12.07.2012

HMS Group acquired the leading Russian compressor producer Kazankompressormash

Moscow, Russia – July 12, 2012 – HMS Group (LSE: HMSG), the leading pump manufacturer and provider of flow control solutions and related services in Russia and the CIS, announces today that it has completed an acquisition of KazanKompressorMash (“KKM”), located in Kazan (Tatarstan, Russia), one of the leading manufacturer of centrifugal and screw compressors in Russia. The deal has been approved by the Federal Antimonopoly Service.

Artem Molchanov, Managing Director (CEO) of HMS Group commented: “This transaction is a great fit with HMS Group and well-aligned with our strategy. We have a unique expertise of successful execution of the large-scale projects with pump-based integrated solutions. With strong and renowned product portfolio of compressors, mission critical unit in all technological processes with gas transportation and processing involved, we will be able to take a similar approach and focus on compressor-based integrated solutions on the markets that we understand well. Given the similar sale channels, procurement and production systems in pumps and compressors, I believe the integration of KKM will lead to realization of the implied synergies.  Efficiency growth and business expansion in gas equipment market will help us to create additional value for our shareholders”.      

HMS Group paid total cash of RUB 5.5 billion ($168 million) for 77.8% of voting shares (74.47% of share capital) of KKM. The transaction was financed with Rub 3 bn of bond issue with 3-year maturity, and Rub 2.5 bn of bank loans.

For the FY2011, in accordance with RAS, KKM had revenues of Rub cca 2.8 billion ($85 million). The company had low outstanding debt of Rub 220 million as of the end of 2011. HMS will consolidate KKM financials into HMS Group IFRS reporting starting from July 1, 2012.

Transaction rationale:

     1.   Access to the new adjacent markets thanks to combined product offering 

  • Strong and renowned brand of KKM will enable entering the market of screw and centrifugal compressors with 7% market share in Russian compressors market for oil and gas production and transportation industries1
  • HMS footprint and engineering capabilities will be deployed to leverage sales of  compressors
  • Combined offering driven by compressors sales will strengthen HMS presence in the oil upstream, gas-processing, metals and mining and general chemistry markets

     2.   Attractive compressor market fundamentals1 

  • The total Russian compressor market was valued at USD 2.1 billion in 2010. The market is poised to grow at a CAGR of 17.8% over the forecast period (2011-2016).
  • The largest and the most profitable segment  is oil and gas production and transportation, which accounted for 76% of the total market revenues. Gas processing applications is expected to offer high growth opportunities in the future.
  • Moderate competition due to limited number of local players, high entry barriers in the KKM’s core markets due to advanced technical specialization

     3.   Strengthening of presence in the core markets 

  • Large customer base intersection
  • Broadening the product offering of HMS for oil and gas companies will give new  competitive advantages in oil and gas upstream, midstream and downstream industries

“I’m pleased to say, this is twentieth acquisition we completed since HMS inception, pursuing our growth strategy. By now we accumulated expertise in acquisitions of the best-in-class players and further successful integration. We have a detailed integration plan and clear understanding how to multiply current results of KKM” – added Mr.Molchanov.

CONFERENCE CALL DETAILS:

Thursday, 12 July 2012 
9.00 AM (EDT) / 2.00 PM (UK) / 3.00 PM (CEST) / 5.00 PM (MOSCOW)
Speakers:
Sergey Klinkov - Head of Investor Relations
Kirill Molchanov – First Deputy General Director, CFO and Co-Founder 
Alexander Rybin – Head of Capital Markets

To participate in the audio meeting, please dial in:

UK Local:                      +44(0)20 7136 2055
UK Toll Free:                 0800 279 4977  
Russia Local:                 +7 495 705 9450  
Russia Toll Free:             8 800 500 9312    
US Local:                       +1646 254 3364  
US Toll Free:                  1 877 249 9037  
Confirmation Code:         8249583
Title:                             HMS Hydraulic Machines and Systems acquisition of KKM


Webcast Meeting:
 
To access the live and/or achieved event, clink on the link: 

Webcast link

Conference ID:              495901     
Event Title:                    HMS Group conference call on acquisition of Kazankompressormash

Please, join in 5-10 minutes prior to the scheduled start time. Pre-registration is available.

Please also find investor presentation with detailed description of the acquisition: http://grouphms.com/shareholders_and_investors/speeches_and_presentations/

KazanKompressorMash is the manufacturer of centrifugal and screw compressors, spare parts and appliances used in oil and gas upstream, transportation, refining, petrochemical and gas processing, metal & mining industries. KKM has modern production facility located in Kazan with production floor of 127 m2 integrated with advanced and one of the largest R&D centre. More than 60 years of engineering and production expertise and certified ISO 9001:2000 quality management system allows KKM to comply with standards of international compressor producers. KKM had Rub 2.8 billion of revenue in 2011.

The HMS Group is the leading pump manufacturer and provider of flow control solutions and related services to the oil and gas, nuclear and thermal power generation and water utilities sectors in Russia and the CIS. The HMS Group’s products are mission-critical elements of projects across a diverse range of industries. It has participated in a number of large-scale infrastructure projects in Russia, including providing pumps and modular equipment to the Vankor oil field and pumping stations on recent trunk pipelines projects linking Russia’s core oil producing areas to export ports on the Pacific Ocean and Baltic Sea. The Group reported revenues of RUB 7.3 billion, adjusted EBITDA of RUB 1.4 billion and profit of RUB 485 million for the 3 months ended March 31, 2012. The HMS Group’s global depositary receipts (“GDRs”) are listed under the symbol “HMSG” on the London Stock Exchange. 

 

For further information, please contact:

Investor Relations: Sergey Klinkov, Head of Investor Relations
Phone: +7 (495) 730-6601 x 1302, Klinkov@hms.ru

Media Relations: Nozima Karimova, Head of Press Service
Phone: +7 (495) 730-6610, Karimova@hms.ru

Disclaimer
The information contained herein has been prepared using information available to HMS Hydraulic Machines & Systems Group Plc (“HMS Group” or “HMS” or “Group” or “Company”) at the time of preparation of the presentation. External or other factors may have impacted on the business of HMS Group and the content of this presentation, since its preparation. In addition all relevant information about HMS Group may not be included in this presentation. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or reliability of the information.
Any forward looking information herein has been prepared on the basis of a number of assumptions which may prove to be incorrect. Forward looking statements, by the nature, involve risk and uncertainty and HMS Group cautions that actual results may differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Report for a description of the major risk factors. This presentation should not be relied upon as a recommendation or forecast by HMS Group, which does not undertake an obligation to release any revision to these statements.
This presentation does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in HMS Group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision.


1  According to Frost and Sullivan research