PJSC Evropeyskaya Elektrotekhnica increased the volume of shipped engineering products by 23% in the first quarter of 2019

PJSC Evropeyskaya Elektrotekhnica increased the volume of shipped engineering products by 23% in the first quarter of 2019

May 6, 2019. Moscow – PJSC Evropeyskaya Elektrotekhnica (hereinafter the "Company") publishes its operation results for the first quarter of 2019.

The Production segment allows the Group to participate in the initial stage of the cost creation chain in specialized markets, developing and offering customers its own advanced developments and engineering solutions. According to the results of the reporting period, engineering products made by the Company accounted for a total of around 39% of the Group's deliveries.

The Activities of Engineering Centers segment provides the Group with income and attractive profitability of engineering projects through the sale of engineering products of its own production and third-party vendors. The updated list of completed projects, with sectoral breakdown, is published on the Company's website.

Key operating indicators of PJSC Evropeyskaya Elektrotekhnica:

Ilya Kalenkov, General Director of PJSC Evropeyskaya Elektrotekhnica, commented on the published results:

“In the past quarter, the Company continued its steady development in all key business areas.

Our recent start in Oil&Gas equipment production is rapidly gaining momentum, since the reference list of customers of ROG-Engineering already contains more than 35 big names of the Oil&Gas sector of Russia, Uzbekistan and countries of South-East Asia. In addition to its “classic” products, ROG-Engineering successfully brings to the market innovative equipment of its own development. One example is the facility preparing oil for processing, which will allow the mini refinery to increase the share of output of light fractions from 50–60% to 70–80%, and this means a multiple increase in profitability of its operators' business.

The successful launch of the Heat Capacity Modernization Program in Russia provides great grounds for optimism about the engineering market prospects in the country. This is a large source of new additional demand for domestic engineering companies. And this has been one of the key events for the domestic engineering market over the past few years.

Very attractive opportunities open up for the players in the Russian engineering market against the background of a clear trend towards import substitution in the Russian manufacturing industry. We can see that domestic manufacturers are more willing to turn their wise attention to domestic suppliers of engineering and technological equipment with a view to reduce or completely exclude hardly predictable risks of sanctions from Western technology suppliers. For instance, in April NOVATEK, a big player in the LNG global market, announced its intention  to increase the localization in Russia of its production of equipment and components for the next LNG projects from 30% currently to 80–85%.

I am very pleased to note the growing interest of customers in our developments in the engineering equipment segment, for example in industrial electric heating systems. The total number of projects where they are used grows and so does the volume of orders.

Our long-term relationships with key vendors of the engineering market are developing successfully:

• Schneider Electric SE: our Company is now a member of the Golden Club Prisma, a privileged community gathering the most experienced partners of Schneider Electric in Russia, that is to say manufacturers of electric switchboard equipment on Schneider Electric components;

• ABB Ltd.: our Company has a direct partnership agreement with this vendor;

• Lighting Technologies: we are an official distributor of this supplier;

• DKC: our Company is an official distributor of this vendor. We are among DKC's five biggest distributors around the world in volume of deliveries.

We expect the next quarter to be rich in news concerning the expansion of our collaboration with strategic vendors as well. The high level of relations with vendors is another aspect of our Company's competitiveness, as it allows us to offer truly attractive price conditions in the case of complex deliveries of products to our customers.

The Company also started working on launching its own production of technological equipment in the Russian Industrial Zone in the Suez Canal Economic Zone in Egypt. This will allow the use of the logistic and economic advantages of the site in Egypt."

Own production: engineering equipment

In the first quarter of 2019, the Group continued to supply engineering equipment of its own production:

1. Electric switchboard equipment

In the first quarter of 2019, our Project Directorate finalized several major projects of production and delivery of low-voltage complete devices in the field of digital, transport, energy, logistics and utility infrastructure:

• 115 Prisma columns (Schneider Electric) carrying up to 2500A (Masterpack Schneider Electric circuit interrupters) for the Data Centers of the Bank of Russia.

• Pumping units control boards for Prokshino station of the Moscow Metro.

• 6 power-dry transformers of 6 kV for the needs of the Moscow Metro.

• 25 automated process control system (APCS) boards for the Troitsky water pipeline, Krasnodar Region.

• An operating DC system for the needs of the 220 kV substation Zalivskaya (Volgograd Region).

• A pumping units control station for municipal needs (Yuzhno-Sakhalinsk).

• 38 distribution switchboards (LS IS circuit interrupters) for the Vnukovo logistics complex.

• A main distribution switchboard (MDB) 1600A (based on DKC and SE components) for a greenhouse in the Samara Region.

As part of the development of a more comprehensive and competitive offer for our key clients, the specialists of the Project Directorate have received additional training and certification in the partner companies Schneider Electric, ABB and DKC. In the second quarter of 2019, we expect the status of our Company to raise to an industrial partner for major strategic vendors.

2. Complete transformer substations for voltage of up to 35 kV

In the first quarter of 2019, the Company produced transformer substations with a total installed capacity of 105 MVA for 16 customers.

3. Industrial electric heating systems

St. Petersburg: the first comprehensive project (engineering-delivery-installation-commissioning) is being carried out using the electric heating system produced by the EE. Client: Interfill (Tosno, Leningrad Region).

St. Petersburg: a project of installing electric heating systems for roofs in four production workshops at the Cherepovets metallurgical plant (Severstal) has been implemented.

4. Lighting equipment

In the first quarter of 2019, we supplied lamps for commercial lighting and developed customized lighting fixtures and lighting systems:

• for the customer INGKA (MEGA shopping centers network);

• for the retail chains Mothercare, Hamleys, Victoria's Secret and others;

• we worked on the creation of stable algorithms to regulate lighting in non-standard light structures, with a wide dynamic 0–100% brightness range, using DALI and DMX protocols.

R&D:

• we developed new technical solutions for the power supply system of LED ceiling lights;

• we worked on the use of new LED chips with enhanced color rendition CRI=98;

• we continued experimenting, together with the LED and Optoelectronics Center of the National Academy of Sciences of Belarus, on the lighting of green crops in multi-rack mini-farms;

• we continued experiments in order to find optimal LED spectra for energy-efficient lamps used in year-round cultivation of tomatoes, cucumbers, eggplants and peppers, for the purpose of using them in commercial greenhouses.

Own production: equipment for the Oil&Gas industry

In 2019, a subsidiary of the Group, ROG-Engineering LLC, which creates equipment for the Oil&Gas and petrochemical industries, continues to expand its client base and increase its business volumes.

At the end of the quarter, the company welcomed the following new customers: Irkutsk Oil Company LLC, RITEK (OC LUKOIL) LLC, Sladkovsko-Zarechnoye LLC (FG SAFMAR), Gazpromneft-Hantos LLC, JSC Varieganneft (OC RussNeft), Small Oil Company of Tatarstan (Malaya Neftyanaya Kompanya Tatarstana) LLC.

During the quarter, the following projects were implemented:

• ERIELL GmbH (Uzbekistan): manufacture and delivery of 10 flare kits;

• ENTER ENGINEERING PTE LTD (Uzbekistan): manufacture and delivery of a dissipation candle block with hydraulic shutter and a flare system;

• LUKOIL Uzbekistan Operating Company LLC (Uzbekistan): manufacture and delivery of components for flare systems;

• Irkutsk Oil Company LLC: manufacture and delivery of equipment for flare systems;

• RITEK LLC: manufacture of a mobile preliminary water knock-out units (PWKOU) and leasing of the system to the customer;

• Sladkovsko-Zarechnoye LLC: manufacture and delivery of a device for preliminary gas extraction (DPGE);

• JSC Varieganneft: manufacture and delivery of a flare tip;

• Sladkovsko-Zarechnoye LLC: manufacture and delivery of a flare system;

• Gazpromneft-Hantos LLC: manufacture and delivery of internal devices for an Oil&Gas separator;

• Small Oil Company of Tatarstan LLC: manufacture and delivery of flare systems.

At the end of the quarter, the customer base of ROG-Engineering included over 35 companies of Russia and Uzbekistan.

ROG-Engineering launched a new corporate website http://www.rogeng.ru. The site offers users detailed information on all types of equipment produced by the company, including descriptions, photos and videos. Detailed information about the company's services is also available on the website.

R&D

ROG-Engineering continued to prepare for the delivery to a customer of a new innovation, which is an oil pre-processing facility. This innovative facility allows mini refineries to increase the share of light fractions output from the traditional level of 50–60% to 70–80%, which boosts the productivity of light fractions operators: diesel, kerosene and gasoline.

Evropeyskaya Elektrotekhnica is also ready to offer to interested entrepreneurs a number of other innovative technological solutions:

• Improvement in the depth of fuel oil refining (increase the yield of light oil products);

• Reduction in sulfur content in petroleum products to a maximum:

- 10 mg/kg in car fuel,

- 10 ppm in diesel fuel,

- 0.5% in marine fuel;

• Reduction in fuel oil consumption by 15–25% when used as fuel;

• New quality of power substations for Oil&Gas fields.

DEVELOPMENT OF VENDOR RELATIONS

The Company is constantly expanding the range of potential suppliers of equipment, both dynamic (pumps, compressors) and capacitive. For instance, during the quarter, we started a collaboration with NPO PermNefteGaz, a producer of pumping equipment.

MARKETING ACTIVITIES

The Company continued its work on public platforms, taking part in different topical exhibitions and conferences:

• Yamal Oil and Gas Forum and the interregional specialized exhibition “Gas. Oil. New Technologies to the Far North" (March 14–15, 2019 in Novy Urengoy);

• SIBUR LLC Conference on Import Substitution (March 20–21, 2019 in Tyumen);

• Innovative technical solutions of manufacturers from the Russian Federation;     

• 8th international scientific and practical conference “Innovative Technologies in the Processes of Oil and Gas Collection, Preparation and Transportation. Engineering, Construction, Operation and Automation of Production Facilities” (March 25-29, 2019 in Sochi);

• Gazpromneft-Development LLC Technical Council on innovations and presentation of the companies GPN-Development and GPN-NTC (April 3, 2019 in St. Petersburg);

• The business mission of the Franco-Russian Chamber of Commerce and Industry to the Republic of Uzbekistan, holding meetings with the management of local oil and gas companies, such as Lukoil Uzbekistan Operating, Enter Engineering, Eriell Group and East-West Engineering.

• 19th international exhibition “Neftegaz 2019. Equipment and Technologies for the Oil&Gas complex” (April 15–18, 2019 in Moscow), visit and meetings with contractors and vendors;

• 16th International Exhibition of Oil and Gas Equipment and Technologies MIOGE 2019 (April 23–26, 2019 in Moscow), visit and meetings with contractors and vendors;

• Russian Petroleum and Gas Chemical Forum and 27th international exhibition "Gas. Oil. Technologies" (May 21–24, 2019 in Ufa), participation, congress;

• 4th annual international forum and exhibition “Implementation of New Projects in Eastern Siberia and the Far East” (July 10–11, 2019 in Vladivostok), participation in the forum and exhibition.

Activities of engineering centers

In 2018, the Company implemented projects for customers from virtually all significant sectors of the Russian economy:

• Oil&Gas complex;

• steel and mining industry;

• electric power sector;

• engineering;

• chemical industry;

• telecommunications (including data centers);

• transport infrastructure;

• offices and shopping centers;

• science, education, culture and sport institutions;

• food and agricultural industry;

• infrastructure, housing;

• other industries.

During the reporting quarter, the Company delivered engineering equipment mainly on the territory of the Russian Federation.

Moscow: the first deliveries of cables and conductor products have been made to the shipbuilding complex Zvezda. This is the next step in our cooperation with Rosneft Group.

Moscow: we continue to deliver electric installations to UEC Gas Turbines.

Moscow: we delivered lighting products to 6 stores of the retail network Karusel (X5 Retail Group); deliveries are made under the new concept of reconstructing the lighting system of the network's stores that our Company engineered.

Krasnodar: we continue to actively deliver engineering equipment of different categories for the project "New Terminal of Khabarovsk (Novy) International Airport" carried out by the general contractor of the project, i.e. the company Limakmarashchstroy.

Krasnodar: in 2019, the engineering center of Krasnodar will continue to supply engineering equipment to customers in a full range of sectors, such as oil refining, air transport and cultural sites.

ENGINEERING CENTER NETWORK DEVELOPMENT

As of the end of the reporting quarter, the total number of regional engineering centers of the Company was 16.

DEVELOPMENT OF RELATIONS WITH VENDORS AND OTHER PARTNERS

Krasnodar: an agreement was entered into with the tray manufacturer Vergokan, and we will take part in the National Aviation Infrastructure Show NAIS 2019 together with Schneider Electric.

Moscow: we started to use sources of guaranteed uninterrupted power supply by Kehua Tech (PRC), obtained a distributor certificate from ABSOLUTE TECHNOLOGIES, and specialists of the Company got acquainted with the proposals of a supplier during the partnership conference in Sochi organized jointly by ABSOLUTE TECHNOLOGIES and Kehua Tech.

Moscow: we entered into our first supply contract for cable structures produced by SE Wibe in order to implement the Astrakhan GPP project.

Moscow: we started to use more actively the solutions of ESYLUX (Germany) in the projects of the Company, and the Company was recognized as ESYLUX's (Germany) best distributor in the Russian market.

St. Petersburg: we resumed an active dialog with PHILIPS (lighting equipment).

CERTIFICATION/AUDITS

Moscow: our Company successfully completed the detailed certification of NOVATEK on electrical production (production of power equipment such as substations or switchboards). Compliance with the stringent requirements of NOVATEK to suppliers of engineering equipment as well as quality control systems and production control systems were assessed. This work was done in preparation for a possible expansion of our cooperation with one of the leaders of the world LNG market.

Moscow: conformity of the Company with Soyuzatomstroy and SRO Soyuzatomproekt requirements was confirmed. The Company has once again confirmed its compliance with the strong requirements to suppliers of the domestic nuclear industry.

TEAM DEVELOPMENT, ENHANCEMENT

Krasnodar: a new project manager was hired in Krasnodar; he is in charge of work with construction and installation organizations as well as agroindustrial holdings and companies in the region.

St. Petersburg: the capacity of the electrical engineering department has been increased with three more engineers working on the design of power systems and electric heating systems.

St. Petersburg: engineers are preparing for training in the company Lighting Technologies to obtain the Lighting Technologies project specialist certificate.

St. Petersburg: we started to implement a KPI-based performance measurement system for our employees.

[Event from the post-reporting period] St. Petersburg: employees of the Company's lighting department were sent to the international exhibition on lighting engineering Euroluce 2019 in order to get acquainted with the trends in that field.

About Evropeyskaya Elektrotekhnica Group of Companies

• Evropeyskaya Elektrotekhnica Group of Companies (MOEX: EELT) offers comprehensive solutions in the field of engineering and technological systems for industrial, construction and infrastructural purposes: low and medium voltage distribution equipment, low current systems, lighting systems, industrial electric heating systems and equipment for the Oil&Gas and petrochemical industries.

• As a Russian joint-stock company with high corporate governance standards and financial sustainability, the Company's Mission is to improve people's quality of life with its entrepreneurial vigour and engineering competencies.

• The Company was founded in 2004 and unites a distribution center, engineering departments, an electrical laboratory and specialized production facilities. The company is one of the largest electrical equipment distributors in the Russian Federation and an industrial partner of leading companies on the international engineering market.

• The Company's logistics capabilities include delivery (including non-standard and oversize load) to customers throughout Russia, including hard-to-reach Northern areas, as well as to Central Asia, North Africa and the Middle East.

• The Company has its own production of the following equipment:

• Complete transformer substations;

• Medium voltage units;

• Low voltage panels of up to 6,300A (including metro solutions);

• Electric lighting systems;

• Industrial electric heating systems;

• Cabling and wiring products.

• Areas of application of the Company's competences:

• Oil&Gas industry;

• Electric power sector;

• Peaceful atom,

• Steel and mining industry;

• Engineering;

• Transport infrastructure, water supply and sanitation.

• Evropeyskaya Elektrotekhnica's customers include major Russian companies: Rosneft, Gazprom, NOVATEK, LUKOIL, Sibur and Nizhnekamskneftekhim. Supplies were successfully implemented for the following projects: Power of Siberia, Yamal LNG, Smolensk NPP, Data Center of Sberbank of Russia, the Domodedovo, Sheremetyevo, and Pulkovo Airports, etc.

• New areas of Company activity starting from 2018 include development and production of the following:

• Modular equipment for the Oil&Gas and petrochemical industries (Company subsidiary ROG-Engineering, Ufa, Republic of Bashkortostan, Russian Federation);

• Industrial specialized solutions for metro substations (currently being consolidated into the Group's structure: Metrotonnel, Moscow, Russian Federation);

• Industrial electric heating systems.

• Key financial indicators of PJSC Evropeyskaya Elektrotekhnica (IFRS):

The personnel headcount is around 350 people. Since September 2017, common shares of PJSC Evropeyskaya Elektrotekhnica are traded on the Moscow Exchange with trading code EELT.

In June 2018, the company was named Import Substitution Leader at the Leader of Competitive Sales annual national awards, in which 450 domestic suppliers from various industries took part.

Contacts:

PJSC Evropeyskaya Elektrotekhnica

Tel.: +7 (800) 600-71-18

Mailing address: 1 Lyotchika Babushkina Street, Building 3, Moscow, 129344

For more information, please contact:

Stanislav Martyushev

Director for Corporate Communications and Investor Relations

PJSC Evropeyskaya Elektrotekhnica

Tel. +7 (495) 660-71-18 ext. 164

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