, slightly outperforming the broad market

It received dividends worth $466 million from MTS for the third quarter of 2012, including $377 million from Bashneft and $42 million from oil firm Russneft in which it owns a 49 percent stake.

Sistema's third-quarter net profit rose 67 percent year-on-year to $532.2 million, driven by strong earnings at MTS and Bashneft, and would have doubled to $653.2 million excluding an impairment charge related to an Indian unit.

Revenues rose 1 percent to $8.8 billion, held back by a weaker rouble - its main operating currency - against the dollar, while underlying sales in roubles were up 11.3 percent.

Adjusted operating income before depreciation and amortisation (OIBDA) increased by 10.4 percent to $2.4 billion for a 27.6 percent margin.

Sistema also has a presence in agriculture, high technology, retail, banking, aerospace, media and healthcare.

Shamolin did not rule out that Sistema could go ahead with a placement of additional shares to finance acquisitions and consider a new share buy-back pending merger plans.

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