Moscow, 31 March 2017 - Segezha Group, a subsidiary of Sistema PJSFC and a leading Russian vertically integrated forestry holding with a full cycle of logging and advanced wood processing, announces its unaudited consolidated financial results prepared in accordance with International Financial Reporting Standards (IFRS) for the fourth quarter and full year 2016.

KEY OPERATIONAL AND FINANCIAL INDICATORS for Q4 and FY2016

• Revenue 2016 grew by 30.5% YoY to RUB 43.0 bn; in Q4, revenue grew by 36.3% YoY to RUB 11.1 bn.
• OIBDA 2016 increased by 37.0% and amounted to RUB 8.6 bn. The OIBDA margin reached 20.1%. In Q4, OIBDA totalled RUB 1.7 bn, having grown by 60.9% YoY, while OIBDA margin was 15.6%.
• Net income was RUB 1.6 bn in 2016 and RUB 0.1 bn in Q4.
• Net debt to LTM OIBDA[1]equalled 2.7.

Kamil Zakirov, Segezha Group President and Chairman of the Management Board  said,

"In 2016, Segezha Group demonstrated strong financial and operational performance. Growth of revenue and OIBDA was achieved by expansion of our production capacity, which enabled the company to increase sales in almost all business segments. A significant contribution came from our new asset, Lesosibirsk Woodworking Plant No.1, and from expansion of sales of paper sacks produced by our European plants to new markets in Africa, South America and the Middle East.

“In 2016, the Group launched a large-scale investment programme, taking out a syndicated loan of EUR 383.6 mn.  In accordance with our inorganic growth strategy, we acquired the Lesosibirsk Woodworking Plant No.1, began an overhaul of the Segezha Pulp and Paper Mill (Segezha PPM), commissioned a paper sack production facility in the city of Salsk in the Rostov region and began construction of a new plywood mill in Kirov.

“Modernisation of the Segezha PPM envisages installation of a paper-making machine, the first one to be installed in Russia in the last 25 years. In autumn 2016, we completed modernisation of the pulp mill's fibre line, which increased the digesting capacity by 28% to 1,150 t per day. In November, we began installation of the paper-making machine, which will increase the mill's capacity by 110,000 tonnes of paper per year. The installation of the new machine will boost our sack paper output by almost 40%.

“In March 2016, we opened a branch of Segezha Packaging, LLC in Salsk. The new production facility will help us to increase the company's share of the Russian paper packaging market in 2017.

“In August 2016, we launched an additional sack production line in Segezha, which increased the Group's total output of consumer packaging to 32.1 mn pieces.

“We began implementing an investment project aimed at expanding the capacity of the Vyatka Plywood Mill in Kirov. We expect to achieve the design capacity in Q4 2018. The project will help the company to diversify its product portfolio by introducing long-grain plywood, a new high-margin product with enhanced visual characteristics–the structure and pattern of the face veneer, which are important for furniture and other goods manufacturers. This will strengthen our position on the birch plywood market. As a result, the annual output of long- and cross-grain plywood by the Kirov business unit will almost double.

“In 2016, the Group expanded its presence in Asia, principally China, and became an aggressive player in the region.

“An important segment of the Group's strategy is wood housing. Segezha Group plans to enter new markets for prefabricated houses, develop dealerships, enhance competencies of its certified construction partners and develop its own construction competencies, such as turn-key house construction, as well as increasing exports. We are considering introduction of cross-laminated timber technology in the Russian market.

“Segezha Group is currently updating its strategy in light of the latest macroeconomic trends. It has revised its sales strategy, shifted focus to development of environmentally friendly products and human capital. We are concentrating on the most promising and important markets and are committed to creating products with substantial added value.

“Customer focus is a top priority for us today and will remain so for the coming years. Our other priorities include strengthening of the sales function and focusing on quality. The Group's main goals today are further evolution on the basis of modern standards of management, stability, increasing transparency, combination of organic and inorganic growth, training of personnel and, eventually, steady growth of the Group’s value for our shareholder."

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[1] Debt owed to non-related parties and financial lease liabilities net of cash funds to OIBDA for 12 months ending on 31 December 2016.