SIBUR announces limited operational update for Q1 2015

Moscow, 10 June 2015. PAO SIBUR Holding, an integrated gas processing and petrochemicals company and a leader in the Russian petrochemicals industry, today publishes limited operational update for the three months ended 31 March 2015.

KEY HIGHLIGHTS

• Associated petroleum gas (APG) processing volumes increased by 1.4% year-on-year;
• Raw natural gas liquids (raw NGL) fractionation volumes increased by 36.0%⁽¹⁾ year-on-year;
• Liquefied petroleum gas (LPG) sales volumes increased by 19.1% year-on-year;
• Naphtha sales volumes decreased by 41.3% year-on-year due to the termination of low-margin trading operations via Ust-Luga; net of such trading operations naphtha sales volumes increased by 13.9% year-on-year;
• Polypropylene sales volumes increased by 64.5% year-on-year;
• Revenue from sales of energy products increased by 6.0% year-on-year in RR terms (excl. trading operations via Ust-Luga);
• Revenue from sales of petrochemicals increased by 46.0% year-on-year in RR terms;
• ZapSibNeftekhim financing totaled RR 7,371 million (excl.VAT).

OPERATIONAL HIGHLIGHTS

In the first quarter of 2015, our revenue from sales of energy products⁽²⁾ increased by 6.0% year-on-year to RR 43,762 million on higher revenue from sales of natural gas and marginal increase in MTBE, naphtha⁽²⁾ and LPG revenue, which was partially offset by lower revenue from raw NGL sales. The increase in natural gas revenue was a result of the terms of cooperation with Rosneft and the full consolidation of Yugragazpererabotka from March 2014. LPG and naphtha revenue remained largerly at the previous year’s level despite collapsed pricing in international markets due to higher production and sales volumes, alleviation of export duties and the Russian rouble depreciation. The decrease in raw NGL revenue was a result of increased internal use for the production of higher value-added products.

• Natural gas: sales revenue up 39.8% year-on-year to RR 9,916 million due to the full consolidation of natural gas volumes produced at the GPPs of Yugragazpererabotka after gaining full control over the JV in March 2014.
• MTBE: sales revenue up 17.8% year-on-year to RR 5,148 million on higher prices in RR terms and lower stock accumulation.
• Naphtha: sales revenue⁽³⁾ up 10.9% year-on-year to RR 7,602 million; sales volumes up 13.9% year-on-year on a 2.6% increase in production and higher inventory sales. Change in the terms of cooperation with naphtha trading suppliers and the subsequent termination of purchases of the product for resale, providing instead transshipment services via the Ust-Luga transshipment facility to the partners.
• LPG: sales revenue up 3.4% year-on-year to RR 19,629 million; sales volumes up 19.1% year-on-year on a 23.6% increase in production following the launch of integrated transportation and fractionation capacities in 2014, which enabled SIBUR to process increased volumes of available light raw NGL feedstock. The increase in production was partially offset by the growth in internal sales to the petrochemicals business on higher Tobolsk-Polymer capacity utilisation.
• Export duties: support for LPG and naphtha netbacks on lower export duties; 68.7% decrease in naphtha export duty (in USD terms); zeroing of LPG export duty from February 2015.
• Russian rouble depreciation:natural hedge for our effective average selling prices from the collapse in market prices for most products.
• Raw NGL: sales revenue down 80.9% year-on-year on a 36.0%⁽¹⁾ increase year-on-year in fractionation volumes following the expansion of fractionation capacity.

In the first quarter of 2015, our revenue from sales of petrochemical products increased by 46.0% year-on-year to RR 41,217 million on strong sales of basic polymers and plastics and organic synthesis products as a result of capacity expansions and support from Russian rouble depreciation, while synthetic rubbers were slowly recovering benefiting from lower feedstock costs.

• Basic polymers: sales revenue up 64.8% year-on-year to RR 12,186 million primarily due to 64.5% year-on-year increase in PP sales volumes (Tobolsk-Polymer Plant average capacity utilisation of 91.2%).
• Synthetic rubbers: sales revenue up 35.1% year-on-year to RR 9,104 million due to higher capacity load on collapsed feedstock pricing and Russian rouble depreciation, as well as completed homologation with key clients for thermoplastic elastomers; a 16.0% increase year-on-year in commodity rubber sales volumes; and a 25.3% increase year-on-year in thermoplastic elastomers sales volumes.
• Plastics and organic synthesis products: sales revenue up 48.6% year-on-year to RR 14,538 million on higher sales volumes of glycols, PET, and BOPP-films, following capacity expansions.
• Intermediates and other chemicals: sales revenue up 24.8% year-on-year to RR 5,389 million.
• International market prices: decline in international prices in USD terms at lower rate compared to the collapse in hydrocarbon feedstock pricing.
• Russian rouble depreciation: natural hedge to our effective average selling prices despite declined market prices for most products.

In the first quarter of 2015, our hydrocarbon feedstock purchases were impacted by the full consolidation of Yugragazpererabotka from March 2014, when we changed approach to the treatment of APG and NGLs, while there were no changes to the available volumes at operational level. We also observed a decline in our average purchase prices versus the fourth quarter of 2014.

• APG: purchasing expenses up 84.1% year-on-year to RR 5,533 million; purchasing volumes up 40.6% and purchase price up 30.9% year-on-year due to the consolidation of Yugragazpererabotka and the related new terms of cooperation with Rosneft; 1.4% increase year-on-year in total processing volumes; average purchase price down 6.5% quarter-on-quarter.
• NGLs: purchasing expenses down 31.0% year-on-year to RR 5,002 million; purchasing volumes down 35.0% and average purchase price up 6.1% year-on-year due to the consolidation of Yugragazpererabotka; average purchase price down 22.6% quarter-on-quarter.
• Paraxylene: purchasing expenses up 24.5% year-on-year to RR 1,579 million; 13.8% increase in purchasing volumes following PET capacity expansion and 9.5% increase year-on-year in average purchase price.

BORROWINGS

Debt Maturity Profile

Debt Currency Structure

• Total debt: a 28.7% increase vs. 31 December 2014 to RR 265,559 million attributable to the new borrowings to fund the acquisition of a 49% stake in Yugragazpererabotka (fully paid in April 2015), first drawdown of EUR 115 million out of EUR 1,575 million ECA-backed committed credit line for ZapSibNeftekhim (ZapSib-2).
• Cash and cash equivalents: RR 44,824 million of cash pending outstanding payment to Rosneft (fully paid in April 2015).
• Net debt: a 23.6% increase vs. 31 December 2014 to RR 220,735 million.
• Credit lines: RR 222,088 million available under existing credit facilities denominated in Russian roubles, US dollars and euros, both short- and long-term, of which an equivalent of RR 114,542 million committed.

CORPORATE HIGHLIGHTS

• April 2015: SIBUR paid the remaining amount due to Rosneft for a 49% stake in Yugragazpererabotka acquired in March 2014. Since then SIBUR does not have any payable outstanding for this transaction.
• March 2015: Moody's affirmed SIBUR rating at “Ba1” (negative outlook);
• March 2015: first drawdown of EUR 115 out of EUR 1,575 million ECA-backed committed credit line for ZapSibNeftekhim (ZapSib-2);
• March 2015: SIBUR Board of Directors approved the 2015 CAPEX plan of RR 64.7 billion (net of VAT);
• February 2015: official launch of ZapSibNeftekhim construction;
• February 2015: Fitch affirmed SIBUR rating at “BB+” (outlook stable).

The published data may be revised when we publish the IFRS unaudited consolidated interim condensed financial information as of and for the three and six months ended 30 June 2015 and supporting MD&A.

⁽¹⁾ Including fractionation volumes under processing arrangements.

⁽²⁾ Revenue adjusted for naphtha trading operations via Ust-Luga, ceased in 2015.

⁽³⁾Adjusted for naphtha trading operations via Ust-Luga, ceased in 2015.