JANUARY 2016 PUBLICATION OF LUKOIL LUBRICANTS COMPANY (LLK-INTERNATIONAL) LLK-INTERNATIONAL GENERAL DIRECTOR MAXIM DONDE: PAGE 2 „LUKOIL intends to expand extensively its presence in the synthetic oil market. This segment is the future of our business.“ CONTENTS 2 INTERVIEW Аlways Moving Forward LLK-International General Director Maxim Donde sums up the Company's performance in 2015 2 6 CORPORATE AFFAIRS Energetic Expansion in All Directions The heads of LLK-International's foreign subsidiaries speak about their companies' achievements and plans for 2016 13 CORPORATE AFFAIRS LUKOIL Recognized as Innovation Company of the Year in Maritime Shipping Our colleagues win a prestigious award for developing 6 high technology marine lubricants 14 PARTNERSHIP Setting Up Industry Standards LUKOIL becomes the first company in the world to receive the approval of Mercedes-Benz for 0W-30 engine oil for trucks 15 MARKETS LLK-International Prepares Ground for Breakthrough in China 13 The Company starts building its own dealer network in the world's most populated country 18 PARTNERSHIP Renault Russia Picks LUKOIL GENESIS for Its Motrio Brand LLK-International enters another cooperation deal with a leading global car manufacturer 19 FORUM 15 The Year of Opportunities Our coverage of the 11th Moscow International Lubricants Week 23 PRODUCT LUKOIL Motor Oil, Gasoline Stations Recognized as № 1 National Brands in Russia Participants in a nationwide poll recognize LUKOIL's excellence "МАСЛА@ЛУКОЙЛ" in lubricants production and marketing January 2016 "МАСЛА@ЛУКОЙЛ" is a publication of LLK-International 24 CORPORATE AFFAIRS Publisher: RPI Appointments Address: LLK-International, 6 Malaya Yakimanka, Moscow 119180 The latest key staff moves in Turkey and Ukraine Phone: +7 (495) 980 39 12 e-mail: [email protected] Press run: 2,000 The magazine is registered by the Federal Service for Media Law Compliance and Cultural Heritage. Registration certificate ПИ №ФС77-28009 1 Аlways Moving Forward INTERVIEW Last year was a special year for our company, the anniversary year. In our traditional year-end interview, LLK-International General Director Maxim Donde shares his impressions on the Company’s first decade, wraps up performance in 2015 and talks about prospects for further development of LUKOIL’s lubricants business. Mr. Donde, we can say that this is the itable company that would run the time not only for summing up a single lubricants business. year, but the entire decade, too. You Performance figures tell a story of were there when LLK-International how successful we have been in this was founded. Does the Company to- endeavor. The Company’s opera- day match the expectations you had tional profit has since been grow- at the time of its creation? ing by 26 percent each year. Our product range has meanwhile in- Maxim Donde | Looking back at creased sevenfold (from 86 to 600 the path that we have covered over items). The number of automak- the past 10 years, it is truly pleasant ers and equipment manufactur- to know that many of our ambitious ers’ approvals has grown 16 times plans eventually came to fruition. I’d (from 31 to 487). Finally, our annu- like to note that back in 2005 LUKOIL al growth rate of premium product had held the leadership in Russia in sales reached 18 percent. When the terms of size of lubricants manufac- Company was starting out, it was a turing, but on the whole this business local player, and today LUKOIL lu- with scattered assets was somewhat bricants are available in more than questionable from the point of view 100 countries. of its efficiency and profitability. At In many fields the scale of our activi- that very moment LUKOIL President ties eventually surpassed initial expec- Vagit Alekperov set a specific task tations. For example, our marine lubri- for us — ​to create a successful, prof- cants business, which has become one of the Company’s “calling cards” on the international scene, has demon- strated rapid growth. Back in 2008, we took our first steps in this business by founding LUKOIL Marine, and to- day our share in the global market of marine lubricants for maritime ship- ping exceeds 8.5 percent. In 2006, our big strategic success was the creation of LLK-NAFTAN joint venture for additives manufacturing in Belarus. The plant, which had once been the largest additives produc- er in the Soviet Union, was in sham- bles and on the verge of a shutdown. We weren’t afraid to invest money in its modernization and we retained the factory’s R&D specalists. 2 Today, the plant provides a third of all cent share in Russia’s synthetic oil mar- additives we use in lubricants produc- ket in 2016. tion. Growing our share in the segment of From the very outset, we aimed to premium lubricants for imported and produce and market the lubricants new cars has become a chief task for that would have the approvals of us. LUKOIL intends to extensively ex- the world’s leading car and equip- pand its presence in the synthetic oil ment manufacturers. Ultimately, we market. This segment is the future of achieved this goal. Moreover, thanks our business. to our own R&D solutions LUKOIL is An important element of this strate- currently able to manufacture prod- gy was the September 2015 launch ucts that even surpass industry stan- in Russia’s retail market of LUKOIL dards. GENESIS motor oil, which has per- formed greatly in Europe since 2015 was a rather difficult year for 2012. This product has won a num- Russia’s economy. How did that reflect ber of first fill contracts at several on the lubricants industry? European car factories, and is al- so used in many franchised work- М. D. | We have thoroughly stud- shops in Europe and Russia as a ser - ied year-end performance results vice fill. ACCORDING TO LLK-INTERNATIONAL throughout the industry. Official statis- GENERAL DIRECTOR MAXIM DONDE, tics suggests that there has been a cer- How successful was 2015 from the LUKOIL IS GOING TO BOLSTER tain drop in industrial manufacturing viewpoint of first and service fills? ITS REPUTATION AS THE LUBRICANTS BRAND and shipping. № 1 IN RUSSIA BY GROWING THE SHARE According to Rosstat, Russia’s GDP М. D. | According to year-end results, OF PREMIUM PRODUCTS has shrunk by 4 percent. Generally, we have over 10 existing contracts it correlates with a drop in lubricants for first fill, including deals with auto- sales across Russia. We have al- makers that rank in the top 10 glob- cants through franchised workshops so witnessed a dramatic 30-percent ally. We have significantly increased have more than tripled. The Company is aware of the big role such deals have in strengthen- In many fields the scale of our activities eventually surpassed ing the positive image of our brand. initial expectations. For example, our marine lubricants In franchised workshops lubricants business, which has become one of the Company’s “calling are selected by specialists such as me- cards” on the international scene, has demonstrated rapid chanics and technical experts. Their growth decisions aren’t governed by emo- tions, but common sense, concrete fig- ures and facts, results of tests and tri- drop in imports of finished lubricants our client pool in franchised work- als, availability of car manufacturers’ against the backdrop of the ruble’s shops, it has grown 2.4 times com- approvals. The model of future con- devaluation. In this situation, the mar- pared to 2013, and the sales of lubri- sumption of motor oil is defined here. ket offers good prospects for the best Russian lubricants such as LUKOIL products. The OEM’s continuing demands to improve the quality of lubricants, as well as certain changes in Russia’s car fleet, which is dominated by for- eign makes, have brought to the fore- ground the issue of quality of lubri- cants and their diversity. LUKOIL has always paid close attention to these issues, and that is why the Company today is able to supply a high qual- ity alternative to many imported lu- bricants. In this regard, it is rather telling that in 2015 our sales of synthetic oil for passenger cars rose 1.7 times. Current synthetic oil sales dynamics make us confident that we can win a 15-per- 3 ed German Association of Automotive Industry as per the highest A grade was LUKOIL’s Austrian plant. This sig- nifies European recognition of our business since the VDA 6.3 quality management standards system, which was developed by leading German automakers such as Mercedes-Benz, BMW, Volkswagen and MAN, to- day surpasses by far the norms of the car industry’s chief standard ISO/ TS16949. For us it was another con- firmation that the path we had chosen as a company was right. Another notable event was related Many well-known franchised work- GENESIS, has raised a particular in- to the marine lubricants segment. In shops, including dealerships such as terest among consumers. 2015, LUKOIL received the presti- Rolf and AvtoSpetsTsentr had used Тhe fact that the quality of LUKOIL mo- gious ‘Technical Innovation Award’ LUKOIL GENESIS even before it ap- tor oil is on a par with the best import- at Seatrade Maritime Awards cere- peared in Russia’s retail market. The ed lubricants has been confirmed a mony. LUKOIL’s unique products sur- positive experience from first and ser- number of times by laboratory and passed the requirements of leading vice fills gives us confidence that this field tests. Today, consumers know for producers of marine lubricants for oil will also perform well in the retail sure that Russian premium lubricants diesel engines. segment. can be the best.