AFK Sistema : Segezha Group announces IFRS results for 9M 2016

25/11/2016

Segezha Group announces IFRS results for 9M 2016

Moscow, 25 November 2016 - Segezha Group (the 'Group', a subsidiary of Sistema PJSFC), a leading Russian vertically integrated forest holding with a full cycle of logging and value-added wood processing, today announces its unaudited consolidated financial results in accordance with International Financial Reporting Standards (IFRS) for the third quarter (Q3) and first nine months (9M) of 2016.

KEY OPERATING AND FINANCIAL RESULTS FOR Q3 AND 9M 2016

• Revenue for 9M 2016 up 28.6% year-on-year to RUB 31.9 bln;
• OIBDA reached RUB 6.8 bln for 9M 2016, up 29.3% year-on-year. The OIBDA margin for 9M 2016 was 21.4%;
• Net income for 9M 2016 reached RUB 1.8 bln;
• The net debt/LTM OIBDA[1] ratio at the end of Q3 2016 stood at 1.9x;
• Capital investments in 9M 2016 totalled RUB 7.4 bln

Sergey Pomelov, President and CEO of Segezha Group, said:

'Despite a challenging market, the Group continues to deliver strong growth across key financial and operational indicators. Management delivered on key targets, with revenue and OIBDA growth driven by expansion of production capacities and increased sales of paper sacks and sawn timber, an increased share of revenues attributable to high-margin products, as well as measures to optimise production costs. Lesosibirsk Wood-Processing Plant No.1, which we acquired in early 2016, has demonstrated improved production and financial performance, underscoring the success of our investment strategy.

Revenue and OIBDA growth confirm that the management is delivering against key targets and were driven by expansion of production capacities and increased sales of paper sacks and sawn timber, an increased share of revenues attributable to high-margin products, as well as measures to optimise production costs. Lesosibirsk Wood-Processing Plant No.1, which we acquired in early 2016, has demonstrated improved production and financial performance, underscoring the success of our investment strategy.

'The management team's systematic approach to development of the Group's assets, access to forest resources and a sizeable allowable cut area of 6.8 mln ha remain our fundamental competitive advantages. Our logging operations grew by 15% year-on-year in 9M 2016, while the share of in-house wood resources in the Group's wood consumption rose to 63%, helping to maintain production costs at an acceptable level.

'The key driver of business growth and expanding Segezha Group's domestic and international market footprint is implementation of a large-scale investment program to expand and upgrade capacities in key business segments. The first stage of the fibre-line upgrade at Segezha Pulp and Paper Mill (PPM) was completed in October 2016, boosting the pulp-cooking plant's performance by 28% from 900 tons per day to 1,500 tons.

'To finance the investment program, Segezha Group signed a syndicated loan agreement with international and Russian banks for EUR 383.6 mln. The funds will be invested primarily in further upgrades at Segezha PPM and construction of a new plywood mill in Kirov.'

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Segezha Group is one of Russia's largest vertically integrated forest holdings with a full cycle of logging and advanced wood processing. Segezha Group comprises forest, wood processing and pulp and paper assets in Russia and Europe. The Group operates in 12 countries. Segezha Group's production facilities are located in 87 countries and in 6 Russian regions. The company's products are sold in 87 countries. Segezha Group's enterprises employ 13 thousand people. Segezha Group is the largest forest user in the European part of Russia, with the total area of leased forest of more than 7 mln ha. 95% of its products are certified. In 2016, comprehensive forest regeneration will cover 21,000 ha of forests. Segezha Group is: No1 in Russia (52% of the market) and No2 in Europe (16.5% of the market) by paper sack production, No1 in Russia (71% of the market) and No4 in the world by production of quality unbleached sack paper, No5 in Russia and No7 globally by production of large-size birch plywood; it is also a No1 producer of sawn timber in Russia (904K m3/year) and the biggest producer of laminated log houses in Russia (25.5K m3/year). The output of laminated wood structures is 58K m3/year. Website: segezha-group.com

[1] Debt from non-related parties and financial lease liabilities net of cash divided by OIBDA for the 12 months ended 30 September 2016.