FY2019 IFRS results and market overview February 2020 This - - PowerPoint PPT Presentation

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FY2019 IFRS results and market overview February 2020 This - - PowerPoint PPT Presentation

Public Joint Stock Company Chelyabinsk Pipe Plant FY2019 IFRS results and market overview February 2020 This Presentation does not constitute or form part of, and should not be construed as, any offer to sell or issue or invitation to


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SLIDE 1

FY2019 IFRS results and market overview

February 2020

Public Joint Stock Company “Chelyabinsk Pipe Plant”

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SLIDE 2

This Presentation does not constitute or form part of, and should not be construed as, any offer to sell or issue or invitation to purchase or subscribe for, or any solicitation of any

  • ffer to purchase or subscribe for, any securities of Public Joint Stock Company "Chelyabinsk Pipe Plant" (the "Company" and together with its consolidated subsidiaries the

"Group"), nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto nor does it constitute a recommendation regarding the securities of the Company. The information in this Presentation may include forward-looking statements, which are based on current expectations, projections and assumptions about future events. These statements may include, without limitation, any statements preceded by, followed by or including words such as "target", "believe", "expect", "aim", "intend", "may", "anticipate", "estimate", "plan", "project", "will", "can have", "likely", "should", "would", "could" and other words and terms of similar meaning or the negative thereof. These forward-looking statements include all matters that are not historical facts. These forward-looking statements as well as those included in any other information discussed in the Presentation are subject to known or unknown risks, uncertainties and assumptions about the Group and its investments, including, among other things, the development of its business, its growth plan, trends in its operating industry, its future capital expenditures and acquisitions. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur and actual results, performance or achievements may materially differ from any future results, performance or achievements that may be expressed

  • r implied in this Presentation. No representation or warranty is made that any forward-looking statement will come to pass or that any forecast results will be achieved. There are

a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these statements and forecasts. Past performance

  • f the Company and the Group cannot be relied on as a guide to future performance. Forward-looking statements speak as of the date of this Presentation and no one

undertakes to release any update or revision of any such forward looking statement, whether as a result of new information, future events or otherwise. No statement in this presentation is intended to be a profit forecast. Accordingly, undue reliance should not be placed on any forward-looking statement contained in this Presentation. Certain industry, market and competitive position data contained in this Presentation come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but there is no guarantee of the accuracy or completeness of such data. While the Company reasonably believes that each of these publications, studies and surveys has been prepared by a reputable source, none of the Company, the Shareholders, the Banks, nor any of their respective subsidiary undertakings or affiliates, or its or their respective directors, officers, employees, advisers or agents, have independently verified the data contained therein. In addition, certain of the industry, market and competitive position data contained in this Presentation come from the Group’s own internal research and estimates based on the knowledge and experience of the Group’s management in the markets in which the Group operates. While the Company reasonably believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change. Accordingly, undue reliance should not be placed on any of the industry, market or competitive position data contained in this Presentation. Certain information contained in this Presentation is subject to rounding adjustments. Accordingly, any discrepancies between the totals and the sums of the amounts listed are due to rounding. Certain financial information and operating data relating to the Group contained in this Presentation has not been audited and in some cases is based on management information and estimates, and is subject to change. This Presentation also includes certain non-IFRS measures, which have not been subject to a financial audit for any period and which may differ materially from similarly-titled measures used by other companies. The information in this Presentation has not been independently verified. The information and opinions contained in this Presentation are provided as at the date of the Presentation and are subject to amendment, completion and change without notice. In giving this Presentation, neither the Company, nor any of their respective subsidiary undertakings or affiliates, or its or their respective directors, officers, employees, advisers or agents, undertakes any obligation to amend, correct or update this Presentation or to provide the recipient with access to any additional information that may arise in connection with it. 2

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SLIDE 3
  • 1. Key Highlights

4

  • 2. Market Overview & Company Strategy

9

  • 3. Financials

15 Appendix 24

TABLE OF CONTENTS

3

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SLIDE 4

KEY HIGHLIGHTS

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SLIDE 5

CHELPIPE AT A GLANCE

COMPANY OVERVIEW CHELPIPE’S KEY PRODUCTS AND SERVICES

  • Chelpipe is one of the largest pipe manufacturers globally with a

diversified client base and a strong positions in Russia

  • Seamless industrial pipes producer (49% market share)(1)
  • Seamless O&G pipes producer (18% market share)(1)
  • LDP producer(2)
  • Steel pipe producer globally(3)
  • Trunk Pipeline systems producer(3)
  • Key assets are located in Chelyabinsk (Chelyabinsk Pipe Plant),

Pervouralsk (Pervouralsk Pipe Plant), Almetyevsk and Izhevsk (Alnas and Izhneftemash)

  • The Company’s principal shareholders are Andrey Komarov(4)

(87%) and Pavel Fedorov (11%)

  • Mr. Komarov pioneered META philosophy with focus on product

quality, sustainability, HSE and development of human capital, which is now implemented across all Company’s assets

  • The Board of Directors has approved the Company's

development strategy for the period through 2024

  • Strong corporate governance framework with 3 out 7 board

members being INEDs

  • Credit ratings: Fitch – BB- (stable), Moody's – Ba3 (stable)
  • Number of employees: 23,445(5)

KEY FINANCIALS

Source: Company data, IFRS Financial Statements. The segmentation is made for business purposes only, IFRS reporting is based on 4 segments. (1) In Russian market including import in 2019. (2) Based on production of Russian pipe producers including export. (3) Based on 2019. (4) Including 77.3% owned directly and 9.3%, which is currently being transferred to Andrey Komarov from BOUNCEWARD LTD. (5) December 31, 2019. (6) The Company estimates for contribution of various product groups to Company’s adjusted EBITDA over the last 24 months. (7) Adjusted EBITDA is determined as profit/loss for the period adjusted by finance income and costs, income tax, depreciation and amortization, foreign exchange gain/loss, change in fair value of derivatives, gain/loss on disposal of subsidiaries, gain/loss on disposal of property plant and equipment and intangible assets, impairment of loans receivable, interest receivable, property plant and equipment and intangible assets, advances for capital construction and intangible assets, impairment of goodwill, social and charity expenses not related to operating activities.

RUB bn 2017 2018 2019 Revenue 158.3 178.8 192.3 Adjusted EBITDA(7) 23.6 28.2 31.8 Margin 14.9% 15.8% 16.6% Net Debt 67.3 68.4 67.1 Net Debt / Adjusted EBITDA 2.8x 2.4x 2.1х Capex 5.3 5.5 7.6

#1 #2 #1 #5 #1

Seamless Industrial pipes Seamless O&G pipes

Approximate contribution to adj. EBITDA(6)

Trunk pipeline systems Large diameter pipes (LDP) and other welded pipes Oilfield Services

34% 11% 37% 3% 15%

Total pipe segment in adjusted EBITDA split: ~85%

5

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SLIDE 6

CHELPIPE HOLDS LEADING POSITIONS IN ALL MAJOR STEEL PIPE SEGMENTS IN RUSSIA

LDP

(BY PRODUCTION IN RUSSIA IN 2019)

31% 20% 18% 16% 11% 4%

3.0mt

#1

SEAMLESS OIL & GAS PIPES

(BY SALES VOLUME IN RUSSIA IN 2019)

SEAMLESS INDUSTRIAL PIPES

(BY SALES VOLUME IN RUSSIA IN 2019)

49% 31% 4% 16%

0.8 mt

Other Import

#1

49% 18% 11% 14% 8%

2.8 mt

Other Import

#2

Other

Source: Company data, public data

6

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SLIDE 7

KEY EVENTS FY 2019

FRACTURA ChelPipe presented a new product line of high-tech equipment for multi-stage fracking FRACTURA EUROBOND ISSUE Oilfield services division of the ChelPipe Group opened a subsidiary in the United Arab Emirates SARYARQA ChelPipe Group delivered 130 kt

  • f pipes for the SARYARQA

gas pipeline in Kazakhstan TAPI PROJECT CHELPIPE PRIME CONNECTION Chelpipe launched an experimental production facility for development of threaded connections

January

ChelPipe launched new line of complex engineering solutions for metallurgical production ETERNO INGENIUM ETERNO INGENIUM

March April

RIMERA OVERSEAS

June

RIMERA 12Y CONTRACT Oilfield services division of the ChelPipe Group signed a 12 year contract for rolling services with Gazpromneft-Noyabrskneftegas JSC

July

ChelPipe has delivered 2.5 kt

  • f seamless and welded

pipes for construction of Amur TPS AMYR TPS

September November

ChelPipe successfully issued debut Eurobonds in the amount

  • f 300 million USD

STAINLESS SEAMLESS PIPES ChelPipe started implementing a large-scale investment project for the production of stainless seamless pipes for NPP steam generators FINISHING CENTRE ChelPipe has increased OCTG production capacity with Prime threaded connections for 30 kt

December

IRON OZON 32 ChelPipe has increased melting capacity of Iron Ozon 32 up to 1,245 kt ChelPipe delivered 150 kt of pipes for the TAPI main gas pipeline in Turkmenistan

7

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SLIDE 8

KEY PRODUCTS Supplies, th.tons RF Market share, % Production facility

Steel pipe production Seamless industrial pipes 498 Chelyabinsk Pipe Plant Pervouralsk Pipe Plant Seamless O&G 622 Chelyabinsk Pipe Plant Pervouralsk Pipe Plant LDP 916 Chelyabinsk Pipe Plant Other welded 35 Chelyabinsk Pipe Plant Pervouralsk Pipe Plant Trunk pipeline systems Pipeline fittings 21(1) ETERNO SOT Oilfield services Electric Submersible Pumps (ESP) 3,910 pcs ALNAS SRP, custom vehicles and other oilfield equipment 6,311 SPR Izhneftemash Oilfield services 7,098 wells servicing RIMERA-Service

49% 12% 18% 19% <1% 19(2) 45% 15%

ZOOM IN PRODUCT PERFORMANCE

8

Source: Company data. (1) Production including other steel products (2) Only Hot-Formed Bends & Stamp-welded pipe fittings

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SLIDE 9

ASSETS MAP – STRATEGIC LOCATION

9

META and Rimera regional presence Pipe Products & Scrap Oilfield Services Pipeline Equipment

Source: Company data.

Czech Republic

R U S S I A

Pervouralsk

  • Stop valves
  • Ball valves
  • Check and special valves

MSA

  • ESP units production
  • 3,966 pcs supplied

in 2018 ALNAS

  • Scrap processing
  • 90 production sites
  • 13 regions of Russia

META

  • Service and lease of
  • il and gas production

equipment RIMERA-SERVICE

  • SRP units production
  • 5,398 pcs supplied

in 2018 IZHNEFTEMASH Chelyabinsk Almetievsk Izhevsk Moscow

CHELYABINSK PIPE PLANT

  • Chelyabinsk Pipe Plant is primarily focused
  • n LDP, seamless industrial pipes, and

pipeline parts

  • Capacity: 1.65 mt of welded pipes (incl.

LDP), 0.5 mt of seamless pipes

PERVOURALSK PIPE PLANT

  • Pervouralsk Pipe Plant is focused on

seamless industrial pipes and seamless oil & gas pipe products

  • Capacity: 1.2 mt of seamless pipes, 0.1 mt of

welded pipes, 1.1 mt of steel billets

ETERNO VYSOTA 239 FINISHING CENTER IRON OZON 32 CHELYABINSK WORKSHOPS PERVOURALSK WORKSHOPS

MARKET OVERVIEW & COMPANY STRATEGY

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SLIDE 10

3,2 3,3 2,4 2,4 2,1 1,7 1,0 0,8 0,6 0,6 3.8 3.9 0.9 0.6 0.5 0.5 0.3 0.4 0.2 1.3 0.5

7.9 7.4 Top-2 Producer in Russia

BEST-IN-CLASS PRODUCER OF STEEL PIPES

… WITH A STRONG POSITION IN THE RUSSIAN MARKET AND A PRESENCE IN ALL ATTRACTIVE PIPE SEGMENTS

#1

Seamless industrial pipes

(2019 shipments in Russia, mt) Chelpipe ТМK #1

LDP

(2019 production, mt) OMK TMK Chelpipe #2

Seamless O&G pipes(3)

(2019 shipments in Russia, mt) ТМK Chelpipe

Contribution to Chelpipe adjusted EBITDA(4) 37% 34% Trunk pipeline systems

(2019 production, kt) #1 ОМK Chelpipe

15% 3%

ONE OF THE LARGEST STEEL PIPE PRODUCERS GLOBALLY(1)…

(2019 shipments, mt) ТМK Tenaris Chelpipe Vallourec OMK Severstal ArcelorMittal USS(2) #5

Source: Company estimates based on public data. (1) Excluding Chinese producers. (2) US Steel – based on production volumes for 2018. (3) OCTG shipments do not include shipments of drilling pipes. (4) The Company estimates for contribution of various product groups to Company’s adjusted EBITDA over the last 12-24 months.

ZTZ ITZ After sale

  • f IPSCO

10

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SLIDE 11

694 768 788 770 2016 2017 2018 2019

INDUSTRIAL SEAMLESS PIPE SEGMENT GROWTH IN 2016-2019

Source: Fastmarkets MB.

GROWTH OF SEAMLESS INDUSTRIAL PIPES CONSUMPTION IN RUSSIA

(kt)

EXPANSION OF DOMESTIC VEHICLE MANUFACTURING LARGE INFRASTRUCTURE PROJECTS

Russian oil refineries modernization program Reconstruction of power generation plants Sports venues construction for 2018 FIFA World Cup in Russia Domestic Cars Production Domestic Trucks and Buses Production 11

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SLIDE 12

2.0 2.3 2.3 2.3 201 6 201 7 201 8 201 9 1 0.9 1 0.9 1 1 .1 1 1 .2 201 6 201 7 201 8 1 1 M 201 9 68 76 76 75 33% 39% 48% 53% 201 6 201 7 201 8 201 9

Upstream EBITDA as a % of oil price (1)

STABLE NON-CYCLE DEMAND FROM RUSSIAN O&G SECTOR

Source: Company data, Fastmarkets MB, corporate financial statements, FactSet, CDU TEK. Upstream taxes are based on Rosneft’s and Lukoil’s disclosure. Exchange rate and Brent price are based on FactSet data. Oil production and drilling volume are based on CDU TEK. (1) Calculated as average based on upstream EBITDA divided by production as reported by Rosneft, Gazprom Neft and Lukoil in MD&A disclosure.

RUSSIAN OILS REMAIN PROFITABLE DESPITE OIL PRICE VOLATILITY…

Oil production

(mn bblpd)

DRILLING ACTIVITY HAS BEEN RISING AND BECOME MORE COMPLEX…

(km per day)

… CREATING STRONG DEMAND FOR OCTG

(shipments of OCTG in Russia, mt) Brent Price EBITDA, $/boe EBITDA Margin Drilling Volume Share of Horizontal Drilling

… AND KEEP GROWING OIL PRODUCTION

44 54 71 66 9 1 1 1 6 1 6 20% 21 % 22% 24% 201 6 201 7 201 8 1 H 201 9

12

2016 2017 2018 1H 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019

11.3 11.1 10.9 10.9

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SLIDE 13

31% 17% 16% 12% 8% 17% China North America Russia & CIS Other Asia EU RoW

14.0 15.7 15.9 16.3

2016 2017 2018 2019

LDP MARKET OVERVIEW

Source: Fastmarkets MB, Company data.

GLOBAL LDP CONSUMPTION BY REGION 2019

(%)

LDP PRODUCTION IN RUSSIA 2016-2019

(shipments, kt)

GLOBAL LDP CONSUMPTION

(mt)

China RoW

  • N. America

Russia & CIS Other Asia EU

13 318 169 238 445 426 297 392 385 153 187 229 207 457 225 324 381 1,354 878 1,182 1,419 2016 2017 2018 2019

Transneft Gazprom IOC & Other Energy Industrial

RENOVATION AND REPAIR VOLUMES IN RUSSIA 2016-2019

(kt)

2 114 1 608 2 090 2 114 394 1 077 760 861 2 508 2 685 2 850 2 975 2016 2017 2018 2019

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SLIDE 14

Source: Company data. (1) Total costs of Chelpipe subtracting raw materials costs: steel scrap and steel plate.

Aim to become #1 Pipe company globally by EBITDA margin in the medium term, to increase adjusted EBITDA by c.30% and deleverage to a target Net debt/EBITDA <1.5x

CLEAR STRATEGIC GOAL WITH DELIBERATE APPROACH TO EXECUTION

METALLURGY PHILOSOPHY AND

CLIENT-CENTRIC TRANSFORMATION

Further digitalization of production system and business-processes Enhancement of client services and

  • ffering ad-hoc solutions

Internal efficiency and sustainability Corporate culture cultivation and

  • rganizational structure evolution

OPERATIONAL EFFICIENCY IMPROVEMENTS

Clear areas for further improvements: Cutting 2.5% of costs p.a.(1) Operating efficiency program with tangible results for ‘17-’19: >US$155mn in total

&

DEVELOPMENT OF PRODUCT OFFERING

Product mix improvement by investing in HVA niche products with moderate competition Export sales expansion Expected growth of EBITDA by c.30% in the medium term ESG initiatives

14

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SLIDE 15

FINANCIALS

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SLIDE 16

FINANCIAL PERFORMANCE

KEY FINANCIAL METRICS ADJUSTED EBITDA(1) BRIDGE

RUB bn RUB bn

*excl. D&A (1) Adjusted EBITDA is determined as profit/loss for the period adjusted by finance income and costs, income tax, depreciation and amortization, foreign exchange gain/loss, change in fair value of derivatives, gain/loss on disposal of subsidiaries, gain/loss on disposal of property plant and equipment and intangible assets, impairment of loans receivable, interest receivable, property plant and equipment and intangible assets, advances for capital construction and intangible assets, impairment of goodwill, social and charity expenses not related to operating activities.

2017 2018 2019 Revenue ADJUSTED EBITDA EBITDA margin (%) 14.9 15.8 16.6 158.3 23.6 178.8 28.2 192.3 31.8

16

28.2 13.4 (2.9) (3.4) (1.9) (1.6) 0.1 31.8 ADJUSTED EBITDA 2018 Revenue difference COGS* Distribution costs* G&A* Impairment

  • f assets

Others ADJUSTED EBITDA 2019

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SLIDE 17

SEGMENT PERFORMANCE OVERVIEW

 Revenue growth is mainly driven by seamless pipes and supported by stable LDP results on the back of persistent demand from the largest O&G clients  High cost efficiency in seamless pipes due to vertical integration coupled with increased proportion of export sales provide for strong EBITDA margin  Segment represents equipment manufacturing and support services for oil well extraction equipment  In 2019, Rimera Group has presented a new product line

  • f high-technology equipment for multi-stage hydraulic

fracturing FRACTURA improving oil recovery from fields with hard-to-recover reserves  Segment’s revenue is highly dependent on the large infrastructure and industrial projects  Trunk pipeline systems revenue linked to Steel pipes revenue, especially to LDP sales (due to complementary nature of trunk products)  2019 revenue growth was driven by increased LDP volumes thanks to export projects

REVENUE FROM EXTERNAL CUSTOMERS

(RUB bn)

STEEL PIPE PRODUCTION(2) OILFIELD SERVICES TRUNK PIPELINE SYSTEMS

ADJUSTED EBITDA(1)

(RUB bn)

Source: IFRS Financial Statements. Numbers may not add up due to rounding (1) Does not include inter-segment adjustments (in 2017 amounted RUB 409mn, in 2018 amounted to RUB 74mn and null in 2019) (2) Include results of Scrap procurement division (3) Calculated as adjusted EBITDA (excl. inter-segment adjustments) divided by the revenue from external customers

COMMENTARIES

15% 15% 16% 18% 22% 25% 18% 35% 17% EBITDA margin(3) 142.2 163.4 173.4 2017 2018 2019 21.6 24.3 27.6 2017 2018 2019 11.4 12.3 13.6 2017 2018 2019 2.0 2.7 3.4 2017 2018 2019 2.6 3.1 5.3 2017 2018 2019 0.5 1.1 0.9 2017 2018 2019

17

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SLIDE 18

COSTS ANALYSIS

Source: IFRS Financial Statements. Numbers may not add up due to rounding error. (1) Includes adjustments for changes in allowances for inventory obsolesce and changes in balances of work in progress and finished goods (2) Includes adjustments for impairment of assets and loans and interest receivable, adjustments for social and charity expenses, etc.

COST OF SALES 2019 (excl. D&A)

(RUB bn)

DISTRIBUTION COSTS 2019 (excl. D&A)

(RUB bn)

COGS AND SG&A

(RUB bn) 7.6 1.7 1.6 1.1 0.7

2019: RUB12.7 bn

Raw Materials Production Overheads and Repairs Salaries and Salary Taxes Energy and Utilities Cost of Goods for Resale

REVENUE TO ADJUSTED EBITDA BRIDGE 2019 (excl. D&A)

(RUB bn)

G&A COSTS 2019 (excl. D&A)

(RUB bn) 13.5 86.0 14.6 11.0 7.0

2019: RUB131.5bn(1)

3.4 8.1

2019: RUB14.4 bn

1.9 1.0

Transportation, Surveyor and Customs Expenses Salaries and Salary Taxes Packaging, storage and handling Other Commission Salaries and Salary Taxes Consultancy, audit and legal services Other Non-production Overheads and Repairs

(2)

78.5 78.3 86.0 18.5 20.6 23.3 12.5 15.9 14.4 7.4 6.9 7.9 25.0 35.5 35.0 142.0 157.2 166.5 2017 2018 2019 Raw materials Salaries and Salary Taxes Overheads and Repairs D&A Other 192.3 (131.5) (12.7) (14.4) (1.9) 31.8 Revenue Cost of Sales Distribution costs G&A expenses Other Adjusted EBITDA

18

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SLIDE 19

2.7 2.7 6.8 6.8 9.8 4.1 3.0 2017 2018 2019

43% 32% 1 0% 6% 8%

TRACK RECORD OF OPERATIONAL EFFICIENCY IMPROVEMENTS

Source: Company data. (1) Includes cut in energy costs and supply chain management initiatives. (2) Total non-raw materials costs: Total costs of Chelpipe subtracting raw material costs: steel scrap, steel plate and other general raw materials.

Operating efficiency program with target to cut

2.5%

  • f costs(2) p.a.

Optimization of production costs Improving inventory management system Increase pipe-rolling productivity through further debottlenecking Further vertical integration in EAF: 1.25mln mt → 1.35mln mt Creation of Shared Service Center to reduce G&A Increase in energy efficiency through internal generation: 30-40% cheaper electricity based

  • n Chelpipe estimates

Digitalization and predictive analytics based on BigData Optimization of business portfolio to focus on high margin business

Increase in Vertical Integration (in-house steel production) Decrease in Raw Material Costs Staffing Optimization Production Efficiency Gain Other(1)

ALREADY IDENTIFIED AREAS FOR OPERATING EFFICIENCY IMPROVEMENTS CUMULATIVE SAVINGS

(RUB bn)

2017- 2019 TOTAL SAVINGS BREAKDOWN

(%)

>US$155mn

Expected contribution to target adjusted EBITDA growth: c.15%

19

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SLIDE 20

BALANCED APPROACH TO CAPEX MANAGEMENT

MAIN CAPEX ACTIVITIES (RUB mn)

(RUB mn)

Expansion Projects

2,484

IT strategy incl.:

269 Business digitalization (ERP) 212 Internal documentation IT solutions 4 Security automatization 53

Operational efficiency program & modernization / Artificial intelligence solutions

832

Innovative projects / Big data analysis

42

R&D

256

Ecological projects

598

Projects in oilfield services

274

Scrap division improvements

16

Other projects

197

Maintenance projects

2,767

Pipe division

2,056

Rimera (rolling scheme)

2,307

TOTAL CAPEX

7,558

Y-o-Y DYNAMICS

1,936 2,307 1,968 2,767 1,588 2,484

2018 2019

Rimera (rolling scheme) Maintenance Projects

TOTAL CAPEX + 38%

CAPEX as % of revenue CAPEX as % of revenue excluding OFS segment 2.8% 3.1% 2.9% 3.9%

7,558 5,492

20

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SLIDE 21

24.3 18.8 10.0 19.7 (5.5) (8.8) 30.8 (3.6) (7.6) (8.6) 11.1 OCF Before change in WC Cap Ex FCFF Net interest FCF OCF Before change in WC Change in WC Cap Ex FCFF Net interest FCF

1

STRONG FCF GENERATION

FREE CASH FLOW BRIDGE

(RUB bn)

2018 2019

Source: IFRS Financial Statements. Free Cash Flow is calculated as Cash generated from operating activities (excluding net interest payments) – Income tax paid – Capex – net interests. (1) After income tax paid.

RUB5.9 bn (US$95.6 m) increase in Receivables due to delay of payment from customers (almost fully released by 10-Feb-2020)

21

1

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SLIDE 22

LEVERAGE EVOLUTION

(RUB bn)

21.1 26.5 35.5 23.0 20.4 13.2 7.9 23.6 83.1 Liquidity position 2020 2021 2022 2023 2024

DELEVERAGING AND IMROVEMENT OF LOAN PORTFOLIO

Source: Company data, IFRS Financial Statements.

Net Debt Net Debt / Adjusted EBITDA

Chelpipe’s 5-year target: 1.5x Net Debt / Adjusted EBITDA

BY CURRENCY BY INTEREST RATE

72.2% Rub 63.7 bn 27.8% Rub 24.5 bn

Russian rubles Foreign currency

73.9% Rub 65.2 bn 26.1% Rub 23.0 bn

Fixed Floating Current liquidity position can comfortably cover upcoming maturities for the next 4 years Put option on RUB 9.9 bn bond maturing in 2027 Cash & cash equivalents Undrawn committed credit lines Undrawn uncommitted credit lines Debt to be repaid

DEBT BREAKDOWN

(as of 31 Dec 2019)

DEBT REPAYMENT SCHEDULE

(RUB bn, as of 31 Dec 2019)

22

86.1 76.2 67.3 68.4 67.1 3.0х 2.7х 2.8х 2.4х 2.1х 2015 2016 2017 2018 2019

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SLIDE 23

DIVIDEND POLICY OVERVIEW

NET DEBT / EBITDA LEVEL DIVIDEND FORMULA(1) TIMING MANAGEMENT TARGETS

  • Highest of:

─ 100% of IFRS Net

Profit

─ 100% of FCF

  • Highest of:

─ 70% of IFRS Net

Profit

─ 100% of FCF

  • Highest of:

─ 50% of IFRS Net

Profit

─ 75% of FCF

Target to pay dividends of not less than:

  • RUB 7.5 bn in 2020 (already distributed cash dividends RUB 3 bn in 2020)
  • RUB 7.5 bn in 2021

Source: Company data (1) It is necessary to maintain positive level of FCF adjusted by Capex for strategic initiatives after dividend payments calculated on the basis of IFRS financial statements for the period

  • At Board of

Directors’ discretion

23

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SLIDE 24

CHELPIPE AT A GLANCE

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SLIDE 25

REVENUE MIX IN THE PIPE SEGMENT

37% 30% 33% OIL SEGMENT

Stable demand due to growing drilling activity in Russia Stable demand for maintenance and pipeline constructions in CIS Diversified client base with about 6% of revenues coming from Top-7 clients

Source: Company’s data

INDUSTRIAL SECTOR GAS SEGMENT

25

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SLIDE 26

VERTICAL INTEGRATION AND STRONG SUPPLIER BASE

STEEL PLATE PURCHASING STRUCTURE ADVANTAGEOUS LOCATION OF CHELPIPE NEAR STEEL PLATE SUPPLIERS

Source: Company data

HIGH LEVEL OF VERTICAL INTEGRATION IN THE PROCESS OF SEAMPLESS PIPE PRODUCTION BILLETS SUPPLY STRUCTURE

(000 tn)

74% 78% 85% 85%

2016 2017 2018 2019 Metalloinvest Evraz UMMC Others incl. imports IO-32 1,229 1,449 1,464 1,471

55% 59% 40% 41% 40% 20% 42% 43% 17% 17% 16%

2016 2017 2018 2019 ММК Metalloinvest Severstal Others incl. imports

R U S S I A Metalloinvest ММК Chelpipe Chelpipe ММК Metalloinvest

Scrap metal collection

Iron Ozon 32 Pipe-rolling workshops

  • f Pervouralsk and

Chelyabinsk pipe plants Meta Group

Pipe billet production Seamless pipes production 26

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SLIDE 27

META GROUP OVERVIEW

  • Established in 2004, META Group is in the

top 3 Russian companies engaged in scrap processing – More than 90 manufacturing and production sites located in 13 regions of Russia – Production capacity of ca.1.4mt p.a. – Most manufacturing and production sites are equipped with hydraulic belt elevators and excavators (FUCHS and LIEBHERR)

  • 100% self-sufficiency in scrap supplies for

steel mini-mill at Iron Ozon 32 (located in Pervouralsk Pipe Plant)

META BENEFITS

 Strong collection and processing network generates scrap at below market prices  Proximity of scrap collection to manufacturing facilities in Pervouralsk and Chelyabinsk provides competitive advantage via minimized transportation costs  Additional cost savings from in-house processing compared to purchased scrap

KEY GEOGRAPHIC REGIONS IN 2019 SCRAP METAL SALE DYNAMICS AND DEMAND FOR METAL FOR BILLET PRODUCTION

(kt)

Source: Company data (1) Pervouralsk pipe plant

KEY PARTNERSHIPS

OWN SCRAP PROCESSING DIVISION PROVIDES STRONG BASIS FOR VERTICAL INTEGRATION

No Region 1 Sverdlovsk Region 2 Chelyabinsk Region 3 Perm Territory 4 KhMAD 5 Ulyanovsk Region 6 Tyumen region 7 Novosibirsk Region 8 Bashkortostan Republic 9 Krasnoyarsk Region 10 Kurgan Region

PNTZ1 958 1,067 1,161 328 315 212 984 974 1,173 Demand for metal for billet production (IO-32) External client sales (META) Sales to PNTZ (META)

2017 2018 2019

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Source: Company data (1) Electric submersible pump; (2) Sucker-rod drilling pumps;

  • Chelpipe produces, sells and rents out oil well extraction equipment

(such as ESP(1) systems) ‒ Company also produces SRPs(2), beam pumping units, custom vehicles, tubing pipe couplings, completion equipment for hydraulic fracturing

  • In addition to that, Chelipipe provides installation and maintenance

services in respect of ESP systems and provides additional products and services for various stages of oilfield development

  • Company’s facilities in this segment include ALNAS, JSC RIMERA,

Izhneftemash, RIMERA-Service and TOO RIMERA-Kazakhstan ‒ Currently, Chelpipe considers strategic options (incl. potential divestment) around the OFS segment subject to obtaining favorable terms for the disposal

OILFIELD SERVICES

OVERVIEW

SEGMENT OVERVIEW

1 2 3 4 5

Production Service net

KEY GEOGRAPHIC REGIONS PRODUCTION VOLUME IS OPTIMIZED IN ACCORDANCE WITH THE MARKET ENVIRONMENT SHARE OF ESP WELLS SERVICING IN RUSSIA IS INCREASING

52% 58% 62% 48% 42% 38%

2017 2018 2019

Sucker rod pumps Electric submersible pumps

9,367 10,221 10,435

80% 79% 88% 20% 21% 12%

2017 2018 2019

Wells not serviced by RIMERA Wells serviced by RIMERA

55,866 52,277 58,868

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ASSETS MAP – STRATEGIC LOCATION

META and Rimera regional presence Pipe Products & Scrap Oilfield Services Pipeline Equipment

Source: Company data as of December 31, 2019.

Czech Republic

R U S S I A

Pervouralsk

  • Scrap processing
  • 90 production sites
  • 13 regions of Russia

META

  • Service and lease of
  • il and gas production

equipment RIMERA-SERVICE Chelyabinsk Almetievsk Izhevsk Moscow

CHELYABINSK PIPE PLANT

  • Chelyabinsk Pipe Plant is primarily focused
  • n LDP, seamless industrial pipes, and

pipeline parts

  • Capacity: 1.65 mt of welded pipes (incl.

LDP), 0.5 mt of seamless pipes

PERVOURALSK PIPE PLANT

  • Pervouralsk Pipe Plant is focused on

seamless industrial pipes and seamless oil & gas pipe products

  • Capacity: 1.2 mt of seamless pipes, 0.1 mt of

welded pipes, 1.25 mt of steel billets

ETERNO VYSOTA 239 FINISHING CENTER IRON OZON 32 CHELYABINSK WORKSHOPS PERVOURALSK WORKSHOPS

  • Stop valves
  • Ball valves
  • Check and special valves

MSA

  • SRP units production
  • 6,311 pcs sold in 2019

IZHNEFTEMASH

  • ESP units production
  • 3,910 pcs sold in 2019

ALNAS

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1,000 1,000 1,100 1,100 1,250 1,250 1,350 100 150 100 2017A 2018A 2019A Target 412 1,333 1,477 2017A 2018A 2019A

EXAMPLES OF OPERATIONAL EFFICIENCY IMPROVEMENTS

FURTHER ENHANCEMENT IN VERTICAL INTEGRATION

Source: Company data.

ENERGY EFFICIENCY PROGRAMME

  • Since the project launch in 2017, own steel making capacity already

increased by 25%. Project completion is expected in 2020

  • Remaining Capex: RUB 304 mn
  • Total savings 2017-19: RUB 3,222 mn
  • Capacity upgrade in production of own

steel billets leading to significant cost reduction and increased self-sufficiency in steel billets

  • Key activities include purchases of new

equipment and de-bottlenecking through changes in process organization (i.e. reduction of preparation time and improvement in scrap quality)

OWN STEEL PRODUCTION CAPACITY IMPROVEMENT

(kt)

SAVINGS FROM OWN BILLET PRODUCTION

(RUB mn)

  • Launched in 2017, the

programme envisages various activities aimed at reducing energy consumption costs including natural gas and electricity (through changes in production technologies, usage

  • f energy-efficient lamps and

procurement consolidation)

137 152 100

2017A 2018A 2019A

SAVINGS FROM ENERGY EFFICIENCY PROGRAMME

(RUB mn)

  • As a part of the programme, in 2019 the Company signed an

energy service contract for 10 years, whereby the electricity provider builds power generation units and supplies electricity directly to the Company at a fixed price leading to significant cost reduction (>RUB 360 mn p.a.)

  • Total programme savings 2017-19: RUB 389 mn

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IFRS STATEMENTS

2018 2019 RUB bn Cash & cash equivalents 21.6 21.1 Current assets 77.5 81.0 Non-current assets 64.6 67.1 Total assets 142.1 148.1 Current liabilities 64.1 74.6 Non-current liabilities 74.2 67.8 Total liabilities 138.3 142.4 Total equity 3.8 5.7 Total equity and liabilities 142.1 148.1

SUMMARY BALANCE SHEET

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IFRS STATEMENTS

2018 2019 RUB bn Revenue 178.8 192.3 COS (134.6) (138.1) EBITDA 28.2 31.8 Margin (%) 15.8 16.6 Operating profit 20.1 22.5 Margin (%) 11.2 11.7 Profit before income tax 10.8 13.6 Margin (%) 6.0 7.1 Net income 7.7 10.0 Margin (%) 4.3 5.2 Basic EPS (RUB/share) 25.8 32.5

SUMMARY INCOME STATEMENT

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IFRS STATEMENTS

2018 2019 RUB bn Profit before income tax 10.8 13.6 Adjustments for depreciation and amortization 6.9 7.9 Adjustments for finance costs 9.4 9.5 Operating cash flows before working capital changes 28.7 33.8 Cash generated from operations (after interest) 15.5 18.7 Purchase of PPE & intangible assets (CAPEX) (5.5) (7.6) Net cash used in investing activities (6.0) (9.3) Proceeds from borrowings 44.5 61.8 Repayment of borrowings (42.7) (64.3) Dividends paid to owners of the Company (3.7) (4.7) Net cash used in financing activities (8.7) (8.3) Increase/(decrease) in cash & cash equivalents 2.5 (0.4) Cash & cash equivalents at beginning of period 19.1 21.6 Cash & cash equivalents at end of period 21.6 21.1 Free cash flow 10.0 11.1

SUMMARY CASH FLOW STATEMENT

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CONTACTS

Department of corporate finance & investor relations Moscow, Lesnaya Street 5B, 14th floor IR@chelpipe.ru Dmitry Muz +7 (495) 933-27-80 #4485 Elena Karpova +7 (495) 933-27-80 #4440

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