SIBUR IPO talk premature, says CFO

Russian petrochemicals company Sibur is not close to making a decision on whether to go public, despite media reports in the last fortnight to the contrary, its CFO told Global Capital.

Sibur, Russia’s largest petrochemicals firm, reported strong 2018 half-year results on Tuesday, boosting revenue year on year by 21.6% to Rb257.7bn (€3.45bn) and Ebitda by 18.7% to Rb89bn (€1.2bn).

Revenue from sales in the company’s Olefins & Polyolefins segment increased by 13% year on year, and is expected to account for an increasing share of revenue starting from 2020 after the company’s ZapSibNeftekhim facility in Siberia becomes operational.

Given its high profile, Sibur would be one of Russia’s most attractive IPO candidates. Reports in the last two weeks have suggested the company was moving forward with plans to go public. But its chief financial officer Alexander Petrov, who is also a member of Sibur's management board, dismissed talks that any IPO plans were set in stone.

“We normally respond to any questions about an initial public offering by saying that it is better to ask our shareholders, as it is up to them what they decide about the status of the company and the shares they own,” Petrov told GlobalCapital. “What we are doing right now — and this is no different to what we have done in the past — is consider a variety of financing options to develop the company.

“At this stage, it would be premature to talk about specific plans. But we are always considering different options.”

Sibur’s largest shareholder is Leonid Mikhelson, Russia’s richest man, according to Forbes, who owns 48.5% of the company. He is also the major shareholder, chairman and chief executive of gas company Novatek.  Businessman Gennady Timchenko, and Kirill Shamalov, Russian president Vladimir Putin’s former son-in-law, also have stakes in Sibur.

Well capitalised

Sibur’s first-half results were impressive given the global operating environment for Russian companies is far from benign. Russia has been the target of US sanctions already this year and there is talk more could be on the way, despite an apparent rapprochement recently between US president Donald Trump and Putin.

But Petrov says the company was hardly impacted by sanctions.

“The market conditions for us are the oil environment and the exchange rate. We are dependent on the exchange rate as a lot of our sales come from the export market,” said Petrov. “But even here we don’t see the behavioural dynamics of the exchange rate as a consequence of sanctions. We still think the major driver for the exchange rate is oil. Of course, there is one more driver for us — Russia's GDP and the level of GDP growth in Russia.

“It’s difficult to measure how much sanctions contribute to that growth, but there is probably some correlation. GDP growth in Russia remains very important to us because domestic sales are a little bit more attractive. We are able to earn an additional premium by serving local markets, and we pay less in transportation sending products to domestic customers. But this isn’t material for us.”

Sibur is unlikely to hit the IPO pipeline soon. In addition, Petrov says that its good results mean it also doesn’t need to issue any more debt soon.

The company increased its net cash generated from operating activities by 11.6% year on year in the first six months of the year. That cash flow, as well as Sibur’s existing credit facilities, means it is well capitalised enough to continue its investment strategy without the need to raise additional debt.

“We didn’t have any plans to attract additional debt as for the next half of the year we have committed credit lines, which we use as a source of funding for our big projects, particularly the ZapSibNeftekhim polyolefin plant in Siberia,” added Petrov. “This is one of the reasons we did secure debt in advance and don’t therefore need additional fundraising.

“We performed pretty well, better than in previous periods, and generated good operating cash flow, which is a good source of funding as well for us.”

Sibur tapped debt markets in October 2017, issuing a $500m Eurobond maturing in October 2023 at a 4% coupon.