Chelyabinsk Pipe-Rolling Plant Public Joint-Stock Company announces financial results as of year-end 2016 in accordance with IFRS

* Adjusted EBITDA (hereinafter EBITDA) represents the amount of net profit for the accounting period before the deduction of financial expenses and financial incomes, income tax expenses, depreciation of fixed assets and intangible assets, exchange rate differences, changes in the fair value of derivative financial instruments, loss/(profit) on disposal of subsidiaries, negative goodwill.

Sales:

• The volume of pipe sales decreased by 16% compared to the same period in 2015 and amounted to 1,735 tonnes. The share of ChelPipe Group in the total shipments of the Russian pipe producers amounted to 16.5%. The decrease was due to the change of shipment schedules for Gazprom PJSC projects and the reduced demand in the domestic and foreign markets. At the same time, ChelPipe Group increased its share in the segment of high-margin products — the company has increased the shipments of pipes with Premium threads by 10% and strengthened its position in the market of industrial pipes.
•  Supplies of ChelPipe Group in the Russian market at year-end 2016 decreased by 20% to 1,450,000 tonnes, the volume of export shipments of the company increased by 31% to 263,000 tonnes. The increase in export became possible thanks to the participation in the Nord Stream 2 international project, as well as the expanded presence in the markets of the MENA region (Middle East and North Africa). The company also enlarged the share of deliveries to the markets of the United States, Belarus, Kazakhstan and Uzbekistan.
• ChelPipe Groups took part in major pipeline projects of the fuel and energy industry, such as Nord Stream 2, The Power of Siberia, Ukhta-Torzhok 2, 'Gryazovets–Vyborg'.
• Over 15,000 tonnes of pipe fittings were sold in the previous year.

Financial results:

• The revenue decreased by 9% compared to 2015, and amounted to 135,456 million rubles. 
• The gross profit decreased by 6% and amounted to 39,914 million rubles, while EBITDA decreased by 3% to 27,900 million rubles. The EBIDTA indicator was positively impacted by the change in the structure of sales in favor of high-margin products and the increase in efficiency of the company's activity. The EBITDA margin increased by 1,1 % and amounted to 20.6%. 
• The net profit increased by 5% to 6,357 million rubles. 

Debt obligations: 

• At year-end 2016, the company's net debt decreased by 11% to 76.2 bn rubles. The majority of loans are denominated in Russian rubles.
• The net debt / EBITDA ratio decreased from 3.0x to 2.7x as of December 31, 2016.
• At the end of 2016, ChelPipe Group signed loan agreements with Sberbank, VTB and Gazprombank for a total amount of 78,9 bn rubles. The funds received enabled the company in early 2017 to refinance the debt on the syndicated loan raised in 2013.
• ChelPipe Group returned to the market of public borrowings, placing in November 2016 a five-year exchange bonds program with a total volume of 50 billion rubles, which allowed to diversify its loan portfolio and improve its lending terms.

Key events:

• Chelyabinsk Pipe-Rolling Plant was assigned credit ratings: "Ba3" (Moody's Investors Service) and "BB-" (Fitch ratings), with a Stable outlook. This evaluation confirms the position of ChelPipe Group as one of the leading manufacturers of pipe products in Russia and around the world.
• In March 2016, ChelPipe Group won a tender for the supply of 599,000 tonnes of large-diameter pipes for the construction of the Nord Stream 2 pipeline. The first deliveries to the Nord Stream AG 2 project operator began in September 2016.
• In December 2016, the plant ETERNO (a joint project of RUSNANO and ChelPipe Group) launched a new production of import-substituting products, unique for the Russian market, using nanotechnologies. The ETERNO split tees allow to repair major pipelines and put them into operation without interrupting the pumping of hydrocarbons. The plant is planning to launch up to 150 units of new products. President of Russia Vladimir Putin personally participated in the launch and expressed his appreciation of the production.
• The company supplied pipes for the production of units of the first stage of Long Phu 1 Power Plant (Vietnam).
• In 2016, ChelPipe developed OCTG pipes with new types of highly hermetic threaded joints of Premium class were put into production; new brands of ceramic flux for welding and surfacing of stainless steels were also realized.
• Gazprom PJSC and ChelPipe Group signed a roadmap for mastering the production of new generation pipes. The company will develop technological solutions to meet the needs of Gazprom, for the production of large diameter pipes and fittings using laser welding. This is the world's first batch large diameter pipe manufacturing project based on such technology. 
• ChelPipe Group and Gazprom PJSC signed an agreement on a formula-based pricing for large-diameter pipes and pipeline fittings (PF).
• ChelPipe Group and Magnitogorsk Iron and Steel Works (abbreviated MMK) signed an agreement on the formula pricing of hot-rolled sheet metal products from the mill 5,000 of MMK.
• The Izhneftemash plant entered the Brazilian market, shipping a batch of sucker rod pumps to PETROBRAS.
• The Alnas plant launched a new high-tech production line of operative parts of centrifugal pumps.