OREANDA-NEWS. October 24, 2008. SIBUR, Russia’s leading petrochemical company, is continuing to implement its key strategic priorities including developing existing plants and constructing new production facilities, despite the current global economic and financial instability.  However, management are reviewing all elements of these plans to ensure that they are properly aligned to the current turbulent trading and financial environment.

This review recognizes that in recent months many customers are managing their cash flow more tightly and experiencing declining sales.  As a result they are scaling back production with a consequent reduction in demand for products from petrochemical businesses including SIBUR.  Furthermore, the cost of loans needed to finance investment projects is growing.

As has been previously reported, as result of this challenging trading environment and the closure of the international debt markets,  management decided not to proceed with the MBO transaction.

In addition management are taking additional steps to address the impact of the negative trading environment . A key focus in the near future is implementing a significant reduction in costs and optimization of business processes.

Furthermore, SIBUR is also reviewing the temporary reduction of production volumes, setting new priorities for the investment programme, and tighter management of working capital.

In order to maintain a strong financing structure, the company is setting a target debt level of no more than 2:1 debt/EBITDA and a maximum level up to 2.5:1 debt/EBITDA.

“SIBUR is well placed to trade through the current challenging trading and financial environment”, SIBUR President Dmitry Konov said. – “We will continue to implement our development strategy, by investing in new projects but these will also be contingent on improvements in the economic situation and government support.”

He continued: “The company’s strong market position and development potential, our sound and well balanced financing structure and the quality of our management team will enable SIBUR to achieve its development  objectives including the strengthening of its  leading market positions.  We continue to be positive about the longer term prospects for the Russian petrochemical industry.”