2017 full year IFRS results and market overview

Transcription

1 Public Joint Stock Company Chelyabinsk Pipe Plant 2017 full year IFRS results and market overview March 2018

2 Page number SECTION I KEY FIGURES 4 SECTION II MARKET OVERVIEW & COMPANY STRATEGY 7 SECTION III FINANCIALS 20 SECTION IV APPENDIX 26 2

3 SECTION I Key figures

4 CHELPIPE AT A GLANCE KEY FACTS One of Russia s largest pipe manufacturers with a diversified customer base within Oil & Gas and Industrial sectors & total market share of c.17.5% Main operational assets are located in Chelyabinsk (ChelPipe), Pervouralsk (Pervouralsk New Pipe Plant) & Almetyevsk & Izhevsk (Rimera) Core shareholders are Andrey Komarov and Alexandr Fedorov (jointly control more than 80% of ChelPipe Group) Credit ratings: (Ba3/BB-/A+) (Moody's, s / Fitch, neg / RA Expert, s) KEY EVENTS ChelPipe shipped LDP for the first time to Uzbekistan for Uchkyr-Gazli pipeline ZO-32 steel making plant reached historical sales volumes and project capacity of 1 million tons of billets Rimera OFS 3 almost doubled volume of wells in service from 5,700 to 10,400 ChelPipe Group signed a club loan facility with a syndicate of leading international banks totaling 150 mln euros (or USD equivalent) ChelPipe increased number of premium connections sold by 6% Y-o-Y achieving a new company record SECTOR POSITIONING 1 AMONG RUSSIAN PRODUCERS 2 in LDP market 2 in OCTG market 19% 0% 12% 30% 24% 15% Chelpipe ТМК OMK ITZ Other RF 4 Import 16% 17% 18% 49% Chelpipe ТМК OMK Other RF NUMERICAL SUMMARY RUR bln Revenue EBITDA Margin (%) Net income (1.2) Margin (%) (1.0) Gross Debt Cash Net debt Net debt / EBITDA 4.1x 3.0x 2.7x 2.9x Shipments 2, 000 tons LDP OCTG Other seamless Other welded pipes PRODUCT MIX SHIPMENTS 1% Revenue 2 Seamless pipe 2% 19% 35% 45% LDP 3 OFS & trunk pipeline Other pipes 38% 60% Seamless pipe LDP Other welded Market: 1,604 ths t 1 Market: 2,290 ths t 1 RUR bln Output: 1,988 ths t (1) Company estimates for 2017, market size is provided exclusively for LDP & OCTG pipe segments, incl. exports/imports from/to Russia (2) Including only pipe division shipment volumes, incl. export sales (3) OFS oilfield services division (Rimera group of companies) 4) Including Zagorsk Pipe Plant (ZTZ) Source: Company data 4

5 RUR bln RUR bln RUR bln RUR bln RUR bln RUR bln SEGMENTAL PERFORMANCE DYNAMICS REVENUE 1 EBITDA % 21.1% 14.8% Pipe segment 130,8 122,7 145,7 26,5 25,9 21, Oilfield Services 11,7 12,2 12,4 20.8% 13.3% 16.4% 2,4 2,0 1, % 6.5% 9.3% Trunk Pipeline Equipment 8,1 5,9 4,9 0,5 0,4 0, (1) Including inter-segment revenue (2) EBITDA figures exclude adjustments and eliminations and hence differ from consolidated group EBITDA = EBITDA margin Source: Company data 5

6 SECTION II Market overview & company strategy

7 DIVERSIFIED SALES CHANNELS AND LOW CLIENT CONCENTRATION IN INDUSTRIAL SECTOR DOMESTIC VS EXPORT PIPE SHIPMENTS REVENUE MIX IN THE PIPE SEGMENT Exports: +13% Y-o-Y 19% 9% 72% Shipments: 2 mln t Domestic sales Nord Stream 2 Other exports 33% 67% Oil and gas sector Industrial sector, power generation sector, etc. OIL AND GAS SECTOR REVENUE MIX 2% Nord Stream 2 AG 4% 10% Gazprom 28% Rosneft 6% Gazprom neft 7% Surgutneftegaz 7% LUKOIL 11% 25% Transneft Slavneft Other Source: Company data INDUSTRIAL SECTOR REVENUE MIX 5% 95% TOP-7 Customers Other *Including: Kamaz, LLC Siberian generating company, RPRZ, SAAZ Complekt, PJSC "T Plus", Izhneftemash, Krasniy Kotelshik * 7

8 EBITDA margin, % Steel pipe production,th t CHELPIPE RANKS AMONG THE TOP GLOBAL STEEL PIPE PRODUCERS LARGEST GLOBAL STEEL PIPE PRODUCERS (2017) n/a n/a n/a n/a ТМК (B+/B1/-) Tenaris (-/-/A-) Vallourec (B/-/-) Chelpipe (-/Ba3/BB-) ArcelorMittal (-/Ba2/-) US Steel (-/B1/) Baosteel (-/Baa1/A-) Sumitomo (A-/Baa1/-) ОМК (-/-/-) TPCO (-/-/-) 18,5% AMONG INDUSTRY LEADERS IN PROFITABILITY (2017) 14,9% 13,7% 12,2% 8,9% 0,1% n/a n/a n/a n/a Tenaris (-/-/A-) Chelpipe (-/Ba3/BB-) ТМК (B+/B1/-) ArcelorMittal (-/Ba2/-) US Steel (-/B1/) Vallourec (B/-/-) Baosteel (-/Baa1/A-) Sumitomo (A-/Baa1/-) ОМК (-/-/-) TPCO (-/-/-) (1) S&P/Moody s/fitch ratings (2) Figures for FY 2017 Source: Company data and publicly available figures 8

9 RUSSIAN OIL AND GAS SPACE DEMAND REMAINS STABLE NEW PIPE DEMAND & OCTG CONSUMPTION INCREASED STEADY GROWTH IN RUSSIAN DRILLING ACTIVITY thousand tons +12% kilometers 3,625 3,233 39% 30% 33% +64% 27% 1,690 20% 1,033-38% 13% ,4 21,5 20,4 22,6 24,7 28,6 New pipeline construction (LDP) Renewal of existing pipelines (LDP) Consumption of oil & gas industry (OCTG and line pipe) Drilling activity % of horizontal drilling *Company forecast 1) Company data, CDU TEK, public sources 9

10 HORIZONTAL DRILLING VOLUMES GREW WHILE PRODUCTION CUTS HAD A NEGATIVE EFFECT ON DAILY VOLUMES & NUMBER OF ACTIVE WELLS Kilometers 4,255 HORIZONTAL DRILLING IN RUSSIA 5, % 6,954 8,145 11,232 mmbpd 10,78 10,84 RUSSIAN OIL PRODUCTION +1% 10,98 10,97 10, NUMBER OF TOTAL WELLS IN RUSSIA NUMBER OF NEW WELLS COMPLETED IN RUSSIA 143, ,282 +1% 148, , ,770 6,556 6,065 +2% 6,261 7,141 7, *Company forecast Source: Oil and Gas Vertical 2016, BP Statistical Review of Energy

11 OILFIELD SERVICES GREW & MARGINALITY IMPROVED OVERVIEW KEY GEOGRAPHIC REGIONS RIMERA Group was established in 2007 and now represents ChelPipe s oilfield service division Rimera integrates key Russian manufacturers of artificial lift equipment Alnas (Electric submersible pumping systems units) and Izhneftemash (Sucker-rod pump units), and service net which supports OFS equipment and OCTG Rimera managed to nearly double the number of wells in service as a result of intensive market share expansion tactics EBITDA marginality grew by over 3% Y-o-Y as a result of cost optimization and revenue growth VOLUMES ( F) No. Region 1 Republic of Tatarstan 2 Udmurt Republic 3 Orenburg region 4 5 Khanty-Mansi Autonomous region Yugra Nizhnevartovsk Nyagan Nefteugansk Yamal-Nenets Autonomous region Noyabrsk Muravlenko Gubkinskiy Production Service net KEY PARTNERSHIPS 4 5 Volume of pump production, pc Wells in service, pc Rimera clients are the largest oil companies in Russia A 2016A 2017A 2018F 2019F 2020F ESP SRP 2015A 2016A 2017A 2018F 2019F 2020F Source: Company data 11

12 of reactors - Russia Giga watts CHELPIPE MAINTAINS A HIGH LEVEL OF CLIENT DIVERSIFICATION OUTSIDE OF OIL & GAS CHELPIPE SEAMLESS NON OIL/GAS MARKET SHARES RUSSIAN UTILITIES MARKET COMPOSITION % 46% 40% 50% 54% 60% Machinery General use Energy/chemicals Chelpipe market share INVESTMENTS IN NUCLEAR INFRASTRUCTURE E 2019E 2020E 2021E Thermal Hydropower Nuclear Renewables CHELPIPE - TURNKEY SOLUTIONS FOR ATOMIC POWER STATIONS Izhneftemash Hanger support systems SOT Pipe bends 6 Operating Under construction Planned ChelPipe Pipes ETERNO Pipe bends MSA Stop valves Source: BMI, Frost & Sullivan 12

13 000 tn VERTICAL INTEGRATION AND STRONG SUPPLIER BASE BILLETS SUPPLY STRUCTURE % 75% 82% % In 2017 ZO-32 produced 1 mln tonnes of steel a ChelPipe record! STRIP PURCHASING STRUCTURE 6% 6% 7% 9% 27% 30% 60% 55% 1% 18% 5% 40% 20% 54% 58% 4% Ural Steel OEMK Evraz Nadezhdinskiy MZ Mechel Others Zhelezny Ozon 32 High level of vertical integration in the process of seamless pipe production ММК Ural Steel Severstal Others incl. import Advantageous location near steel plate suppliers for LDP division Scrap processing Pipe billet production Zhelezny Ozon 32 Seamless pipes production R U S S I A META Group ChelPipe/PNTZ 1600 km vs 400 km ТМК ММК Chelpipe Source: Company data 13

14 OWN SCRAP PROCESSING DIVISION PROVIDES STRONG BASIS FOR VERTICAL INTEGRATION OVERVIEW KEY GEOGRAPHIC REGIONS IN 2017 The META group of companies was created in 2004 and finds itself today among TOP-3 largest Russian companies which perform procurement and conversion of steel scrap. META has 70 production sites in 13 regions of Russia taking leading positions in the local markets of scrap META constantly works on increase in production efficiency and development of client services, creating non-price competitive advantages and creating new standards of scrap industry The company uses the modern equipment of the largest domestic and foreign manufacturers such as MetsoLindemann, Liebherr,FUCHS, Sierra, KAMAZ, MAZ, MAN, etc Since the launch of Iron Ozone 32 Plant in 2011 the Group saved additional RUB 500mln annually compared to if it had to buy scrapping material from the market No. Region 1 Sverdlovsk Region 2 Chelyabinsk Region 3 Kurgan Region 4 Perm Territory 5 Republic of Bashkortostan 6 Tyumen region 7 Tyumen region (Khanty-Mansi) 8 Moscow and Moscow region 9 St Petersburg and Leningrad region 10 Samara Region 11 Ulyanovsk Region 12 Republic of Mari El 13 Saratov Region PNTZ PROCESSING OF SCRAP Sales of steel scrap, ths t Volumes of non-ferrous scrap, ths t KEY PARTNERSHIPS META s clients are the largest metallurgical holdings of Russia , ,8 14, A 2016A 2017A PNTZ sales External client sales 2015A 2016A 2017A Source: company s data 14

15 CHELPIPE HOLDS STABLE SECOND PLACE IN ALL MAJOR PIPE SEGMENTS IN RUSSIA Number of OCTG manufacturers is constantly increasing in Russia. Currently, there are 3 largest producers which constitute ca. 75% Russian market As of 2017, ChelPipe takes second place by sales volumes ChelPipe s market share in Russia is ca. 16%. 15% 15% 9% 16% 45% Chelpipe ТМК OMK Other RF Import OVERVIEW In 2017 production volume of steel pipes in Russia was 11,4 mt. Russia manufacturers are primarily focused on domestic market which achieved 9,8 mt in 2017, the rest was exported ChelPipe focuses on the following market segments: LDP pipes market focused on manufacturing and repair of main pipelines (75-80% of the market) OCTG market for oil and gas production market Other Seamless Pipe highly diversified market predominantly used in oil & gas, power generation, chemical & heavy machinery sectors ths t BENCHMARKING BY OCTG ChelPipe manufacturers all sorts of OCTG pipe products (the company doesn t manufacture drill pipes) BENCHMARKING BY LDP There are 4 leading LDP manufacturers in Russia ensuring 88% of total sales, each with 10%+ market share Among LDP producers ChelPipe carries a complete spectrum of product range including pipes up to 18 meters long with all sorts of wall thicknesses 0% 19% ths t As of 2017 ChelPipe took the second place by sales volumes ChelPipe s market share in Russia is historically around 24-25% depending on the infrastructure project schedule The LDP producer s capacity in the Russian Federation is enough to satisfy the domestic demand resulting in negligent imports BENCHMARKING BY OTHER SEAMLESS PIPES In Russia there are 2 main manufacturers of seamless pipes (TMK and ChelPipe) with combined domestic market share of 85% Russian manufacturers account for over 89% of the market; the rest is imported ChelPipe focuses on 3 main sectors for seamless pipes: oil and gas, machinery and for general purpose Historically ChelPipe s share in oil & gas pipes c % 3% 11% Chelpipe Machinery sector 50% 46% 12% 30% ths t 24% 15% 40% Chelpipe ТМК OMK ITZ Other RF Import ТМК Other RF Import General use 54% Energy and petrochemical sectors ChelPipe s market share is ca %. Source: Company data 15

16 Oilfield services CHELPIPE PROVIDES A WIDE ASSORTMENT OF VARIOUS PRODUCT LINES FOR THE OIL AND GAS INDUSTRY Products Production output 1, thou.tons Revenue1, % of total Market share 1, % Description Key customers Large diameter pipes (LDP) % -2%* 24% PJSC Chelyabinsk Pipe Plant Product range: single-joint longitudinally welded pipes Ø mm, wall thickness up to 50,0 mm, groups of strength up to X100. Production process: JCO forming, UOE forming Seamless (OCTG) % No Δ* 16% PJSC Chelyabinsk Pipe Plant, JSC Pervouralsk New-Pipe Plant Product range:ø mm, wall thickness 5,0 16,5 mm, groups of strength J55 P110 Other seamless pipes % -4%* 40% PJSC Chelyabinsk Pipe Plant, JSC Pervouralsk New-Pipe Plant Product range:ø 0,3 650 mm, wall thickness 0,1 90 mm. Production process: seamless hot-rolled and cold deformed pipes Pipeline fittings 2 12,4 12% +1%* 17% ETERNO plant produces stamp-welded components using nano-structured materials for oil and gas industry, product size range: mm, wall thickness up to 100 mm SOT produces hot-bended elbows Ø mm. Products produced at SOT are aimed for pipeline bends, for oil satiations piping systems, and for other oil and gas facilities ESP SRP pcs pcs +18%* +18%* 8% +4%* 19% +4%* 44% ALNAS - Products: electric submersible pump units (ESP), gas separators, pump protectors, submersible electric motors, alternative products (brake rotors) Izhneftemash - Products: installation of sucker-rod pumps (SRP), special equipment for oil production, spinning wrenches and pumps, wrenches for wells repair. (1) As of YE 2017 (2) Total revenue from sales of stamp-welded components and connecting parts of pipelines *Over last IFRS reporting period FY

17 INCREASE IN ANNUAL SAVINGS FROM PERFORMANCE IMPROVEMENT PROGRAM End 2016 End 2017 Energy costs Modernization of utility grid Increasing proportion of spot NG purchases by almost 2x -4 RUR mln in NG costs Materials management Advancement of production technology, displacement of certain components Changes to exploitation of certain equipment -50 RUR mln in savings Supply chain management Reduction of delivered costs via supplier changes and centralization of procurement from third parties resulting in volume discounts -126 RUR mln in savings 20% 790 RUR mln in savings* Major operational contributors to financial savings 8% 1% 32% Raw materials Optimization of raw material cost base Installation of new equipment, improvement of mill works at steel making plant -206 RUR mln in service costs 39% Vertical intergration Raw materials Supply chain management Materials management Energy costs Headcount optimization Eliminating ineffective positions, relocating underutilized employees to alternate divisions Reduction of companywide headcount by 547 Interest costs* Renegotiation of with creditors Refinancing of expensive ruble line, early prepayment of old ECA covered euro line Reduction in interest expenses by over 2.9 RUR bln Y-o-Y and increase of duration Vertical integration of production Substitution of external services and products by own capacities, -120 RUR mln in savings Optimization of own billet production -131 RUR mln in savings *Operational improvement savings only, without financial costs decrease 17

18 THE COMPANY HIGHLIGHTS FIVE CORE STRATEGIC PRIORITIES THAT LEAD TO SHAREHOLDER VALUE GROWTH Main targets Efficiency improvement 1 Strategic priorities Increased operational excellence Tasks to be done Finalizing of implementation of a centralized project management system Operating costs reduction and optimization Implementation of KPI system based on business processes model Implementation of a Supply Chain Management system Implementation of an Operational Efficiency Management system Increasing company scale 2 Entry to new markets and growth of number of clients 3 Development of new business streams Production of steel pipes with a higher value add Production of plastic, polymeric and composite pipes Expansion of OCTG product lines Implementation of new welding technologies and new materials (laser welding, alloys, composites and polymers) Diversification of business presence out of core markets Increasing operations coverage of ChelPipe s scrap division (Meta) Development of integrated B2B and B2C solutions Business diversification 4 5 Organizational improvement Business structure Ensuring maximum level of transparency of corporate governance Adaptation and standardization of business processes, unified governance system for all ChelPipe divisions Implementation of word class industry practices in management and control Focus on core business including production of steel pipes, production, leasing and servicing of pumps for upstream oil sector as well as processing of scrap Shareholder Value Growth 18

19 SECTION III Financials

20 RUR mln RUR bln FINANCIAL PERFORMANCE KEY FINANCIAL METRICS 19% 21% 15% 148,4 135,5 158,3 28,9 28,1 23, Revenue EBITDA EBITDA margin (%) ADJUSTED EBITDA BRIDGE 1 (15.8%) Chelpipe was unable to pass cost increase in full effect onto its end clients EBITDA 2016 Changes in revenue Cost of sales Distribution costs G&A expenses Impairment of assets Others 2 EBITDA 2017 (1) Company management changed adjusted EBITDA formula in 2017 to eliminate the impact of indexes that are not accompanying the core operating activities of the Group (2) Including gains/losses in associates & dividend income 20

21 RUR mln RUR mln RUR mln COST STRUCTURE DYNAMICS COST OF GOODS SOLD Raw materials Salaries & taxes D&A Overheads Utilities COGS for resale Changes in inventory allowance Changes in balances of WIP and finished goods 2017 DISTRIBUTION GENERAL & ADMINISTRATIVE Transporation, customs Salaries Packing, storage Advertising Others* 2017 Taxes 2016 Salaries Non production overheads Consulting Others** 2017 *Including: commissions, office expenses, D&A, operating lease expenses & insurance **Including: D&A, Insurance, operating lease expenses, charitable donations & auxiliary materials 21

22 IT CAPABILITIES EXPANSION INCLUDING ERP SYSTEM IMPLEMENTATION RESULTED IN CAPEX INCREASE RUR million YEAR-ON-YEAR DYNAMICS 15% MAIN CAPEX PROJECTS 88 Project name Million rubles Expansion CAPEX: 35% Expansion CAPEX: 37% Expansion projects total CAPEX Internal efficiency optimization 730 IT strategy (ERP/SAP) 290 Equipment for mechanical treatment (hot rolled pipes) 157 Rimera oilfield services improvements 130 META scrap division improvements 86 Technical improvements for Transneft Finishing center expansion (premium connections) 41 Nord Stream 2 projects 22 Other projects Maintenance Projects R&D Other Maintenance projects total CAPEX Rimera oilfield services improvements Pipe division maintenance Total: RUR mln Total: RUR mln Other maintenance works

23 CHELPIPE DEBT STRUCTURE FOR YE2017 CREDITOR BREAKDOWN DURATION BREAKDOWN 7,3% 7,5% 10,8% 56,4% Total debt 1 : RUR 86.4 bln 28,8% Total debt down 5% Y-o-Y 89,2% Other banks Foreign banks Bonds Russian gov-t banks Short-term Long-term CURRENCY DENOMINATION INTEREST RATE 1 10,2% Floating: +37% Y-o-Y 42,0% 58,0% 89,8% 1) According to IFRS Foreign currency Russian rubles Floating Fixed 23

24 DELEVERAGING AND IMPROVEMENT OF LOAN PORTFOLIO DURATION ARE KEY OBJECTIVES OF FINANCIAL POLICY DEBT AND LEVERAGE DYNAMICS AS OF ,4 4,14x 94,0 94,1 86,1 91,1 76,2 86,4 67,3 2,98x 2,72x 2,85x Debt Net debt ND/EBITDA TOTAL DEBT REPAYMENT SCHEDULE 1 CREDIT RATINGS 19,1 9,3 8,4 24,2 10,8 15,2 19,0 Rating agency Credit rating Outlook Last rating action Moody s Ba3 Stable 15/12/2017 Fitch BB- Negative 01/12/ Cash Debt due RA Expert rua+ Stable 03/08/ Debt repayment schedule according to RAS, without IFRS discounting, total debt repayment incl. leasing amounted to RUB 86.8 bln 2. Including RUB10 bln due in 2027 from callable notes 24

25 SECTION IV Appendix

26 IFRS STATEMENTS Summary Balance Sheet RUR bln As at 31 December 2016 As at 31 December 2017 Cash & cash equivalents Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total shareholder s equity Total equity + total liabilities (1) At 31 December 2016, long-term liabilities under the syndicated loan agreement were reclassified to short-term liabilities as in December 2016 the Company sent the irrevocable notice of early repayment of the syndicated loan in the amount of 75.7 RUR bln 26

27 IFRS STATEMENTS CONT D Summary Income statement RUR bln YE 2016 YE 2017 Revenue COS (95.5) (120.7) EBITDA Margin (%) Profit from operations Margin (%) Earnings before tax Margin (%) Net income Margin (%) Basic EPS (RUR/share)

28 IFRS STATEMENTS CONT D Summary Cash Flow Statement RUR bln YE 2016 YE 2017 Profit before income tax Adjustments for depreciation and amortization Adjustments for finance costs Operating cash flows before working capital changes Cash generated from operations (after interest) Purchase of PPE & intangible assets (CAPEX) (4.7) (5.3) Net cash used in investing activities (4.5) (5.5) Proceeds from borrowings Repayment of borrowings (19.6) (131.4) Dividends paid to owners of the Company 0 (3.3) Net cash used in financing activities (1.8) (8.2) Net increase in cash & cash equivalents Cash & cash equivalents at beginning of period Cash & cash equivalents at end of period Free cash flow to firm

29 CHELPIPE GLOBAL ASSETS MAP Industrial valves Czech Republic Oil production equipment Almetievsk, Izhevsk Scrap collection and processing Ural and Povolzhsky Region Stop valves Ball valves Check valves Special valves Pumping units and aggregates Chain of scrap processing sites Engineering Moscow Development of complex solutions Manufacturing of pipes Czech Republic Manufacturing of fittings and valves Oil & Gas equipment Oilfield services Pipes and stamp welds Chelyabinsk Nanoenabled stainless steel connections Stamped-welded pipeline joints (SWPJ) Moscow Almetievsk Buguruslan Magnitogorsk R U S S I A Gubkinskiy Muravlenko Noyabrsk Izhevsk Nyagan, Talinka Nefteyugansk Pervouralsk Nizhnevartovsk Chelyabinsk Steel melting and seamless pipes Pervouralsk Round and square billet Seamless pipe production Oilfield services Tatarstan, Udmurtia, Khanty-Mansiysk, Orenburg, Yamalo-Nenets Regions Steel pipes production Chelyabinsk Large diameter pipes (LDP) Pipes for oil and gas production Industrial pipes Pipeline equipment Chelyabinsk Hot bends Cold bends Short-radius bends K a z a k s t a n Almaty Distribution network Russia, Kazakhstan Trade branched in Russia and Kazakhstan 16 storage facilities Repair services of pumping equipment Pipe services 29

30 CHELPIPE HAS A VERTICALLY INTEGRATED DISTRIBUTION NETWORK ACROSS RUSSIA Main regions of distribution 1 Astrakhan, Volgograd and Rostov regions 2 Moscow, Bryansk, Vladimir, Ivanov, Kaluga, Orel, Nizhegorodsk, Ryazan, Tver and Yaroslavl regions 3 Bashkortostan, Tatarstan, Mordovia Republics, Udmurt, Kirov, Samara, Saratov and Penza regions 4 Khanty-Mansi Autonomous region and Tyumen region 5 Khakassia, Kemerovo, Novosibirsk and Krasnoyarsk regions 6 Sverdlovsk & Chelyabinsk regions 7 Finland (Nord Stream 2 project) Legend - Automotive shipments - Prominent rail shipments - Regions with most pipe shipments Finland Russia 7 2 PNTZ 1 3 Chelpipe The Company strives to grow sales volumes through its distribution network penetration while adding marginal contribution & client diversification through its commercial distribution capabilities 30

31 CHELPIPE S SCRAP DIVISION AIMS TO EXPAND ITS REGIONS OF PRESENCE BY 2022 No. Forecasted regions in Sverdlovsk Region 2 Chelyabinsk Region 3 Kurgan Region 4 Perm Territory 5 Republic of Bashkortostan 6 Tyumen Region 7 Khanty-Mansi Autonomous Area 8 Samara Region 9 Ulyanovsk Region 10 Republic of Mari El 11 Saratov Region 12 Kirov Region 13 Nizhegorodsk Region 14 St. Petersburg and Leningrad Region 15 Arkhangelsk Region 16 Republic of Karelia 17 Vologda Region 18 Murmansk Region 19 Novgorod Region 20 Pskov Region 21 Moscow and Moscow Region 22 Tula Region 23 Ryazan Region 24 Vladimir Region 25 Yaroslavl Region 26 Tver Region 27 Smolensk Region 28 Kaluga Region Accounts for ~40% of META shipment volumes and supplies exclusively internal scrap needs at PNTZ PNTZ - META region of presence as of META forecasted regions of presence by