Annual Review 2019 F CUS ON WHAT REALLY MATTERS Introduction FCUS ON WHAT REALLY MATTERS Strategic Review Business Review Sustainability Review Corporate Governance Financial Information Additional Information Delivering Value for Our Stakeholders Delivering Value for Our Stakeholders At SIBUR, we have a clear mission: to change ourselves and the Believing in the importance of sharing the results of our To learn more about world for the better. We produce materials essential to human activities in a transparent manner, we maintained regular our stakeholders, see p. 104 progress; by doing so efficiently and effectively, we aim to create communication with our stakeholders throughout the long-term, sustainable value for our stakeholders while safeguarding year. Below are the key highlights from our work with the well-being of the environment and society at large. our stakeholders during 2019. Strategic and Portfolio, Capital markets Communities responsible customers Employees Shareholders and lenders and NGOs thinking and market SIBUR's Board of Directors approved We aim to better address the needs of our We are committed to ensuring the We are committed to maintaining Our strong balance sheet provides us with SIBUR continues to make meaningful the 2025 Sustainability Strategy, centred customers and develop our operations safety, integrity and well-being of our a balance of both investments in further a platform to continue to invest in attractive economic and social contributions on five key focus areas in which SIBUR to meet market demands. As customer 23,000 employees. Our aspiration is to development and delivering superior growth opportunities while maintaining in the regions where it operates. can contribute to the resolution of expectations evolve, we also seek to ensure create a culture that nurtures new ideas returns to our shareholders. our track record as a reliable company that global problems and create long-term that more of our products are responsibly and rewards strong performance. always meets its obligations. SIBUR joined the UN Global Compact sustainable value for all stakeholders. sourced and sustainably produced. SIBUR remains one of the most profitable and integrated the UN Sustainable Over the last year, our LTIF improved petrochemical companies: with an FY19 In June 2019, Fitch upgraded SIBUR’s Development Goals (SDGs) from SIBUR created a Committee on Ecology, SIBUR began production at the by 16%, and we intend to further reduce EBITDA margin of 32%, the Company investment-grade rating to BBB-; the 2030 Agenda for Sustainable Sustainable Development and Social ZapSibNeftekhim (ZapSib) polyolefin this figure by 5% annually; consistently exceeds the industry In August 2019, Standard & Poor’s Development into its operations; Investment at the Management Board complex, whose launch stimulates Our professional training activities average; assigned SIBUR a BBB- rating, which During 2019, SIBUR paid level; the growth of the polymer processing totalled 42 hours per FTE; In March 2019, SIBUR revised its dividend means SIBUR now holds an investment- USD195 million in corporate taxes and SIBUR joined two international industry and encourages the production Third place in HeadHunter’s ranking of policy, targeting a payout ratio of no less grade rating from the world’s three major made an economic contribution of associations and initiatives: the UN of final products; the best Russian employers in 2019; than 35% of NI; rating agencies; approximately USD8 million through Global Compact and Petcore Europe; SIBUR launched PolyLab, Russia’s first Two of the goals outlined in our Over the last 10 years, SIBUR has In September 2019, the Company carried inter-region charitable programmes; SIBUR processed 22.6 billion cubic R&D centre for the development and Sustainability Strategy include grown its revenue and EBITDA fourfold out its third Eurobond placement, with SIBUR’s Formula for Good Deeds metres of APG in 2019 and prevented testing of polymer products in Skolkovo; increasing employee engagement from and sevenfold, respectively, and we are more than half of the bonds ultimately programme was named the Best Social the emission of 72 million tonnes of SIBUR set a course for the introduction 74% in 2019 to 80% and developing constantly screening ideas with a focus purchased by foreign investors. Project in Russia in the Charity category. greenhouse gases (in СО2 equivalent); of a circular economy by considering the corporate practices aimed at promoting on profitable niches and feedstock In June 2020, Fitch and Moody’s affirmed SIBUR adopted specific goals in terms r-PET project at POLIEF to incorporate leadership culture and equal monetisation for further value creation. SIBUR's ratings at investment-grade of environmental and climate impact polyethylene terephthalate (PET) flakes opportunities. BBB- and Baa3, respectively, with a stable reduction; from used packaging into the production outlook. S&P also affirmed its investment- SIBUR integrated ESG indicators into process for primary PET, and by entering grade BBB- though changed the outlook its investment process. into partnerships in the field of waste to negative in May 2020. management; In June 2020, SIBUR raised USD 500 mln SIBUR launched the first in Russia eco- following the offering of 5-year Eurobonds. friendly dioctyl terephthalate plasticiser APG — associated petroleum gas, by-product of oil Compared to a selected peer group (in alphabetical The coupon rate was set at 2.95%, which (DOTP) facility in Perm, which is the production. order): BASF, Braskem, Dow, LyondellBasell, Petronas, is a record low for Russian corporate Including contractors providing services as part PTT Chemicals, SABIC and Westlake Chemical. the 2025 Sustainability To learn more about single largest production site of its kind of the Company’s ongoing operations, but excluding Adjusted for FX gains/losses, extraordinary and issuers. Strategy, see p. 88 in Europe. contractors involved in construction. one-off income and expenses. 2 Annual Review 2019 www.sibur.ru/en 3 About the Report FCUS ON WHAT REALLY MATTERS Strategic Review Business Review Sustainability Review Corporate Governance Financial Information Additional Information About the Report Contents The information contained herein pertaining to SIBUR (the “Group”) has been provided Introduction Business Review Corporate by the Company solely for information purposes. By reading this Annual Review, you agree 2 50 to be bound by the limitations set out below. Delivering Value for Our Stakeholders Our Business Governance 104 4 52 Corporate Governance The material contained in this Annual Review is presented solely for information purposes and About the Report, Contents Application of Our Products is not to be construed as providing investment advice. As such, it has no regard to the specific 106 investment objectives, financial situation or particular needs of any recipient. It should not be 6 54 Board of Directors SIBUR at a Glance Feedstock Sourcing regarded by recipients as a substitute for the exercise of their own judgment. 118 8 56 Corporate Secretary There may be material variances between estimated data set forth in this Annual Review and Business Model Midstream 119 actual results, and between the data set forth in this Annual Review and corresponding data 10 62 Management Board previously published by or on behalf of the Company. Geographic Footprint Olefins & Polyolefins 122 12 66 Anti-corruption Policies and Compliance This Annual Review contains forward-looking statements that are subject to change without Key Developments Plastics, Elastomers & Intermediates notice; this includes statements based on the Company's current expectations and projections 124 14 74 about future events. All statements, other than statements of historical fact, contained herein are External Auditor Contributing to a More Value Chain forward-looking statements. Sustainable Future 124 76 Information for Shareholders Forward-looking statements are subject to inherent risks and uncertainties, such that 16 Production Flows and Investors future events and actual results may differ materially from those set forth in, contemplated How to Sort Waste Properly 78 by or underlying such forward-looking statements. The Company may not actually achieve Transportation & Logistics or realise its plans, intentions or expectations. 80 Research and Development Financial There can be no assurance that the Company’s actual results will not differ materially from Strategic Review 82 the expectations set forth in such forward-looking statements. 20 Digital Transformation Programme Information Message from the Chairman 128 Factors that could cause actual results to differ from such expectations include, but are not of the Management Board Management’s Discussion and Analysis limited to, the state of the global economy, the ability of the petrochemical sector to maintain 24 of Financial Condition and Results levels of growth and development, risks related to petrochemical prices and regional political Investment Case Sustainability of Operations and security concerns. The above is not an exhaustive list of the factors that could cause actual 180 results to differ materially from the expectations set forth in such forward-looking statements. 30 Review Independent Auditor’s Report The Company and its affiliates are under no obligation to update the information, opinions Growth Strategy 86 or forward-looking statements in this Annual Review.