9M 2019 Operational and Financial Results
29 October 2019
DISCLAIMER
The information contained herein pertaining to SIBUR (the "Company") has been provided by the Company solely for use at this presentation. By attending this presentation, or by reading these presentation slides, you agree to be bound by the limitations set out below. This presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall any part of it nor the fact of its distribution form part of, or be relied on in connection with, any contract or investment decision relating thereto.
No representation or warranty, either express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness, correctness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. The Company accepts no responsibility for any losses howsoever arising, directly or indirectly, from this presentation or its contents. The material contained in this presentation is presented solely for information purposes and is not to be construed as providing investment advice. As such, it has no regard to the specific investment objectives, financial situation or particular needs of any recipient. There may be material variances between estimated data set forth in this presentation and actual results, and between the data set forth in this presentation and corresponding data previously published by or on behalf of the Company. This presentation contains forward-looking statements, including (without limitation) statements containing the words "anticipates," "expects," "intends," "may," "plans," “forecasts,” "projects," "will," "would", "targets,“ “believes” and similar words. These statements are based on the current expectations and projections of the Company about future events and are subject to change without notice. All statements, other than statements of historical fact, contained herein are forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, such that future events and actual results may differ materially from those set forth in, contemplated by or underlying such forward-looking statements. The Company may not actually achieve or realize its plans, intentions or expectations. There can be no assurance that the Company's actual results will not differ materially from the expectations set forth in such forward-looking statements. Factors that could cause actual results to differ from such expectations include, but are not limited to, the state of the global economy, the ability of the petrochemical sector to maintain levels of growth and development, risks related to petrochemical prices and regional political and security concerns. The above is not an exhaustive list of the factors that could cause actual results to differ materially from the expectations set forth in such forward-looking statements. The Company and its Affiliates are under no obligation to update the information, opinions or forward-looking statements in this presentation.
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9M 2019 HIGHLIGHTS Key Developments
Key Results
FINANCIALS
Revenue at RUB 395 bln (-5% y-o-y) / $6.1 bln (-10% y-o-y) EBITDA at RUB 126 bln (-16% y-o-y) / $1.9 bln (-21% y-o-y)
RUB bln
Adj. EBITDA at RUB 135 bln (-12% y-o-y) / $2.1 bln (-17% y-o-y)
INVESTMENTS
EBITDA and EBITDA margin (%)
Revenue
RUB bln
(5%) 414
in RUB terms
36% 395
Net Debt / LTM EBITDA
32% (16%)
150
ZapSib: commissioning and start-up works are underway - cracker unit operating in a test mode, first tonnes of PE and PP produced
126
2.1x(1) 1.6x
Amur: preliminary 1.5mt LPG supply agreement signed with Gazprom leading to project capacity uplift from 1.5 mt of PE to 2.7 mt of PE/PP (September) SIBUR entered into a binding contract for the sale of its petrochemical facilities in Togliatti to Tatneft (October)
9M18 +0,4% y-o-y
9M19
9M18
2,767 ths tn
9M19 +0.4% y-o-y
31 Dec'18 30 Sep'19
5,699 ths tn
CORPORATE
(1)
S&P assigned SIBUR BBB- investment grade with stable outlook (August); SIBUR now has IG-rate from 3 major rating agencies Five-year Eurobonds issue of $500 million at a 3.45% coupon rate (September)
Petrochemical products +6,7% y-o-y
Raw NGL fractionation
4,927 ths tn
Midstream products
0.40 LTIF
SIBUR joined UN Global Compact (September) Our net debt increased primarily due to new Eurobond placement in September 2019 and Group’s adoption of IFRS 16 starting 1 January 2019
3
Please follow the link to see the video of the construction site: https://www.sibur.ru/en/press-center/video/
ZAPSIB PROGRESS UPDATE Progress Update
Preparations for the Launch & Distribution
Construction and pre-commissioning works completed at key processing and technological units
Production site panoramic view: cracker unit trial run
Client portfolio was formed on key markets based on preliminary pre-marketing activities in Russia, CIS, Turkey, Europe and Asia Distribution agreement signed with SINOPEC to supply polyethylene to China Logistics upgrade - platform in Tobolsk and Hub in Kaluga region (Karl Schmidt) launched and fully operational
Continued demobilisation of the contractors’ construction staff Commissioning and start-up works at advanced stage:
o
PP produced in a test run from third-party and internal feedstock
o
First PE produced from ethylene of cracker unit
Packaging of first batches of PP produced in a test run
Project Budget and Financing
(1) (2) (3)
Invested as of 30 Sep’19(1): c.$7.7 bln (or RUB 469 bln) Residual budget for 4Q2019-2020 c.$1.2bln(2) Committed credit lines (ECA, NDB)(3) c.$564 mln
Calculated using annual average ₽/$ exchange rates and average exchange rates for the 1H’19 Calculated based on exchange rates ₽/$ at 65.61, ₽/€ at 74.93 ECA stands for Export Credit Agency. NDB stands for New Development Bank. Undrawn or unutilised amounts
4
MACRO ENVIRONMENT Average Oil Price (Brent)(1)
Russian GDP(2)
CPI & PPI(3) 30 Sep’19 / 30 Sep’18 30 Sep’18 / 30 Sep’17
$ / bbl
72.1
(10%) 64.7
14.6% 1.5%
1.2%
3.4%
4.0% (2.4%)
9M18
9M19
9M18
Average Exchange Rate(4)
9M19
EOP Exchange Rate(4)
6% 61.4
65.1
(2%) 65.6
64.4
(8%) 76.2
PPI
Tariffs Indexation
30 Sep’19 31 Dec’18
₽/$
CPI
70.3
Description
Effective Date
Indexation Rate
Regulated natural gas price
Aug 2018 Jul 2019
3.4% 1.4%
Railway transportation tariff
Jan 2019
3.6%
SIBUR effective avg. 9M19/9M18 electricity tariff 9M18 (1) (2) (3) (4)
9M19
₽/$
12.0%
₽/€
Source: Bloomberg Sources: 9M18 - Russian Federal State Statistics Service, 9M19 - Ministry of Economic Development of the Russian Federation (estimate) Source: Russian Federal State Statistics Service Source: Bank of Russia
5
MARKET ENVIRONMENT – MIDSTREAM Oil and FX $
RUB/USD
Midstream Brent
80
Change 9M19 vs. 9M18
$/t
700.0
Naphtha LPG DAF Brest
LPG CIF ARA Natural gas (RHS)
$/000 m3
95.0
600.0
85.0
500.0 +6% (10%)
60
40
75.0
400.0
Comments
9M19 was marked by lower oil prices pressured by increased oil production in US outpacing OPEC+ cuts.
Production in 3Q19 remained flat - 100.5 mln bbl / day; US Permian basin was key contributor to oil production, resulting in LPG volumes surge
At the end of 3Q19, the rise in oil prices was temporarily caused by attacks on Saudi oil facilities in September, the price has then returned to the same levels
Russia and OPEC agree to extend OPEC+ agreement
Q-o-Q production cut in Saudi Arabia, flat in the US, growth in Russia
Source: Argus, FAS, Bloomberg
(19%) (22%)
200.0
65.0 (25%) 55.0
100.0
45.0 (3%)
300.0
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19
Change 9M19 vs. 9M18
35.0 Q1/17Q2/17Q3/17Q4/17Q1/18Q2/18Q3/18Q4/18Q1/19Q2/19Q3/19
Comments – EU & US Hydrocarbons 9M19 LPG and naphtha benchmarks posted a much deeper decline compared to oil mainly driven by higher LPG volumes exported from US as a result of growth in oil and APG production and lower demand for naphtha as a feedstock for chemical producers 3Q19 LPG benchmarks further down as a result of significant growth in exports from the US Naphtha benchmarks down due to the decrease in world oil prices, as well as lower demand (increased competition with LPG)
6
MARKET ENVIRONMENT – PETROCHEMICALS Polypropylene Spread to Naphtha (O&P) $ per tonne
China
Europe*
Change 9M19 vs. 9M18
Polyethylene** Spread to Naphtha (O&P) $ per tonne
China
Change 9M19 vs. 9M18
Europe*
Change 9M19 vs. 9M18
(22%)
400
+1%
600
600
PET-naphtha in China MEG-naphtha in Europe
600
900
900
PET & MEG Spreads to Naphtha (PE&I) $ per tonne
(8%)
(11%)
200 (20%)
300
Comments China: weaker domestic demand due to trade war and depreciation of the RMB relative to the USD. Expectations of local capacity additions put additional pressure on prices. Europe: balanced market with significant US imports partially compensated by unplanned local cracker outages. Russia: more favourable environment in 1H19 resulted from maintenance shutdowns of major Russian producers followed by weaker Q3 pricing dynamics Source: IHS * Spot prices ** PE calculated as average LDPE, LLDPE and HDPE
(66%)
Q3/19
Q2/19
Q1/19
Q4/18
Q3/18
Q2/18
Q1/18
Q4/17
Q3/17
Q2/17
Q1/17
Q3/19
Q2/19
Q1/19
Q4/18
Q3/18
Q2/18
Q1/18
Q4/17
Q3/17
Q2/17
0 Q1/17
Q3/19
Q2/19
Q1/19
Q4/18
Q3/18
Q2/18
Q1/18
Q4/17
Q3/17
Q2/17
Q1/17
300
Comments
Comments
China: markets remained under pressure on elevated geopolitical and US/China trade issues. Weaker demand and slower inventory build-up from converters exacerbated by price decline expectations.
PET: in 1H18, supply shortage due to force majeure of major manufacturers and delay in new capacities launch. Commissioning of delayed capacities, reopening of repaired ones and cheaper feedstock resulted in weaker margins continuing through 9M19. Seasonal demand declining since midAugust.
Europe: economic slowdown and negative customers expectations. European exports were competing to US products Russia: domestic market dynamics were resilient to global benchmarks fluctuations, yet we observed weakening spread during the period
MEG: new capacities in US and China, higher imports from US to EU due to higher duties in China; expectations of additional launches in end-2019 Russia: in line with China PET and European MEG with one-month lag 7
3Q 2019 FINANCIAL SUMMARY(1) Average Oil Price(2)
Revenue
4,935
3Q18
4,442
2Q19
Average LPG
3,997
3Q19
Price(2)
Russian Rubles, bln
RUB / bbl
$ / tn
320
2Q19
3Q19
Petchem index (IPEX)(3) Rebased to 100% in 1Q18 110% 90%
(34%)
(6%)
(5%) 156
135
(5%)
129 61
2Q19
3Q19
3Q18
Revenue USD Equivalents, mln (illustrative)
3Q18
404
CapEx(4)
(17%)
3Q18 581
EBITDA
42
40
35
31
33
2Q19
3Q19
3Q18
2Q19
3Q19
CapEx(4)
EBITDA
(16%) 2,385
6%
(33%)
(5%)
(5%) 2,097
1,999
(5%)
930
6%
529
650
620
2Q19
3Q19
503 476
70%
3Q18 Europe
2Q19
3Q19
3Q18
3Q18
2Q19
3Q19
NEA
World
(1) (2) (3) (4)
Values in USD estimated based on average ₽/$ rate of 64.6, 64.6 and 65.5 in 3Q19, 2Q19 and 3Q18, respectively Source: Argus ICIS composite index, comprising 12 chemical products Includes purchase of PPE, intangible assets and other non-current assets
8
9M 2019 SIBUR FINANCIAL SUMMARY(1)
Russian Rubles, bln
Revenue
EBITDA
CapEx(2)
Net Leverage
(5%) 414
395
9M18
9M19
150
6.7
(16%) 126
9M18
Revenue USD Equivalents, bln (illustrative)
Net Operating Cash Flow
9M19
EBITDA
127
9M18
(5%) 88
105
100
1,6x
9M19
9M18
9M19
31 Dec'18
Net Operating Cash Flow
CapEx(2)
2,1x
30 Sep'19
Net Leverage(3)
(10%) 6.1 (21%) 2.4
9M18
(30%)
9M19
9M18
(34%) 1.9
2.1
9M19
9M18
1.4
1.7
9M19
9M18
(1) Values in USD estimated based on average ₽/$ rate of 65.1 and 61.4 in 9M19 and 9M18, respectively (2) Includes purchase of PPE, intangible assets and other non-current assets (3) Net Debt for the purpose of Net Leverage calculation is converted in USD with respective end-of-period ₽/$ exchange rates
(10%)
1.5
1.4x
9M19
31 Dec'18
2.2x
30 Sep'19
9
ADJUSTED EBITDA DYNAMICS Adjusted EBITDA Dynamics %
Segments %
EBITDA margin
EBITDA margin
9M18 RUB 153.0 bln
Consolidated EBITDA RUB 150.2 bln
Olefins& Polyolefins
9M18 9M19
Plastics, Elastomers& Intermediates
9M18 9M19
Midstream
9M18 9M19
5.6
(10.8)
(12%)
(19.1)
(RUB bln)
RUB 135.0 bln
Consolidated EBITDA RUB 126.2 bln
EBITDA by Segment (RUB bln)
36%
0.4
Unallocated
6.0
Adjustments(1)
29.5 35.1
31% 36%
21% 14%
27.1 16.3 95.3 76.2
45% 40%
9M18 (1.8) 9M19 (1.4) 9M18 9M19
2.9 8.9
32%
9M19 (1) Adjusted for SIBUR’s portion of EBITDA of JVs and associates less NCI share of subsidiaries’ EBITDA.
10
CASH FLOWS HIGHLIGHTS FY 2016 CashFlow FlowReconciliation Reconciliation 9M18 Cash RUB bln
FY 2017 CashFlow FlowReconciliation Reconciliation 9M19 Cash RUB bln
Net CF: (29.3)
147.4
(4.8)
(15.8)
Net CF: (2.9)
(104.9)
125.3
(8.5)
(28.3) (100.2)
(18.2) 48.5
Cash as of 31.12.17
OCF(1)
(27.1)
64.6 (9.8)
3.9
19.2
WC Income CapEx(2) Repay- Divi- Interest Other Cash change tax as of ment dends paid 30.09.18 paid of debt paid
14.8
(41.5) (9.4)
(4.9)
11.9
Cash OCF(1) WC Income CapEx(2)Proceeds Divi- Interest Other Cash as of change tax from dends paid as of 31.12.18 paid debt paid 30.09.19
Key Factors Affecting Cash Flows
OCF before WC changes decreased by 15.0% due to lower EBITDA Negative changes in working capital were primarily attributable to the increase in recoverable VAT balance Higher income tax paid due to:
substantial FX gain recognised in the period and one-off gain following the sale of LPG tank car fleet
utilisation of prepaid taxes in the first quarter of 2018
CapEx in line with approved budget Proceeds from debt as a result of new Eurobond issue in Sep’19 and drawdowns for ZapSib compared to repayment of Eurobonds 2013 in 1Q18
(1) Operating cash flow before working capital changes and income tax paid (2) Includes purchase of property, plant and equipment, intangible assets and other non-current assets.
11
DEBT PROFILE Key Figures RUB bln, except as stated
Overview
30 September 2019
30 June 2019
31 December 2018
30 Sep’19 vs. 30 Jun’19, %
30 Sep’19 vs. 31 Dec’18, %
389.2 115.7
367.6 98.2
332.4 86.6
6% 18%
17% 33%
256.6
251.9
245.8
2%
4%
16.9
17.5
-
(3%)
n/m
11.9
18.9
14.8
(37%)
(20%)
377.3
348.7
317.6
8%
19%
6.2
6.3
7.1
3.6
3.0
3.1
7.5
7.8
8.5
313.7
323.9
391.9
(3%)
(20%)
73.4
90.0
133.8
(18%)
(45%)
Total debt Conventional debt ZapSib related debt
Lease liabilities Cash & cash equivalents Net debt WA loan tenor (years) WA Conventional debt WA ZapSib related debt Available credit lines, incl. Committed
30 September 2019 2.20x
Total debt increased mainly due to:
o o o
New draw-downs for ZapSib funding Adoption of IFRS 16 from 1 January 2019
Placement of a USD 500 million Eurobonds maturing in 2024 at a 3.45% coupon rate
Net debt increased in line with total debt Net leverage increased to 2.1x from 1.6x Accumulated ZapSib investments of $7.7 bln is significantly higher than the overall debt balance of SIBUR
Loan portfolio structure as of 30 Sep’19
Leverage Ratios Debt / EBITDA
30 June 2019
1.86x
31 December 2018 1.65x
ZapSib Debt/Conventional
Debt / EBITDA (in $)
2.24x
1.93x
1.49x
$/€/₽
Net debt / EBITDA
2.13x
1.76x
1.58x
Long-term/Short-term
Conventional net debt ZapSib related net debt Net debt / EBITDA (in $)
0.69x 1.44x 2.17x
0.54x 1.22x 1.83x
0.37x 1.21x 1.43x
Fixed/Floating Unsecured
69%
31%
57%
27% 93%
38%
16% 7%
62% 100%
12
LIQUIDITY AND DEBT MATURITY PROFILE(1) As of 30 September 2019, ₽ bln
325
uncommitted credit lines
240
122 committed credit lines
59 36
73 cash & cash equiv.
12 Liquidity
30
49
22
17
12
11
11
2025
2026
2027
2028
2 4Q2019 Loans
2020
2021
2022
Eurobonds
2023 RUB bonds
2024
ECA
After 2028
NWF
(1) Items denominated in $ and € are converted into ₽ at ₽/$ and ₽/€ FX rates as of 30 September 2019.
13
APPENDIX
14
O&P (OLEFINS & POLYOLEFINS) SEGMENT HIGHLIGHTS Segment Financial Performance RUB bln
36%
31% 75
78
Key Factors
External Revenue EBITDA
35
30
Revenue: +4% EBITDA: +19% 9M18
9M19
$481 mln
$539 mln
Tobolsk PP Results RUB bln
48%
50%
17 14
Decline in PE prices followed negative dynamics of international benchmarks, partially supported by higher domestic prices for PP in the 1H 2019 as a result of temporary PP supply disruptions. EBITDA increase was driven by higher spreads as feedstock purchase price decline was outpacing the decrease in the benchmark and domestic prices for PE and PP.
EBITDA ($): +12%
Revenue(1) Structure 9M19
EBITDA margin EBITDA
Segment revenue increased on higher sales volumes of PP and PE.
Quarterly EBITDA dynamics
Ethylene Other 7 5
BOPP-film
PP
18
10
9
11
12
12
2Q 19
3Q 19
10 8
% 18 9M18
9M19
PE (LDPE)
52 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
(1) Represents external revenue
15
PE&I (PLASTICS, ELASTOMERS & INTERMEDIATES) SEGMENT HIGHLIGHTS Segment Financial Performance RUB bln
21%
External Revenue EBITDA EBITDA margin, %
14%
125
117
27
Revenue: (6%) EBITDA: (40%)
16
9M18
9M19
$441 mln
EBITDA ($): (43%)
$250 mln
Key Factors
Revenue down due to negative pricing dynamics across the segment Plastics and Organic Synthesis volumes up slightly:
o o
Higher MEG sales volumes and DOTP production Lower PET and alcohols sales volumes (due to maintenance shutdowns)
Elastomers revenue up on higher sales volumes EBITDA negatively affected by tighter spreads, as well as purchases of TPA instead of paraxylene during capacity expansion project and increased fixed costs in the reporting period
Revenue(1) Structure 9M19 Intermediates and other chemicals
Quarterly EBITDA dynamics 11
Other sales
9
14 1 MTBE and fuel additives Plastics & Organic Synthesis
% 35
8
7
14 36
6
5
5
1Q 19
2Q 19
3Q 19
Elastomers
1Q 18
2Q 18
3Q 18
4Q 18
(1) Represents external revenue
16
MIDSTREAM SEGMENT HIGHLIGHTS Segment Financial Performance RUB bln
45%
40%
174
76
Revenue: (6%) EBITDA: (20%)
9M18
9M19
$1,551 mln
$1,171 mln
EBITDA ($): (25%)
Price benchmarks on LPG and naphtha were down on:
o o
External Revenue EBITDA EBITDA margin, %
163 95
Key Factors
Higher volumes imported to Europe from US Weaker demand in Europe caused by warmer winter season and logistical constraints
Higher external LPG sales volumes on shift towards higher share of internal naphtha consumption Naphtha sales volumes up as internally produced naphtha was redirected to external sales while purchased naphtha was used at our crackers to take advantage of logistic savings
Revenue(1) Structure 9M19 Naphtha 18
Natural gas
Quarterly EBITDA dynamics 40
Other sales 1
27
32
28
29
28 20
23
% 58
LPG 1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
3Q 19
(1) Represents external revenue
17
OPERATING EXPENSES STRUCTURE AND DYNAMICS OpEx
Key Factors
Lower feedstock and materials costs driven by lower
RUB bln 70%
76%
o o
+3%
299
290
netbacks largely offset by: > volumes of naphtha (40%) and raw NGL (8%) purchased
external purchases of TPA instead of paraxylene during shutdown as part of capacity expansion project in Blagoveshchensk
financial results of 2018
Higher electricity tariffs to compensate for capital
Higher transportation & logistics costs due to transfer of inhouse transportation services outside SIBUR‘s perimeter
9M18 x%
9M19
- % of revenue
Feedstock & Materials 22%
23%
Higher staff costs (continued) o salaries indexation in mid-2018 o upward staff bonuses revision for the positive
Higher staff costs o growth in the headcount of NIPIGAZ as a result of the
expenditures of generating companies under the CDA (Capacity Delivery Agreement) modernization program
Lower purchases of goods for resale driven by lower volumes of MTBE purchases for resale and reduction in NIPIGAZ procurement volumes
expansion of its operations
Transport & Logistics 13%
15%
Staff Costs 8%
9%
Energy and Utilities 7%
8%
Goods for resale 6%
4%
Other 15%
17%
(2%) 91
+9%
+13%
90
+9% 53
9M18
9M19
9M18
+10%
59
9M19
33
36
9M18
9M19
(34%) 24
29
32
9M18
9M19
9M18
60
66
16 9M19
9M18
9M19 18