Financial Presentation 4Q / FY 2019 IFRS Results March 06, 2020 - PowerPoint PPT Presentation

Financial Presentation 4Q / FY 2019 IFRS Results March 06, 2020

Disclaimer No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the Company, or any of its shareholders or subsidiaries or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this presentation. This presentation contains certain forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. PAO TMK does not undertake any responsibility to update these forward-looking statements, whether as a result of new information, future events or otherwise. This presentation contains statistics and other data on PAO TMK’s industry, including market share information, that have been derived from both third party sources and from internal sources. Market statistics and industry data are subject to uncertainty and are not necessarily reflective of market conditions. Market statistics and industry data that are derived from third party sources have not been independently verified by PAO TMK. Market statistics and industry data that have been derived in whole or in part from internal sources have not been verified by third party sources and PAO TMK cannot guarantee that a third party would obtain or generate the same results. 2

4Q / FY 2019 Summary Financial Results and Market Update 3

4Q 2019 vs.3Q 2019 Summary Financial Highlights Sales declined QoQ due to a lower sales at the American Revenue remained almost flat QoQ as the strong performance of division, reflecting an ongoing slowdown in drilling activity in the Russian division fully compensated for a weaker North America and operators focusing on capital discipline performance at the American and European divisions 1,500 1,200 -3% QoQ 0% QoQ US$ mln Thousand tonnes 1,000 900 600 1,102 1,100 500 923 896 300 0 0 3Q2019 4Q2019 3Q2019 4Q2019 Adjusted EBITDA increased QoQ, due to a stronger performance at the Russian division, which fully compensated for a weaker Net profit decreased YoY, mainly due to the impairment of assets performance at the American and European divisions +30% QoQ 200 18% 16% 20 15% EBITDA margin, % 13% 0 150 0 12% US$ mln US$ mln 100 9% 180 -20 (40) 139 6% 50 -40 3% 0 0% -60 3Q2019 4Q2019 3Q2019 4Q2019 Source: TMK data 4

FY 2019 vs. FY 2018 Summary Financial Highlights Revenue declined YoY, mainly due to a decline at the Sales declined YoY, mainly due to lower sales at the American American and European divisions. This was partially offset by and European divisions, which were partially offset by higher revenue at the Russian division, despite the negative stronger sales at the Russian division effect of currency translation -4% YoY -7% YoY 4,000 5,000 Thousand tonnes 4,000 3,000 US$ mln 3,000 5,099 4,767 2,000 3,989 3,828 2,000 1,000 1,000 0 0 12m2018 12m2019 12m2018 12m2019 Net profit increased YoY, due to higher gross profit at the Adjusted EBITDA decreased YoY, due to lower EBITDA at the American and European divisions, which was almost fully offset Russian division as well as FX gain, which fully offset the negative effect from impairment of assets by a stronger performance at the Russian division -2% YoY 600 18% 80 EBITDA margin, % 14% 14% 500 15% 60 400 12% US$ mln 700 688 US$ mln 300 9% 40 66 200 6% 20 100 3% 0 0 0 0% 0 12m2018 12m2019 12m2018 12m2019 Source: TMK data 5

Russian Market Overview Pipe market in Russia Key considerations 12 4Q 2019 vs. 3Q 2019 10  In 4Q, the Russian pipe market declined by 10% compared Non-Energy to the previous quarter, mainly due to weak seasonal 8 demand for industrial pipe, both seamless and welded, and Mln tonnes lower shipments of large diameter pipe. The demand for 6 OCTG pipes was stable following traditionally higher purchasing activity by the oil and gas companies. Energy 4  The share of horizontal drilling increased to nearly 54% in 2 4Q 2019. 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Source: TMK estimates Russian drilling activity remains robust 90 12M 2019 vs. 12M 2018 75  The Russian pipe market declined by 1% year-on-year, due 60 to lower demand for line pipe, which was almost fully compensated by slightly higher demand for industrial pipe 45 km/d and stable demand for OCTG pipe, 30  Demand for OCTG was supported by the increasing 15 complexity of hydrocarbon production projects in Russia and a higher share of horizontal drilling (up to 53% in FY 0 2019 from 48% in FY 2018). 2015 2016 2017 2018 2019 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 Source: CDU TEK 6

4Q 2019 vs. 3Q 2019 Results 7

4Q 2019 vs. 3Q 2019 Sales by Division and Product Group Sales by division  Russian division sales remained almost flat QoQ, as the higher demand for line pipe fully offset weaker sales of 900 0% large diameter and industrial pipe sales Thousand tonnes  American division sales decreased QoQ, mainly due to 600 weak demand, resulting from a slowdown in drilling activity, -27% with the average number of rigs decreasing by 11% 766 763 1% quarter-on-quarter, and operators focusing on capital 300 discipline 116 86 44 44  European division sales remained almost flat QoQ 0 Russia America Europe 3Q2019 4Q2019 Sales by product group  Seamless pipe sales slightly increased QoQ, due to higher 1% 800 seamless line pipe sales and stable OCTG sales at the Russian division, which fully compensated for lower Thousand tonnes seamless pipe sales at the American division 600 -12%  Welded pipe sales declined QoQ, mainly due to lower 400 sales of large diameter pipe at the Russian division 641 635 200  Total OCTG sales declined QoQ, due to lower sales at the 288 255 American division 0 Seamless Welded 3Q2019 4Q2019 Source: TMK data 8

4Q 2019 vs. 3Q 2019 Revenue by Division Revenue Revenue per tonne* 7% 2 000 1 000 -7% 800 -4% 1 500 6% US$/tonne US$ mln 600 1 000 922 864 1 593 400 1 488 -31% 1 203 1 201 1 132 1 155 500 -3% 200 185 53 51 127 0 0 Russia America Europe Russia America Europe 3Q2019 4Q2019 3Q2019 4Q2019 * Revenue /tonne for the Russian and American divisions is calculated as total revenue divided by pipe sales. Revenue for the European division is calculated as total revenue divided by pipe+billets sales   Russian division revenue increased QoQ, supported by stable Russian division revenue per tonne increased QoQ, due to a demand for OCTG, higher demand for line pipe and, as a result, more favourable product mix a better sales mix  American division revenue per tonne was lower QoQ, due to an  Weaker revenue at the American division was mainly a result of unfavorable pricing environment lower OCTG pipe sales and an unfavorable pricing environment  European division revenue per tonne decreased QoQ, due to  European division revenue decreased QoQ, due to the negative the negative effect of currency translation effect of currency translation Source: Consolidated IFRS financial statements, TMK data Note: Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums. 9

4Q 2019 vs. 3Q 2019 Adjusted EBITDA by Division Adjusted EBITDA Adjusted EBITDA margin 47% 25% 200 21% 20% 16% 160 15% 8% 10% 120 US$ mln 4% 198 5% % 80 0% 135 0% -56% 40 -5% 0 -10% 4 2 0 -15% -16% -20 -40 -20% Russia America Europe Russia America Europe 3Q2019 4Q2019 3Q2019 4Q2019   Russian division Adjusted EBITDA increased QoQ, due to lower Russian division Adjusted EBITDA margin increased by 5 p.p. raw material prices and an improved sales mix QoQ, reflecting a higher share of line pipe in the sales mix   American division Adjusted EBITDA was negative, due to lower American division Adjusted EBITDA margin declined QoQ pipe sales and an unfavorable pricing environment  European division Adjusted EBITDA margin declined QoQ  European division Adjusted EBITDA decreased QoQ as conditions in the European pipe market remained challenging, with slowdown in demand resulting from an unstable economic environment and continued pressure on prices Source: Consolidated IFRS financial statements, TMK data Note: Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums. 10

12M 2019 vs. 12M 2018 Results 11