Chelpipe Group approves new dividend policy

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5, Lesnaya St., Bld. V, Moscow, Russian Federation

https://chelpipegroup.com/press-center/Chelpipe-Group-approves-new-dividend-policy/

Moscow, 4 February 2020. The Board of Directors of PJSC Chelyabinsk Pipe Rolling Plant (“Chelpipe Group”), a leading Russian steel pipe producer and a provider of integrated solutions to companies in the fuel and energy sector, has approved a new dividend policy in line with best industry practices. Chelpipe Group intends to pay dividends at least twice a year. This decision is aimed at increasing shareholder value and boosting returns to shareholders.

Payouts under the dividend policy will vary depending on the company’s debt burden. This approach is designed as a balancing mechanism to support financial stability while also taking into account Chelpipe Group’s needs for capital expenditures associated with strategic investment projects:

• The company plans to pay dividends equal to at least 100% of IFRS Net Profit or free cash flow (whichever is the higher) if the net debt/EBITDA ratio is less than 1.5x;
• The company plans to pay dividends equal to at least 70% of IFRS Net Profit or at
least 100% of free cash flow (whichever is the higher) if the net debt /EBITDA ratio is
equal to or higher than 1.5x but lower than 2.5x;
• The company plans to pay dividends equal to at least 50% of IFRS Net Profit or at
least 75% of free cash flow (whichever is the higher) if the net debt /EBITDA ratio is
equal to or higher than 2.5x but lower than 3.5x;
• If the net debt/EBITDA ratio is 3.5x or above, dividend payments will be at the discretion
of the Board of Directors;
• All dividend payments are subject to approval by the general meeting of shareholders.

Taking into account the interests of a wide range of stakeholders is an important element in improving Chelpipe Group’s corporate governance system. A clearly defined dividend policy increases the company’s transparency and predictability in the eyes of shareholders, while a flexible formula for determining payouts acts as a guarantor of the company’s financial stability and also supports ongoing implementation of strategic projects. We are exploring various options for entering equity markets, including a potential equity offering on Moscow Exchange, as part of our efforts to strengthen Chelpipe Group’s status as a publicly traded company and finance future growth. Any decision will take into account the interests of all key stakeholders, Chelpipe Group’s strategic priorities, and prevailing market conditions.

Boris Kovalenkov

CEO of Chelpipe Group

The new dividend policy will apply to dividend calculations for FY 2019 and beyond. Before 2020, Chelpipe Group paid out dividends once a year in 2017 and 2018, and twice in 2019, in the aggregate amounts of RUB 4.7 billion, RUB 5.5 billion and RUB 7.7 billion, respectively.