SIBUR reports Q1 2020 IFRS results

Moscow, 14 May 2020. PJSC SIBUR Holding, an integrated petrochemicals company, today
publishes its operational and financial results for the first quarter of 2020 in accordance with
International Financial Reporting Standards (IFRS).

Operational and financial highlights for Q1 2020:

• Processing of associated petroleum gas (APG) increased by 2.7% 1 (1) year-on-year.
• ZapSib: Start-up and commissioning works were completed at the key production
  facilities. As a result, in the first quarter of 2020 ZapSib produced 115 thousand tonnes
  of polypropylene and 259 thousand tonnes of polyethylene, part of which is en route to
  clients and, was not reflected in the sales volumes for the reporting period. Sales of
  polypropylene and polyethylene grew by 87.3% and more than 100% year-on-year,
  respectively.
• In January 2020, the Company completed the construction of its new thermoplastic
  elastomers production facility in Voronezh and launched trial production.
• Revenue decreased by 7.8% year-on-year due to negative pricing dynamic in rouble
  terms in the Midstream and the Plastics, Elastomers & Intermediates segments. This
  was partially offset by revenue growth of 30.4% year-on-year in the Olefins &
  Polyolefins segment, driven by higher sales of polypropylene and polyethylene.
• EBITDA decreased by 15.2% year-on-year as a result of lower margins for most product
  groups due to negative pricing dynamics. In the Olefins & Polyolefins segment, this was
  offset by higher sales of polypropylene and polyethylene from ZapSib.
• The EBITDA margin was 31.0%, remaining consistently high against the industry
  average.
• Net operating cash flow was flat year-on-year and amounted to RUB 23 billion due to
  lower profit tax expense as a result of the financial loss recorded for the period, which
  was driven by the non-cash negative impact of FX revaluation following the decline in
  the rouble exchange rate.

Dmitry Konov, Chairman of the Management Board of SIBUR Holding, said: “In terms of the external factors beyond our control, the beginning of the year delivered a perfect storm for us – the unprecedented pandemic paralysed the operations of entire industries around the world, constraining global economic growth. Hardly anyone was able to predict the scale of its impact, and even now it is impossible to fully assess the extent and length of the COVID-19 effect. We have been steadily transforming SIBUR into a company with a balanced business model capable of resisting volatility and pressure on the markets, while remaining highly flexible. In these challenging times, we can rely upon our unique expertise, balanced product mix – which is in demand by various industries across the world – high margins, solid financial discipline, competent strategy and risk management. The recently completed large-scale investment project – ZapSib – is already helping us offset negative effects of low hydrocarbon prices by boosting internal consumption of feedstock materials and higher production of polymers. In the first quarter, the project made its first contribution to the EBITDA of the Olefins & Polyolefins segment, supporting stable operating performance in the reporting period despite the negative pricing environment. EBITDA margin remained high, thus providing a greater degree of resilience, which is necessary for the further growth of the Company and the Russian petrochemical industry as a whole, amid continued market volatility. To reduce the external impact on our results, we have launched a large-scale cost optimisation programme and prioritised specific CAPEX projects. We reduced our overall CAPEX programme for this year by optimising projects at early stages and by implementing lean payment schedules. We strengthened our liquidity position through prudent debt management and accumulated a liquidity cushion to support seamless operation throughout 2020. While certain industries among our end consumers have been under pressure from the recent extraordinary events, demand from the healthcare and food industries has significantly increased and is expected to maintain at the new higher level in the foreseeable future. We increased sales of polypropylene for production of protective medical products, continued preparation works to launch the new production of synthetic nitrile butadiene latex for production of medical gloves, and developed new grades of polyethylene for production of medical packaging.Our current objective is to ensure the safety of all of our employees and our operational continuity while maintaining focus on our long-term goals, in order to continue the Company’s growth.”
Operating results
In Q1 2020, SIBUR’s gas processing plants (GPPs) processed 5.7 billion cubic metres (1) of associated petroleum gas (APG), an increase of 2.7% year-on-year. As a result, natural gas output totalled 5 billion cubic metres (1) , up 2.7% year-on-year. Raw NGL fractionation volumes increased by 2.9% year-on-year and amounted to 2 million tonnes (2) . LPG sales decreased by 29.9% to 1 million tonnes due to higher internal use for ZapSib operations. Sales of naphtha were flat year-on-year and amounted to 298 thousand tonnes. Following the completion of key start-up and commissioning works at ZapSib, sales of polypropylene grew 87.3% to 243 thousand tonnes. Polyethylene sales increased by more than 100% year-on-year to 132 thousand tonnes. Sales of plastics and organic synthesis products grew by 5.6% year-on-year to 200 thousand tonnes, primarily supported by sales of DOTP following the launch of production in 2019. Sales of elastomers declined by 21.4% to 107 thousand tonnes as a result of the sale of Togliatti-based assets in November 2019.

Financial results
In Q1 2020, revenue decreased by 7.8% year-on-year to RUB 120.7 billion, with the following
dynamics across business segments:

• Olefins & Polyolefins revenue increased by 30.4% to RUB 30.9 billion. This growth was
  largely attributable to higher sales of polypropylene and polyethylene from ZapSib,
  partially offset by lower prices for these products.


• Plastics, Elastomers & Intermediates revenue decreased by 19.5% to RUB 30.8 billion,
  mainly due to the negative dynamics of rouble-denominated prices for most products
  and lower sales volumes of elastomers and MTBE due to the sale of Togliatti-based
  assets. This decline was partly offset by stronger sales of DOTP following the launch of
  the new production facility in 2019.


• Midstream revenue decreased by 22.8% to RUB 45.7 billion on the back of higher
  internal consumption of LPG by ZapSib and negative price dynamics for LPG and
  naphtha.

EBITDA decreased by 15.2% year-on-year and amounted to RUB 37.4 billion on the back of lower spreads for most product groups due to negative pricing environment. In the Olefins Polyolefins segment, this impact was partly offset by higher polypropylene and polyethylene sales from ZapSib. The EBITDA margin was 31%. The net loss was RUB 52.3 billion driven by the negative RUB 84.5 billion impact from FX revaluation (mostly USD- and EUR-denominated loans). Excluding the non-cash FX impact, adjusted net profit for the period amounted to RUB 32.2 billion. SIBUR’s debt and repayment schedule remain at comfortable levels. The majority of the Company’s debt relates to the ZapSib project, the operational results of which have not yet been fully reflected in the P&L. However, once the project reaches its full production capacity, SIBUR’s leverage will start to improve.

Borrowings
As of 31 March 2020, total debt amounted to RUB 493.3 billion, an increase of 29.9% from 31 December 2019. The increase was driven by rouble depreciation against the US dollar and euro, as well as drawdown of credit facilities for ZapSib funding.
Net debt 4 (5) as of 31 March 2020 increased by 23.4% compared to 31 December 2019 and amounted to RUB 447.2 billion The net debt (5) to EBITDA ratio amounted to 2.7х as of 31 March 2020, compared to 2.1x as of 31 December 2019.

The full version of the Consolidated Unaudited Interim Financial Information as of and for the three months ended 31 March 2020 in accordance with IFRS is available on our website at http://investors.sibur.com/results-centre/financial-results.aspx?sc_lang=en.

(1) Excluding third-party volumes processed at SIBUR’s capacities
(2) Including volumes processed at third-party capacities and excluding third-party volumes processed at SIBUR’s capacities.
(3) EBITDA adjusted for the contribution of joint ventures and associates
(4) Includes purchase of property, plant and equipment, intangible assets and other non-current assets
(5) Net debt is calculated as total debt (starting from 1 January 2019 including lease obligations) excluding cash and cash
equivalents