On February 21, 2019, SIBUR Holding, an integrated petrochemicals company, published its operational and financial results for the fourth quarter and the full year ended December 31, 2018 in accordance with International Financial Reporting Standards (IFRS).

Operational and financial highlights for FY2018 include substantial progress on ZapSibNeftekhim construction: as of December 31, 2018, the project was 92.5-percent complete, up from 71 percent as of end-December, 2017. The polypropylene unit was 99.6-percent complete; the steam cracker was 96.0-percent complete; and the polyethylene unit was 95.0-percent complete as of the same date.

SIBUR’s EBITDA increased by 25.0 percent year-on-year, reaching an all-time high of RUB201 billion. Revenues increased by 25.1 percent year-on-year due to higher midstream products prices. Raw NGL fractionation volumes increased by 2.5 percent year-on-year. Plastics and organic synthesis products sales volumes increased by 3.8 percent year-on-year.

SIBUR’s CEO Dmitry Konov commented, “2018 was a year of great success for us, as we achieved record-breaking financial results and confidently reached the final stage on the way to the launch of ZapSibNeftekhim, one of the world’s largest polyolefin production facilities. This large-scale investment project is the largest single-unit polyolefin production facility, which will become a landmark event post-launch not only for SIBUR, but also for the entire Russian petrochemical sector, supplying a wide range of industries, including fast-moving consumer goods, the automotive industry, construction, and pharmaceuticals. As a result of the professionalism and the synergetic efforts of SIBUR’s team through the whole year, the project is well ahead of the original schedule, and the mechanical completion is now scheduled for the second quarter of 2019, instead of late 2019.”

In 2018, the company’s revenue increased by 25.1 percent due to favorable pricing of petrochemical products, rising beyond RUB0.5 per ton (tn). Despite a surge in petrochemical feedstock prices in the reporting period, the company’s EBITDA grew by 25 percent. The EBITDA margin remained consistently high at over 35 percent, primarily due to the company’s balanced business model and returns on earlier investments. Thanks to a carefully considered financial policy, leverage remained at the same comfortable level as reported last year. The results in 2018 will further support the company’s strategy to diversify its sales markets, to increase the share of high-added-value cutting-edge products, and to improve operational efficiency.”

Operational results

In 2018, SIBUR’s gas-processing plants (GPPs) processed 22.3 billion cubic meters of APG, almost on par with the previous year. As a result, the production of stripped dry gas (SDG) totaled 19.4 billion cubic meters. Raw NGL fractionation volumes increased by 2.5 percent year-on-year, reaching 7.7 million tons. Additional volumes contributed to an increase in LPG sales volumes of 8.8 percent year-on-year, to 5.4 million tons. SDG sales volumes remained flat year-on-year at 18.5 billion cubic meters.

SIBUR increased sales volumes of most of its petrochemical products. Sales of plastics and organic synthesis products increased by 3.8 percent year-on-year to 800 thousand tons, as a result of higher alcohol production due to a two-year maintenance cycle at the production site in Perm, accompanied by higher glycol output due to increased productivity and the start of production of a new type of polystyrene since June 2018. Sales of elastomers remained flat year-on-year at 486 thousand tons. Sales of polypropylene decreased by 2.5 percent year-on-year to 583 thousand tons due to a maintenance shutdown in Tobolsk. Sales of polyethylene (LDPE) decreased by 2.2 percent year-on-year to 262 thousand tons, which was caused by a planned maintenance shutdown of the production site in Tomsk.

Financial results

Olefins and polyolefins revenue increased by 14.4 percent year-on-year to RUB100.9 billion, mainly due to positive pricing dynamics in PP and in BOPP-films, partly offset by a decline in revenue from LDPE sales.

Plastics, elastomers, and intermediates revenue increased by 16.4 percent year-on-year to RUB171 billion, largely due to positive pricing in the plastics and organic synthesis products, as well as in MTBE.

Midstream segment revenue increased by 30.7 percent year-on-year to RUB240.8 billion, largely due to higher LPG and naphtha prices.

The EBITDA increased by 25.0 percent year-on-year to RUB201.0 billion, driven by the strong performance of the midstream segment and the plastics, elastomers, and intermediates segment. Growth was partially offset by weaker olefins and polyolefins segment EBITDA, primarily reflecting tighter spreads. Over the past five years SIBUR’s EBITDA increased by 2.5x, with the rise of more than 5x in the olefins and polyolefins segment.

The net profit decreased by 7.9 percent year-on-year to RUB110.8 billion. The main factor was the reflection of the gain on the disposition of Uralorgsintez recorded in 2017 versus a substantial FX loss in 2018 due to the depreciation of the Russian ruble against the euro and the U.S. dollar and the corresponding revaluation of the company’s FX-denominated debt in 2018.

Capital expenditures increased by 12.0 percent year-on-year to 151.4 billion as a result of the ZapSib transition to the final stage of project implementation, as well as the depreciation of the Russian ruble against the euro and the dollar that affected payments in these currencies. Substantial progress was made on ZapSibNeftekhim construction: as of December 31, 2018, investment in the project totaled RUB411.9 billion, or approximately USD6.9 billion.

Borrowings

In 2018, total debt increased by 6.4 percent year-on-year to RUB332.4 billion as of December 31, 2018. The increase was attributable to new drawdowns of ZapSib-related financing, as well as to the depreciation of the Russian ruble against the euro and the U.S. dollar. The increase in total debt was partially compensated by a decrease in debt not related to ZapSib. Net debt increased by 20.4 percent year-on-year to RUB317.6 billion. The net-debt-to-EBITDA ratio remained flat at 1.6х.

About SIBUR

SIBUR is the leader of the Russian petrochemical industry and one of the largest companies globally in this sector. It has more than 26,000 employees. The company’s unique vertically-integrated business model allows it to create highly-competitive products consumed in the chemical, fast moving consumer goods, automotive, construction, energy, and other industries in 80 countries worldwide.

SIBUR helps reduce CO2 emissions stemming from the burning of oil extraction by-products, such as associated petroleum gas (APG), by recycling them instead. In 2018, SIBUR processed 22.3 billion cubic meters of APG, thus cutting greenhouse emissions by 72 million tn, which is equivalent to the annual CO2 footprint of a middle-sized European country.