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Chelpipe Group's Board of Directors approves development strategy through 2024 and nominates two new independent directors

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Chelpipe Group's Board of Directors approves development strategy through 2024 and nominates two new independent directors
Moscow, 4 February 2020. The Board of Directors of Public Joint-Stock Company Chelyabinsk Pipe Rolling Plant (Chelpipe Group, the Company or the Group), a leading Russian steel pipe producer and a provider of integrated solutions to companies in the fuel and energy sector, has  approved the Company's development strategy for the period through 2024 and nominated two independent directors for approval by the shareholders meeting.
The new strategy seeks to ensure consistent and strong business growth by transforming Chelpipe Group to a customer-centric enterprise. The strategy focuses on developing the Company’s offering in high value-added segments, gradual expansion in adjacent segments, entry into new regions, and operating efficiency improvements. The key objectives and expected effects include:

• Focus on developing high-potential segments with moderate levels of competition and on increasing the share of niche products with high added value;
• Operating efficiency improvements to deliver a target annual reduction of at least 2.5% of aggregate costs not associated with raw materials;
• Maintaining a consistently high EBITDA margin;
• Sales channel and product portfolio diversification with a targeted export revenue share above 25%;
• Ongoing deleveraging to achieve a target net debt / EBITDA ratio of below 1.5x;
• Better structure and quality of corporate governance, higher transparency, and a more appealing investment case.

Chelpipe Group’s corporate philosophy will serve as the foundation fr om which to achieve these strategic goals. This philosophy is based on the principles of sustainable development and balancing the interests of all stakeholders, including clients, investors, shareholders, employees and society.

Value proposition enhancement

The Company will focus its efforts on high-potential segments, high value-added niche products, quality of service, and integrated engineering solutions rather than pursuing production growth in any market environment. This approach is expected to contribute to the Group's efforts to expand its proposition in target markets and maintain its share of export sales in revenue mix at above 25%.

Corporate philosophy

Chelpipe Group’s key focus areas are strengthening its corporate culture, organisational structure and process management, as well as developing its production system, improving customer experience and digital transformation. Sustainability is at the core of Chelpipe Group’s strategy and the Company remains committed to upholding stringent health and safety standards, meaningful employee development, environmental well-being, as well as social and economic development for the regions wh ere it operates. The Company will continue planning and working towards these goals in line with best  practices.

Corporate governance

Improving the structure and quality of corporate governance is another focus area for Chelpipe Group as it seeks increase transparency and strengthen its investment case. To this end, the Board of Directors has nominated two new and highly reputable independent directors with a wealth of relevant expertise – Regina von Flemming, an independent  director and member of the Board of Directors of MTS PJSC, and Doug Gardner, member of the Board of Directors, Chairman of the Audit Committee at Kaspi.kz, member of the Consultation Council and the Audit and Finance Committee at Kaspi Bank, Managing Director at CAIGAN Capital. If elected at the general meeting of shareholders on 27  february 2020, the number of independent members on the Board of Directors will  increase to three, including Vadim Makhov, Professor of Business Practice at the Moscow School of Management Skolkovo.
Approval of our long-term strategy marks a major step towards transformation into customercentric business. Our key target for the next five years will be growing our fundamental value by improving customer experience, focusing on high-margin segments with the strongest outlook, incremental targeted investments into production capacities and improving our internal efficiency. By the end of 2024 these strategic investments, together with our extensive operating efficiency programme, will make us the industry leader in terms of EBITDA margin. A major part of our new strategy involves integration of sustainability targets into our strategic priorities. We have already been quite successful in this area, fostering economic and social growth and delivering global shipments of products made to today’s most rigorous standards. We are making every effort to integrate a sustainable development framework into every business process. At the same time, we are working to ensure the highest quality and scope of corporate disclosure on achieving sustainable development goals in line with best practices.
Andrey Komarov
chairman of Chelpipe Group’s Board of Directors
The Company’s management expects to present the details of the new strategy to investors in due course.

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