4 August 2020. PJSC SIBUR Holding, the largest integrated petrochemicals company in Russia, today publishes its operational and financial results for the three and six months ended 30 June 2020 in accordance with International Financial Reporting Standards (IFRS).
Key performance indicators and corporate highlights
ZapSibNeftekhim continues to increase production volumes. In the first half of 2020, the complex produced 206 thousand tonnes of polypropylene and 507 thousand tonnes of polyethylene. Sales of polypropylene grew by 81.6% compared to the first half of 2019, and sales of polyethylene increased by more than 100%.
Revenue decreased by 11.6% year-on-year on the back of negative price dynamics in most product groups, which was partially offset by a 58.2% increase in the Olefins & Polyolefins segment due to increased sales of polypropylene and polyethylene.
EBITDA decreased by 14.2% year-on-year as the spreads of most product groups narrowed due to negative price dynamics. The EBITDA of Olefins & Polyolefins segment increased by 37.2% as a result of growth in sales volumes of polypropylene and polyethylene from ZapSibNeftekhim which was partially offset by lower prices in the period.
EBITDA margin was 31.4%, remaining at a consistently high level relative to the industry average.
Net cash flow from operating activities amounted to RUB 60.1 billion, up 8.9% compared to the first half of 2019 due to a significant reduction in income tax expenses as a result of a loss on exchange differences stemming from the weakening of the RUB exchange rate.
In June, SIBUR and Sinopec signed a shareholder agreement with respect to the Amur GCC, which is under review by regulatory authorities. If the project is implemented, Sinopec is expected to have a 40% share in the Amur GCC.
Fitch and Moody’s rating agencies affirmed SIBUR’s long-term issuer default ratings at investment grade BBB- and Baa3, respectively, with a stable outlook. As such, the Company’s investment-grade credit ratings were confirmed by three key agencies.
SIBUR successfully placed a five-year Eurobond worth USD 500 million on the Irish Stock Exchange at a record low rate for Russian corporate issuers of 2.95%. Settlement of proceeds from the Eurobond issue took place in July. A few weeks earlier, SIBUR placed its BO-01 and BO-02 exchange-traded bonds, worth RUB 10 billion and RUB 5 billion, respectively, at the lowest-ever coupon rate for market placements by corporate issuers.
A designated Sustainable Development Committee was established at the level of the Company’s Board of Directors. This decision is aimed at further strengthening SIBUR's activities in sustainable development; centralising the risk management system; strengthening the Company’s business reputation, investment attractiveness and relationships with stakeholders; as well as long-term strategic development.
Under the challenging epidemiological conditions being experienced both in Russia and across numerous regions around the world, the Company has remained committed to its key priorities: ensuring the safety of its employees and supporting the needs of society during the pandemic, ensuring ongoing production and sales efficiency, optimising the cost of its investment programme and managing liquidity. SIBUR developed and implemented a timely plan to switch to remote and shift work, which has proven to be highly effective. With the easing of restrictions in the regions where the Company operates, we are gradually returning to our standard mode of operations with the necessary security measures.
In the second quarter, SIBUR conducted thorough work to identify new sources of demand and sales channels outside of Europe, for petrochemical products as well as midstream products, in order to provide additional flexibility for the Company in the current economic situation. It is worth noting that the Company expects a significant positive effect from the implementation of optimisation measures by the end of the year – savings of 15–20% of planned costs for 2020.
Alexander Petrov, a member of the Management Board and Managing Director for Economics and Finance at SIBUR, said:
“Thanks to a systematic response and proactive actions, SIBUR successfully made it through the second quarter, which coincided with the far-reaching restrictions on the back of pandemic and a high degree of uncertainty in the macro environment.
“Despite external challenges, SIBUR has continued to grow, generating cash flow from operating activities, and consistently high business margins serve as an indicator of the Company’s financial stability and reflect its competitive position in the global petrochemical market. Our strategic project, ZapSibNeftekhim, helps to mitigate a significant share of the negative external factors by increasing production and making a significant contribution to the financial results of the Tobolsk site as a whole, whose EBITDA margin reached 38% in the first half of the year.
“After overcoming the acute phase of the pandemic in Russia and the introduction of restrictive measures, including on businesses, three leading rating agencies confirmed SIBUR’s investment rating, and the subsequent issue of Eurobonds at a record low coupon rate indicates the continued high level of confidence on the part of the international financial community in the Company.”
In the first half of 2020, SIBUR’s gas processing plants (GPPs) processed 10.9 billion cubic metres(1) of APG, similar to the previous year. As a result, natural gas output totalled 9.5 billion cubic metres(1). Raw NGL fractionation volumes increased 3.6% year-on-year to 3.9 million tonnes(2). As a result of the increase in internal midstream product consumption due to the launch of the ZapSibNeftekhim complex, the volume of external LPG sales decreased by 32.9% to 1.8 million tonnes. Likewise, naphtha sales decreased by 18% to 491 thousand tonnes.
As a result of the gradual production ramp-up at the ZapSibNeftekhim complex, polypropylene sales increased by 81.6% to 508.7 thousand tonnes. Sales of polyethylene increased by more than 100% to 551.3 thousand tonnes. Sales of plastics and organic synthesis products increased by 2.1% to 404.1 thousand tonnes due to the sale of Togliatti-based assets and the resulting decline in sales volumes of elastomers and MTBE. This was partially mitigated by the increase in DOTP sales following the 2019 launch of new production facilities and the increase in intermediate products available for external sales following the sale of Togliatti-based assets in November 2019, as well as increased production volumes following the launch of ZapSibNeftekhim. Sales of elastomers declined by 20.6% to 213.3 thousand tonnes due to the sale of Togliatti-based assets.
Selected Operating Results
In the first half of 2020, revenue decreased by 11.6% year-on-year to RUB 235.3 billion, with the following dynamics across business segments:
Olefins & Polyolefins revenue increased by 58.2% year-on-year to RUB 77.7 billion. This growth was largely attributable to higher sales of polypropylene and polyethylene from ZapSib and partially offset by lower prices for these products.
Plastics, Elastomers & Intermediates revenue decreased by 27.7% to RUB 57.1 billion mainly due to negative pricing dynamics for most of the products and the decrease in elastomers sales volumes due to the sale of Togliatti-based assets in 2019. This decline was partly offset by stronger sales of DOTP following the launch of the new production facility in May 2019.
Midstream revenue decreased by 35.6% to RUB 73.9 billion on the back of higher internal consumption of LPG by ZapSib and negative pricing dynamics for LPG and naphtha.
EBITDA decreased by 14.2% to RUB 73.9 billion on the back of lower spreads for most product groups due to the negative pricing environment. In the Olefins & Polyolefins segment, this impact was partly offset by higher polypropylene and polyethylene sales from ZapSib. The EBITDA margin was 31.4%.
In the first half of 2020, the net loss was RUB 4.5 billion, driven by the negative RUB 42.3 billion impact of FX revaluation (mostly USD- and EUR-denominated loans). Excluding the non-cash FX impact, adjusted net profit for the period amounted to RUB 37.9 billion. SIBUR’s debt and repayment schedule remain at comfortable levels. The majority of the Company’s debt relates to the ZapSib project, which has been gradually ramped up to reach its full production capacity. Polyethylene and polypropylene production averaged 65% of nominal capacity in the first half of 2020.
As of 30 June 2020, total debt amounted to RUB 464.1 billion, an increase of 22.2% from 31 December 2019. The increase was driven by the depreciation of the rouble against the US dollar and the euro, as well as the drawdown of credit facilities for project funding and operational activities.
Net debt(5) as of 30 June 2020 increased by 15.7% compared to 31 December 2019 and amounted to RUB 419.1 billion, which was partially offset by cash accumulation by the end of the reporting period as a result of the build-up of an extra liquidity cushion.
The net debt to EBITDA ratio as of 30 June 2020 amounted to 2.7х in RUB terms and 2.5x in USD terms.
The full version of the consolidated unaudited interim financial information as of and for the three and six months ended 30 June 2020 in accordance with IFRS is available on our website at http://investors.sibur.com/results-centre/financial-results.aspx?sc_lang=en.
(1) Excluding third-party volumes processed at SIBUR’s capacities.
(2) Including volumes processed at third-party capacities and excluding third-party volumes processed at SIBUR’s capacities.
(3) EBITDA adjusted for the Group’s portion of EBITDA of joint ventures and associates and net of the non-controlling interest of related subsidiaries’ EBITDA.
(4) Includes purchase of property, plant and equipment, intangible assets and other non-current assets
(5) Net debt is calculated as total debt (starting from 1 January 2019 including lease obligations) excluding cash and cash equivalents