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Message from the Chairman of the Board

2016 was the year that put the viability of our business model and development strategy to the test.
Ivan Streshinsky
Chairman of the Board of Directors
Management Company Metalloinvest

Dear shareholders, partners and colleagues,

2016 was the year that put the viability of our business model and development strategy to the test. High price volatility, asignificant drop in iron ore prices, and foreign exchange market instability coupled with other events proved a real challenge for the Company.

I am happy to report that thanks to the joint and prompt actions of the Board of Directors and the management team, supported by the collective efforts of all our staff, we have passed this stress test with flying colours.

Our flexible business model, diversified product portfolio, operational efficiency, and financial stability gave us the strength to weather the downturn and deliver record-high operational performance and stable financial results. As at the year-end, our revenue saw a small decline of 3% to USD 4,261 million, largely due to declining prices for the Company’s products in USD equivalent. Our balanced borrowing policy translated into further deleveraging, with total debt decreasing to a five-year low on the back of the debut Eurobond redemption and partial early repayment of pre-export facilities. We improved the structure of our debt portfolio through refinancing and increasing the proportion of rouble-denominated and long-term borrowings. We succeeded in maintaining our net debt / EBITDA ratio at an acceptably low level of 2.5x.

Our EBITDA decreased by 12% to USD 1,258 million in 2016, mainly due to overall market volatility and commodity prices growing faster than prices for finished metal products. At the same time, our target EBITDA margin remained relatively high, at 30%.

Our strong financial position and the viability of our strategy have been confirmed by the international rating agencies that upheld Metalloinvest’s long-term ratings and stable outlook.

The development of our corporate governance system is an important pillar of business sustainability. We are constantly improving our corporate governance procedures based on global best practice.

The full consolidation of JSC Holding Company Metalloinvest on the balance of USM Metalloinvest LLC was a key event of 2016. By streamlining our ownership structure, we will be able to improve the Company’s transparency and the quality of corporate governance.

The Company has historically put a strong emphasis on the implementation of sustainable development principles by focusing on HR policy, health and safety, reduction of environmental impact and the economic and social development of its regions of operation.

Metalloinvest looks to the future with confidence and continues to pursue its strategic goals aimed at strengthening its market leadership in high value-added products. In 2017, we are going to launch a third hot briquetted iron (HBI) plant at Lebedinsky GOK, which will bring our commercial HBI capacity to 4.5 million tonnes per annum and reinforce our global leadership as a supplier of this high-margin metallised product.


Ivan Streshinsky
Chairman of the Board of Directors
Management Company Metalloinvest