hms group investor presentation

HMS Group JP Morgan Russia Corporate access days

Investor presentation

13-14 March 2012

Agenda

2

WHO WE ARE 3

Operating environment 4

HMS at a Glance 5

Development of Business Model 6

INVESTMENT HIGHLIGHTS 7

Attractive Industry Fundamentals 8

The Leading Provider of Flow Control Solutions 9

Advanced R&D Capabilities 10

Main Shareholders Run the Business 11

Healthy Debt Position 12

Hedging & Risk Management 13

FINANCIAL PERFORMANCE 14

Financial Highlights for 9M 2011 15

Pumps 16

Oil & Gas Equipment 17

EPC 18

EBITDA Development in 9M 2011 19

Capex & Working Capital as of 30 June 2011 20

2011 & 2012 BUSINESS UPDATE & OUTLOOK 21

HMS Group M&A Strategy & Outlook 22

Backlog 23

Selected End-market Prospects for Mid-term 24

Business Update 25

CONTACTS 26

APPENDIX 27

WHO WE ARE

3

4,498

6,724

13,399 14,046

14,772

23,070

20,560

744 830 1,423 1,644 1,890

3,519 4,398

16.5%

12.3%

10.6%11.7%

12.8% 15.3%

21.4%

2005 2006 2007 2008 2009 2010 9M 2011

Revenue, Rub mn EBITDA, Rub mn EBITDA margin, %

9 months 2011 key financials contribution by business segments

Key investment highlights Key financial indicators for 2005-9m’11

Growing markets in Russia and the CIS:

oil & gas

power generation

water

Leader in flow control solutions on these markets

Best team in Russia:

management

sales

research & development

Resilient financial growth and healthy debt position

HMS at a Glance

Notes: Hereinafter “EBITDA” read as “EBITDA adjusted”, “EBITDA margin” read as “EBITDA adjusted margin” and “Net Income” read as “Profit for the period/year” Pumps read as Industrial pumps

Source: Company data

Industrial pumps

Revenue Rub 12,136 mn

EBITDA Rub 3,628 mn

Oil & gas equipment


EBITDA Rub 220 mn

EPC


EBITDA Rub 431 mn

New photo

Pump station of Baltic pipeline system, Transneft Oilfield Pump Station 2, Vankor oilfield, Rosneft Oil Pump Station “Tayezhnaya”, Transneft

4

9M’11 total revenue Rub 20,560 mn EBITDA adj. Rub 4,398 mn profit for the period Rub 2,972 mn

7.4%

9.2%

10.8%

9.0%

2.4% 2.3% 2.1%

-0.6%

1.3%

2.2%

1.0%0.2% 0.4% 0.4%

1.4% 1.5%

0.4% 0.1% 0.1% 0.0%

0

100

200

300

400

500

600

2000 2002 2004 2006 2008 2010 2012F 2014F 2016F 2018F 2020F

mn t

onnes

Total production, 2000-2008 Traditional oil regions, 2009-2020F Greenfield, 2009-2020F Change in total production, % YoY

Company Investments Time frame

Investments in oil upstream

Gazprom Neft US$ 80 bn by 2020

Lukoil US$ 50 bn by 2017

Rosneft US$ 125 bn by 2020

TNK-BP US$ 45 bn by 2020

Total US$ 300 bn

Investments in oil downstream

Gazprom Neft US$ 11 bn by 2018

Lukoil US$ 20 bn by 2020

TNK-BP US$ 3 bn by 2016

Total US$ 34 bn

Investments in oil transportation

Transneft, capex US$ 43 bn by 2017

Transneft, modernization US$ 15 bn by 2017

Total US$ 58 bn by 2017

Investments in nuclear

Rosatom US$ 350 bn by 2030

Oil upstream50%

Oil refining2%

Oil trasportation18%

Water12%

Thermal8%

Nuclear1%

Metal1%

Others8%

Installed base of HMS Group in Russia

Oil production in Russia, history & perspectives HMS revenue by segments, 2010

Operating Environment

5

Source: REnergyCo, Rosstat Source: Company data, Management accounts

Greenfield CAGR 11.2% 2012F-2020F


87% 87%

57%

98%

70%

13% 13%

43%

2%30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Water wellpumps

Water injectionpumps (CNS)

Thermal powergeneration

pumps

Oil pipelinepumps,

Transneft

Nuclear powergeneration -Feed pumps

HMS Group Others

Announced investment programs1

1 Selected companies

Source: Public data, companies’ websites

5% 6% 25% 25% 36%

95% 94% 75% 75% 64%

2008 2009 9M 2010 2010 9M 2011

Revenue from integrated solutions Revenue from standard equpment


Development of Business Model

Why integrated solutions ESPO-I pipeline is an example of integrated solutions

Producers Products / Services

HMS and other suppliers including Siemens

Design, production and testing of pumps

HMS

Design of integrated pumping solution

Overall project management

Procurement for supply of engines, cooling sleeves, valves and other equipment

Turn-key commissioning

1. Trunk pump 2. Motor 3. Coupling 4. Oil coolers 5. Adsorptive dryers 6. Air collectors 7. Compressors

8. Joints 9. Friction oil pipelines 10. Air cooling unit 11. Antifreeze feed pipes for oil coolers 12. Antifreeze feed pipes for motor coolers 13. Antifreeze air cooling unit

6

Type of project / Service

Standard pumps Integrated solutions & customized pumps

Source Array of small-size contracts

Large-scale projects

Research & development Normal Critical

Technical entry-barriers Average High

Competition type Price R&D and references

Competition level High Limited

Revenue growth potential Limited Unlimited

EBITDA margin 10-15% 25-30%

Revenue downside potential

Limited Limited, nearest 1.5 year

Frequency High n/a

Aftermarket demand Average High

Integrated solutions’ revenue contribution

INVESTMENT HIGHLIGHTS

7

2.4

8.0

17.9

4.2

12.2

30.4

1.1

5.2

9.8

2002 2010 2015E

Power generation

Municipal water

Oil & Gas, surface

712

1,226

337

810

271

540

2010 2015E

Oil refining & petrochemicals

Oil pipelines

Oil exploration & extraction

357

743

610

1,586

392

1,011

2010 2015E

Municipal water

Thermal power

Nuclear power

Attractive Industry Fundamentals

8

21.4% 13.5%

14.3% 20.0%

CAGR 2002-10

58.1

25.4

Russian selected pumps market revenues, Rub bn

Russian energy & utilities infrastructure investments, Rub bn

Source: Frost & Sullivan 2010

Mix of growing markets

7.7

‘10-15E

16.2% 17.5%

17.1%

17.3%

CAGR 2010-15E

13.0%

3,340

1,359

12.2%

15.7%

9.5%

CAGR 2010-15E

2,576

1,320

Russian oil sector investments, Rub bn

CAGR 11.8% CAGR 16.2% CAGR 18.0%

CAGR 16.1%

Power generation

Municipal water

Oil & Gas, surface

Municipal water

Thermal power

Nuclear power

Oil refining & petrochemicals

Oil pipelines

Oil exploration & extraction

31.6

48.9

28.6

32.9

2009 2010

HMS Group revenue, US$ mln

Other

59.8 73.8

42.9

61.4

2009 2010

HMS Group revenue, US$ mlnOther

9

Leading market share on key markets…

292.6 331.8

173.1

243.9

2009 2010

HMS Group revenue, US$ mln

Other

Oil industry1 Water utilities2 Power generation3

HMS Group has leading positions in all key markets of presence with ~ 40% share on pumps market.

HMS Group managed to expand its market share in the most key segments of business

In the oil industry and water utilities the company’s share outperformed overall market growth

Decrease in power generation pumps is attributable to the nuclear industry’s specifics expressed in long-term only

contracts. Revenue from signed in 2009 contracts will be recognized during 2011/2012

Key conclusions

465,7

575,7

102,7

135,2

60,2

81,8

+41% +43%

+15%

1 includes pumps and oil and gas equipment 2,3 includes pumps

The Leading Provider of Flow Control Solutions

Notes:

Market growth +24% Market growth +32% Market growth +36%

Advanced R&D Capabilities

Very strong in-house R&D and significant experience in pump

development

Unique testing facility (one of the largest in the former Soviet

Union and globally) for all types of large specialized pumps

for nuclear power plants and oil transportation

Deep integration with clients’ R&D

Giprotyumenneftegaz (GTNG) is the leading Russian R&D

centre specializing in design of on-surface (as opposed to

sub-surface) facilities for oil and gas fields, e.g. it

designed over 200 fields in Russia including many of the

largest (e.g. Samotlor, Mamontovskoye, Priobskoye)

Significant R&D resources for design of water utilities

projects (RVKP)

Pumps Project design

Pre-tender project

preparation

up to 24 months

Tender, pricing and contract

negotiation

1–3 months

Design and production

1–24 months

Delivery and installation

1 month

After-market services

Pre-tender preparation/aftermarket support is crucial for establishing/maintaining strong

relationships with clients

HMS ability to participate in pre-tender preparation stage creates unique competitive advantage

10

Free-float37%

Vladimir Lukyanenko

24%

Managers22%

German Tsoy17%

Vladimir Lukyanenko Non-executive Director

Shareholder In company since 2005

Artem Molchanov Managing Director (CEO)


Main Shareholders Run the Business

The Board is comprised of professionals with

significant experience in pump and oil and gas

industries

It includes founders, who have led HMS since its

inception

HMS is the core business of the largest

shareholders

Long-term commitment to the business from

shareholders

Source: Company data as of December 6, 2011

Board of Directors Comments

Shareholders Structure

Kirill Molchanov First Deputy CEO (CFO)


German Tsoy Chairman of the Board


Yury Skrynnik Director for Strategic Marketing


Nikolay Yamburenko Head of Industrial Pumps


Philippe Delpal Independent

Chairman Audit Committee

Andreas Petrou Non-executive

Gary Yamamoto Independent

Chairman Remuneration Committee

Founders

11

Shares are held through HMS Technologies

3,455

4,539 4,297

4,885

2.0

2.4

1.2

0.9

2008 2009 2010 9M 2011

Net Debt, Rub mn Net Debt to EBITDA LTM

96.4% 1.7% 2.0%

Rub Euro Others

S&P corporate credit rating: BB- Outlook: Stable

12

Moderate leverage… …with comfortable repayment schedule…

…and low currency and maturity risks Comments

Source: Company data as of 01 March, 2012

1 EBIT LTM / Interest expenses as of September 30

Healthy Debt Position

Low leveraged business profile with Net Debt to EBITDA LTM ratio of only 0.9 with internal covenant of 2.5

Easy access to additional liquidity with more than Rub 1.7 bn of undrawn credit facilities

Steady debt repayment schedule with negligible currency risk and prudent maturity structure

More than 96% of Rub-nominated debt with fixed interest rate

Interest rate of 8.9%, down from 11% a year ago, while interest coverage ratio1 of 15.4

Source: Company data Source: Company data as of 01 March, 2012

98.3% 1.7%

Fixed rate Floating rate

15.9% 84.1%

Short-term debt Long-term debt

Including Rub 3 bn bonds

issue

13

Risk type Coverage

Raw materials price fluctuations Sale price adjustments for standard products in line with raw materials costs changes

Advances received under the long-term projects are transferred to the suppliers in order to fix raw materials price for the whole project life-cycle

Delay of projects execution

Currency risks

Interest risk

Short-term oil price drop

Day-to-day monitoring and control over of projects implementation

99% of debt with fixed interest rate

Revenue, expenses and debt are nominated in Rubles

Limited impact on business based on standard products and solutions

High opportunity costs for customers with complicated long-term projects: - HMS solutions are mission critical for the infrastructure projects - Only 1-2% of total project’s CAPEX relates to pumps - HMS solutions are usually implemented on the final stages of project execution

– Long-term oil price decline – fallen revenues

Low risk due to limited competition and large market share, and also because of commodities price correlation (steel and oil)

Long-term oil price decline – influence on margin

Not covered

Hedging & Risk Management

FINANCIAL PERFORMANCE

14

EBITDA performance

3Q’11 2Q’11 chg, QoQ Rub, mn 9M’11 9M’10 chg, YoY

6,703 6,806 -1.5% Revenue 20,560 16,158 +27.2%

2,056 2,221 -7.4% Gross profit 6,349 3,781 +67.9%

1,265 1,545 -18.1% EBITDA 1 4,398 2,251 +95.4%

1,169 1,364 -14.3% Operating profit 3,912 1,988 +96.8%

890 1,091 -18.5% Net income (loss) 1 2,972 1,052 +182.6%

5,689 4,599 +23.7% Total debt 5,689 5,088 +11.8%

4,885 4,105 +19.2% Net debt 4,885 3,189 +53.2%

0.9 0.7 Net debt to EBITDA LTM 0.9 1.2

30.7% 32.6% -195bps Gross margin 30.9% 23.4% +748bps

18.9% 22.7% -383bps EBITDA margin 1 21.4% 13.9% +746bps

17.4% 20.0% -260bps Operating margin 19.0% 12.3% +672bps

13.3% 16.0% -276bps Net income margin 14.5% 6.5% +795bps

ROCE 2 38.6% 28.0% +1,006bps

Financial highlights

HMS Group Financial Highlights

Source: Company data 1 Hereinafter, read EBITDA as EBITDA adjusted, Net income as Profit for the period / year, EBITDA margin as EBITDA adjusted margin 2 EBIT LTM / average capital employed 15

Revenue performance



431 709 1,111 1,268 1,588 1,545 1,265

11.2%

13.4%

15.8%

18.4%

22.5% 22.7%

18.9%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

EBITDA, Rub mn EBITDA margin

3,835 5,314 7,009 6,912 7,051 6,806 6,703

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Revenue, Rub mn Linear ( Revenue, Rub mn)

7,598

12,136

1,502

3,628

19.8%

29.9%

9M 2010 9M 2011

Revenue Pumps, Rub mn

EBITDA Pumps, Rub mn

EBITDA margin Pumps, %

Pumps financial highlights, Rub mn

Pumps


Pumps:

■ Execution of the project in the oil transportation segment as well as delivery of standard pumps resulted in high EBITDA and EBITDA margin growth, YoY

■ Revenue from pumps excluding integrated solutions grew by 5.5% YoY with EBITDA margin of 18.7% due to growth of demand and effective cost control

■ EBITDA margin is lower in 3Q 2011 vs. 2Q 2011 due to unusual high 22.4% EBITDA margin in 2Q 2011 for standard pumps, resulted from signing of a good number of lucrative contracts

ebitda +142%

revenue +60%

ebitda -18%

revenue -12%

16

9M 2011 vs. 9M 2010

ebitda +32%

revenue -8%

3Q 2011 vs. 3Q 2010 3Q 2011 vs. 2Q 2011

3,942

3,619

796

1,054

20.2%

29.1%

3Q 2010 3Q 2011




4,090

3,619

1,2891,054

31.5%

29.1%

2Q 2011 3Q 2011




Oil & gas equipment financial highlights, Rub mn

Oil & Gas Equipment


Oil & gas equipment:

■ Absence of orders for integrated solutions in 9 months of 2011 affected revenue and EBITDA margin performance

■ Situation is expected to brighten in 4Q 2011 – beginning of 2012 due to participation in current tenders for new infrastructure projects in Eastern Siberia as well as entrance into new market segments

■ 3Q 2011 revenues up QoQ due to recently acquired Sibneftemash

■ EBITDA margin grew to 6.7% in 3Q 2011 compared to the previous quarter also thanks to Sibneftemash’s EBITDA margin of more than 20%

ebitda -48%

revenue -8%

ebitda n/a

revenue +20%

17

9M 2011 vs. 9M 2010

ebitda -32%

revenue -1%

3Q 2011 vs. 3Q 2010 3Q 2011 vs. 2Q 2011

4,033

3,722

422220

10.5%

5.9%

9M 2010 9M 2011

Revenue OG equipment, Rub mn

EBITDA OG equipment, Rub mn

EBITDA margin OG equipment, %

1,410 1,402

13793

9.7%6.7%

3Q 2010 3Q 2011




1,172

1,402

-16

93-1.4%

6.7%

2Q 2011 3Q 2011




4,392 4,385

262431

6.0%9.8%

9M 2010 9M 2011

Revenue EPC, Rub mn

EBITDA EPC, Rub mn

EBITDA margin EPC, %

EPC financial highlights, Rub mn

EPC


ebitda +64%

revenue -0%

ebitda -63%

revenue +18%

18

9M 2011 vs. 9M 2010

ebitda -42%

revenue +3%

3Q 2011 vs. 3Q 2010 3Q 2011 vs. 2Q 2011

EPC:

■ Revenue remained stable at Rub 4,385 mn for 9M 2011, compared to Rub 4,392 mn in 9M 2010

■ HMS’ policy of participation in the construction projects with higher than average profitability led to slower revenue growth

■ EBITDA grew by 64.5% YoY with average EBITDA margin of 9.8%:

– Construction sub-segment’s EBITDA margin grew to 3.9% in 9M 2011 though revenue contracted – Project & design sub-segment of EPC stood at 19.4% EBITDA margin for 9M 2011 while revenue amounted to

Rub 1,675 mn ■ EBITDA margin dropped to 4.8% in 3Q 2011 compared to 2Q 2011 due to temporary change of contracts mix

■ Signing of a large contract in August 2011 hasn’t substantially influenced construction sub-segment’s revenue for 3Q 2011

1,5351,587

13176

8.5%4.8%

3Q 2010 3Q 2011

Revenue EPC, Rub mn

EBITDA EPC, Rub mn


1,347

1,587

206

76

15.3%

4.8%

2Q 2011 3Q 2011

Revenue EPC, Rub mn

EBITDA EPC, Rub mn


63.5%

15.1%12.1%

9.4%

60.5%

20.8%

11.8%6.9%

Materials Labour Cost of goods sold Other costs

9M 2010 9M 2011

1,988

46

(668)

9

(323)

1,052

3,912

13

(326)

67

(693)

2,972

Operatingprofit

Financeincome

Financecosts

Share ofresults ofassociates

Income taxexpense

Net income

9M 2010 9M 2011

69%

12%

19%

2%

21%

Revenue Cost of sales SG&A expenses & others Operating profit Depreciation & amortisationw other deductions

EBITDA

77%

11%

12%

2%

14%

Revenue Cost of sales SG&A expenses & others Operating profit Depreciation & amortisationw other deductions

EBITDA


operating expenses 14.2 bn vs. 16.6 bn in 9M’11 | +18% yoy revenue in 9M’11 | +27% yoy ebitda in 9M’11 | +95% yoy

Net income components, Rub mn

EBITDA Development in 9M 2011

EBITDA key drivers, % of revenue

Cost of sales components, Rub mn

Source: Company data 19


0

20,000

40,000

9M 2010 9M 2011

351

4,216

(5,317)

(715)

(1,815)

(1,992)

4,244

804

Cash as ofJan 1, 2011

Operatingcash flowbefore WCchanges

WCchanges&others

Income tax& interest

paid

Net cashused in

operatingactivities

Net cashused ininvestingactivities

Net cashfrom

financingactivities

Cash as ofJul 1, 2011

-

1,307

791 (1,355)

6,833 7,576

Working capital9M 2010

Inventorieschange

Receivableschange

Payableschange

Working capital9M 2011

456

745

249

346

1.8x

2.2x

9M 2010 9M 2011 Organic capex, Rub mn Depreciation, Rub mn Capex to Deprecation ratio, x

HMS Group generated Rub 4,216 mn of operating cash flow before changes in working capital

Substantial working capital increase in 9M 2011 led to the negative operating cash-flow due to ongoing execution of the large infrastructure oil transportation contract with significant advance payments received last year

Working capital is expected to fit target range of 10-15% of revenue with positive operating cash flow in 9M 2012 as a result of:

Next payment of more than Rub 2 bn under the contract

Prepayments on contracts signed in 2H 2011, and contracts in process of signing

Investing cash flow consisted of:

Organic capex of Rub 745 mn, in line with target level of 1.5-2.5 times depreciation

Acquisition of Sibneftemash for Rub 1,280 mn, and Bobruisk for Rub 272 mn

Comments Working capital as of 30 Sept 2011, Rub mn

Cash flow performance in 9M’11, Rub mn Capital expenditures in 9M’11 vs. 9M’10

CAPEX & Working Capital as of 30 Sept 2011


Source: Company data Source: Company data

20

Sibneftemash acquisition (1,280) Rub mn

IPO proceeds 3,373 Rub mn

WC changes (4,825) Rub mn

+ +

+ =

13%

23%

1H 2010 1H 2011

WC to Revenue LTM

6%

28%

9M 2010 9M 2011

Working capital to Revenue LTM

6%

28%

9M 2010 9M 2011

Working capital to Revenue LTM

Bobruisk acquisition (272) Rub mn

2011 & 2012 BUSINESS UPDATE & OUTLOOK

21

The Acquisition of

Dimitrovgradkhimmash (DGHM) in Feb’12

Key financials, RAS:

2011E Revenue of Rub 1.6 bn 2011E EBITDA Rub 387 mn 2011E EBITDA margin 24.5%

Deal details:

Rub 206 mn for next 11% of the company (followed by several previous transactions resulted in Rub 543 mn for 51%) 2.2x EV/EBITDA 2011E (9.8x EV/EBITDA in 2006)

16.5

9.3

5.6

10.4

7.5

4.1

GTNG Sibneftemash Bobruisk

EV/EBITDA Acquisition Year EV/EBITDA next year after Acquisition Year

18.5%

37.2%

24.1%

-0.8%

-9.7%

18.5%18.2%

35.1% 37.5%

11.2%

n/a

37.2%

HMS PumpsM&A in 2003

NEMM&A in 2005

HMS NeftemashM&A in 2004

TGSM&A in 2006

SKMNM&A in 2007

GTNGM&A in 2010

CAGR Revenue 2011 CAGR EBITDA 2011

EV/EBITDA of recently acquired companies What does HMS Group buy

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

HMS Group M&A Strategy & Outcome

22


CAGR of selected subsidiaries’ revenue & EBITDA: from M&A to 2012 (RAS)

Pumps, compressors, oil & gas equipment, project & design

Russia and the CIS

Revenue within $ 20-100 mn

Low-leveraged companies

Friendly management

Acquisitions rationale:

Broadening of HMS Group’s product portfolio with complementary equipment

Potential growth of revenues and EBITDA margin of acquired companies:

– Sales power and R&D capability of HMS Group

– Well-known brands and/or technical equipment base of acquired companies

Potential growth of revenues and EBITDA margin of the whole Group through integrated solutions


HMS not only grew through acquisitions but managed to achieve significant organic growth

PUMPS OIL & GAS EQUIPMENT

CONSTRUCTION PROJECT & DESIGN

Revenue recognition depends on production period for various type of equipment and the nature of the project

Backlog structure performance

Backlog

Source: Company data, Management accounts

23

1

2 There is no direct correlation between decline in backlog and potential decline in revenues because of backlog’s diversification and different production periods of equipment as well as projects’ nature

Rub mn 9M 2011 6M 2011 chg, QoQ 9M 2010 chg, YoY Production period /Annual revenue

Products & services on demand, short production cycle about Rub 4 bn

Core equipment & services 7,364 7,323 +1% 7,622 (3%) 2-8 months

Construction component of EPC 1,595 1,492 +7% 2,847 (44%) 6-18 months

Oil transportation pumps 3,138 4,914 (36%) 10,101 (69%) 12-36 months

ESPO pumps 2,306 4,011 (43%) 10,101 (77%) 12-36 months

Non-ESPO pumps 832 903 (8%) 0 n/a 6-12 months

Total backlog 12,097 13,728 (12%) 20,570 (41%)

1 366 2 198

2 637

5 533

2010 2011

Полученные заказы на строительство, млн. руб.

Полученные заказы на проектирование и дизайн, млн. руб.

3 897 7 832

2010 2011

Полученные заказы на нефтегазовое оборудование, млн. руб.

7,376 6,597

12,404

2010 2011

ВСТО, млн. руб.

Полученные заказы на промышленные насосы, млн. руб.

16 914 23 222

12 404

2010 2011

Проект ВСТО, млн. руб.

Полученные заказы, искл. ВСТО, млн. руб.

Overview

Order intake development

24

Total order intake

EPC Industrial pumps

Although overall order intake in 2011 contracted by 21% as compared with the previous year and amounted to Rub 23.2 bn…

The Group enjoyed 37% YoY order intake growth, net of a large ESPO-related contract amounted to Rub 12.4 bn that had been signed in the first half of 2010

Order intake in industrial pumps business segment down by 67% YoY due to a high-base effect resulted from the massive ESPO-related contract obtained in 2010

Order intake in the oil and gas equipment segment demonstrated impressive growth of 101% YoY and amounted to Rub 7,832 mn versus Rub 3,897 mn in the beginning of 2011.

Order intake in the EPC segment rose by 93% from Rub 4,003 mn to 7,731 mn mainly due to significant contracts signed by the Group in the second half of 2011:

–orders in the construction sub-segment grew by 108% from Rub 2,634 mn to Rub 5,478 mn

–project and design orders up 65% from Rub 1,368 mn to Rub 2,253 mn.


Oil and gas equipment


29 318

4 003

19 780 7 731

ESPO project, Rub mn

Order intake, net of ESPO, Rub mn

ESPO project, Rub mn

Industrial pumps excluding ESPO, Rub mn

Oil and gas equipment, Rub mn Orders for construction works, Rub mn

Orders for project and design, Rub mn

Project Brief description Completion Key metrics Comments

Rosneft

Vankor 2 stage Further development. Capex for 2011 $ 2.6 bn next stage by 2014 Min capex Rub 480 bn HMS won a number of tenders

Yurubcheno-Tokhomsk oilfield Start of oil production in 2013. Oil reserves & resources 513mt by 2013 pick production 10mtpa

Komsomolskoe, Priobskoe oilfields Achievement of 95% level of associated gas utilization HMS participated in previous stages

Lukoil & Bashneft JV

Trebs and Titov fields JV. Project development stage. Reserves 141 mt. Start of production is expected in 2013. Max capacity 6 mtpa

by 2013 Capex c.$ 5.9 bn HMS has good references for previous

projects

Transneft

ESPO expansion OPS to be constructed to deliver oil to Khabarovsk and Komsomolsk refineries

9 OPS by 2015 HMS participated in previous stages

Zapolyarye – Pur-pe pipeline Oil transportation from YANAO and Northern Krasnoyarsk region to ESPO pipeline

4 OPS by 2016 Capex Rub 120 bn HMS participates in a project design

ESPO expansion OPS to be constructed to deliver oil to Primorsk refinery 4 OPS by 2017 HMS participated in previous stages

Pur-pe – Samotlor expansion Construction of 2 OPS 2 OPS by 2017 Capex Rub 53 bn HMS participated in previous stages

Yurubcheno-Takhomskoe-Taishet pipeline

Oil transportation from Yurubcheno-Tokhomsk and Kuyumbinsk oilfields to ESPO-1. Length ~600 km. Capacity ~18mtpa

Investment decision by 2011-end

Capex Rub 63 bn HMS participated in previous stages

TNK-BP

Russkoe oilfield Giant oilfield in YANAO with specific oil. Project production 20 mtpa

Capex $ 4.5 bn HMS participates in a project design

Samotlor Further development of an active oilfield in Nizhnevartovsk. by 2014 Capex $ 4.6 bn HMS participated in previous stages

Uvat 21 oilfields in Tyumen region HMS participated in previous stages

East- and Novo- Urengoy gas & condensate fields

Planned production for 2011 is 3.2bcm, up 17% in 2010 HMS participates in a project design

Verkhnechonsk oilfield Oilfield located in the Eastern Siberia, Irkutsk region. Development was stimulated by close proximity of ESPO pipeline.

Peak production by 2014

Additional $3-4 bn HMS participated in previous stages

Gazprom

Shtokman gas and condensate field The field will become a resource base for Russian pipeline gas and liquefied natural gas (LNG) exports to the Atlantic Basin markets

HMS produces units for complex gas preparation

Gazprom Neft

Priobskoe oilfield Western Siberia. Recoverable reserves ~600 mt HMS participates in a project design

Urmanskoe and Shinginskoe oilfields Eastern Siberia

Kuyumbinskoe oilfield 50/50 w TNK-BP thru Slavneft. Reserves C1 65 mt, C2 151 mt

Sberbank Capital

Dulisma oilfield Irkutsk region. Further development. 3rd resource base for ESPO Total reserves 15 mt HMS participated in previous stages

Taas-Yuriah oilfield Sakha region. Further development. Total reserves ~130 mt Capex Rub 15-30 bn

Iraq

Rumaila brownfield Consortium headed by BP Capex $ 15 bn HMS submitted technical survey

Az Zubair Consortium headed by Eni Capex $ 20 bn HMS participates in a tender

Municipal water

Central Asia Irrigation stations for Uzbekistan and Turkmenia HMS has good references

Nuclear

Rosatom Pumps for 5 blocks. Tender to be held at 2011-end –2012-beg By 2014 Tenders Rub 1.5 bn HMS has good references

Financial and Operational highlights

Selected End-market Projects for Mid-term

Source: Public information, Company data as of December 6, 2011

Increased number of HMS end-market projects

25

Contracts signed

Financial and Operational highlights

Business Update


Selected contracts and events up to date

26

Core events

First TURNKEY project on Srednebotuobinskoe oil & gas condensate field, Rub 2.6 bn

Development of the second stage of the East-Siberian oilfield totaled Rub 2.7 bn

UNIQUE testing facility was put into operation to increase R&D capacities

First large contract for AFTERMARKET services on an East-Siberian oil and gas field, Rub 480 mn

Large contracts & significant events

Contract worth more than Rub 1 bn for construction of well clusters and their support infrastructure facilities on a gas field in

Western Siberia (2H 2011)

Contract to provide engineering services on a gas field in Eastern Siberia, Rub 1.27 bn (2H 2011)

Contract for production of pumps for Rostov and Baltic nuclear stations of Rub 613 mn

Contract for delivery of modular equipment for Surgutneftegaz of Rub 668 mn

Contract for provision of replacement and overhaul services for Transneft, Rub 186 mn

Permanent inflow of standard contracts

Contract for production of pumping equipment for Norilsk Nickel

Contract for production of oil and gas equipment for Surgutneftegaz and Rosneft

Contract for production of modular equipment for Vingapur oil and gas field

Contract for delivery of group measuring units to Gazprom Neft

In 3Q 2011 HMS Group sold products

and services for Rub 3,554 mn to

3,426 clients (excluding three largest

clients) with average revenue per client

of around Rub 1 mn

Contacts and HMS Group Key Details

27

Company address: 7 Chayanova Str. Moscow 125047 Russia

Investor Relations Phone +7 (495) 730-66-01 [email protected] http://grouphms.com/shareholders_and_investors/ Twitter HMSGroup and HMSGroup_Rus Sergey Klinkov, Head of Investor Relations [email protected] Inna Kelekhsaeva, Deputy Head of Investor Relations [email protected]

HMS Hydraulic Machines & Systems Group Plc is listed on the London Stock Exchange Identifier Number Number of shares outstanding ISIN US40425X2099 117,163,427 Ticker HMSG Bloomberg HMSG LI Reuters HMSGq.L Credit Rating Standard & Poor’s BB- (Outlook stable) affirmed on 29 November, 2011

mailto:[email protected]



http://grouphms.com/shareholders_and_investors/












APPENDIX

28

Focus on integrated solutions and other highly-engineered products

Higher margin than stand-alone products and services HMS Group’s largest customers more often prefer to work with manufacturers

that can offer integrated and customized solutions Creates strong ties with customers, pull-through demand for aftermarket services

Strengthen position in core markets including aftermarket and export

Take advantage of positive market trends in existing core markets Organic expansion into attractive market segments Increase of aftermarket services component to generate higher-margin and

regular cash flows Core export opportunities: water projects in FSU, Rosatom nuclear contracts,

O&G in Kazakhstan and Iraq

Expand research and development capabilities

Leverage leading R&D capabilities in order to develop next-generation customized pumps, technological upgrades and integrated pump systems

Work closely with customers to develop technical policies and standards

Improve operational efficiency

Commitment to integration and optimization of current production assets and commitment to increase synergies between acquired businesses

Standardization and continuous improvement of operations and business processes (e.g. ERP, budgeting and reporting methodology and software development, etc.)

Pursue selective & value enhancing acquisitions

Our targets are technology and R&D facilities Pursue acquisition opportunities in high-growth sectors where HMS has limited

presence Search for cost and revenue synergies

HMS Group Business Strategy

29

2009–Today Integrated Solutions Modular Equipment Design and Manufacturing

Pump Design and Manufacturing Pump Trading

2007–2008 Construction Modular Equipment Design and Manufacturing


2004–2006 Modular Equipment Design and Manufacturing


2003 Pump Design and Manufacturing Pump Trading

1993–2002 Pump Trading

HMS Group Positioning

The sole domestic engineering company in Russia

30

From pumps to integrated solutions based on excellent R&D base

Above ground

Under ground

Note: * Modular Equipment (Oil & gas equipment)

Industry HMS IntegraEurasia

DrillingWeir Flowserve

Dresser

RandTechnip Schlumberger

Baker

Hughes

Power generation √ √ √

Oil and Gas √ √ √

Water √ √ √

Oil and gas equipment √ √ √ √

Repair √ √ √

Oil and Gas √ √ √ √

Power generation √

Water √

Seismic research √ √ √ √

Well service √ √ √ √

Drilling √ √ √ √

Oil production increase √ √ √ √

Pum

ps

ME*

EPC

Serv

ice

Russian Foreign

1,890

3,519

12.8%

15.3%

2009 2010

EBITDA margin

1,298

3,027

2009 2010

14,772

23,070

2009 2010

18.0%

36.2%

2009 2010

Revenue, 2009 vs 2010 Comments

Financial Performance for 2010

Source: Company data Source: Company data


Total revenue up 56% yoy to Rub 23,070 mn

The growth reflects:

Significant increase in size of orders for pump-based integrated solutions

Completion of key projects

Consolidation of GTNG

Stable growth of revenue from ordinary contracts

Organic revenue growth of 47% yoy, excluding impact from GTNG

ROCE, 2009 vs 2010 EBIT, 2009 vs 2010

EBITDA, 2009 vs 2010

Net income, 2009 vs 2010

+133% +1,825bps

+56% +86%


70

1,581

2009 2010

+2,156%


31

55%

16% 15%

4% 2% 2%5%

60%

16% 13%

3% 2% 1%5%

Materials Labour Cost ofgoods sold

Constructionworks by

sub-contractors

D&A Utilities Others

2009 2010

75.3% 2.5% 9.1%

0.5% 12.6% 1.9% 0.7% 15.3%

Revenue Cost of sales Distribution andtransportexpenses

SG&A Other expenses Operating profit Depreciation &amortisation

Others EBITDA*

EBITDA key drivers, 2009 vs 2010 (% of revenue)

Comments Cost of sales components comparison, 2009 vs 2010

EBITDA Development in 2010

expenses

EBITDA increased by 86% yoy to Rub 3,519 mn due to:

Strong revenue growth in all business units

Focus on innovative high-margin contracts

Effective cost control

Consolidation of GTNG

EBITDA organic growth of 72% yoy

EBITDA margin increased to 15.3%

SG&A grew less than revenue due to economy of scale

and cost optimization strategy


operating expenses

20.2bn vs 13.7bn in 2009 |+47.2% yoy revenue in 2010 +56.2% yoy

0

50,000

2009 2010

75.6% 3.3% 12.4%

1.5% 7.3% 2.3% 3.1% 12.8%

Revenue Cost of sales Distribution and transport expenses

General & Administrative

expenses

Other expenses Operating profit Depreciation & amortisation

Others EBITDA


32

Modular equipment:

Sales up 39% yoy, driven by demand from the major oil

companies to equip new oil fields and modernize existing

installed base of modular equipment

EBITDA decreased 24% yoy and EBITDA margin also down to

10.3% due to execution of low-margin contracts concluded in

2009

Highlights by core segments, 2009 vs 2010 Comments

Pumps:

Sales up 70% yoy to Rub 10,712 mln, enjoying strong demand

for integrated pumping solutions primarily in oil transportation

and upstream

EBITDA grew by 134% yoy, and EBITDA margin rose to 22.1%,

primarily attributable to increasing share of contracts for pump-

based integration solutions

Revenue & EBITDA Contribution by Segments


Pumps

Modular equipment

EPC EPC:

Revenue growth of 46% yoy is primarily attributable to an impact of GTNG acquisition and entering the market of projects and design. Revenue growth, excluding an effect of acquisition, was c. 14% yoy

EBITDA increased significantly to Rub 550 mln, and EBITDA margin rose to 9.0%. Newly acquired GTNG added to EPC’s EBITDA Rub 271 mln

Such a significant EBITDA growth is primarily attributable to a low EBITDA base in 2009, caused by significant price pressure connected to investment cutbacks by oil companies

ebitda +1,548%

revenue +46%

ebitda -24%

revenue +39%

ebitda +134%

revenue +70%

6,308

10,712

1,012

2,367

16.0%

22.1%

2009 2010

Revenue, Rub mln EBITDA, Rub mln EBITDA margin, %

4,166

5,805

786 599

18.9%

10.3%

2009 2010


4,189

6,135

33 550 0.8%

9.0%

2009 2010


33

Source: Frost & Sullivan report 2009, Transneft website (www.transneft.ru)

Novorossiysk

Moscow

Unecha

Primorsk

Kozmino

Skovorodino

Verkhnechonskoye

Tengiz

Timano-Pechora basin

Caspian Pipeline Consortium expansion (35 MMt, 1,510 km)

Baltic Pipeline System-II (50 MMt, 1,000 km)

ESPO-I and ESPO-I capacity expansion (50 MMt, 2,694 km)

Russia

ESPO-II and ESPO-II capacity expansion (47 MMt, 2,046 km)

Talakanskoye

Purpe-Samotlor (25 MMt, 430 km)

Vankor Salymskoye

Samotlor

Nizhnevartovsk

Priobskoye

Purpe

Tyamkinskoye

Russkoye

Taishet

Zapolyarnoye-Purpe (45 MMt, 536 km)

Syzran

Tikhoretsk-Tuapse 2 (12 MMt, 295 km)

Haryaga Yuzhny

Khylchuyu

Haryaga-Yuzhny Khylchuyu (8 MMt, 160 km)

Yurubcheno-Tokhomskoe

Yurubcheno-Tokhomskoe-Taishet (18 MMt, 600 km)

Tuapse

Tikhoretsk

Komsomolsky NPZ -port De-Kastry (9 MMt, 313 km)

Oil pipeline projects

Mature oil producing regions

Underdeveloped oil producing regions

Developing oil fields

HMS participation confirmed

Oil products pipeline projects

Komsomolsky NPZ

De-Kastri

“Yug” (South) (9 MMt, 1,465 km)

Komsomolsky NPZ -De-Kastry (n.d., 300 km)

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

New Milestone Projects Oil & Gas Production and Oil Transportation

Zapolyarnoye

South

> 3 bn tons of oil reserves to

be developed in the next

several years

Oil production development

> 10,000 km of pipelines to be constructed or

replaced

> 140 of pump stations to be constructed or

reconstructed

> 550 reservoirs with total capacity of almost

10 mln m3 to be reconstructed

Transneft investment program 2010-2017

Central Asia

Rapidly growing sales of modular equipment to oil and gas sector in Kazakhstan

Iraq

Significant installed base of HMS pumps from Soviet and post Soviet periods

Currently undertaking projects for Oil Ministry and BP

Export markets

26 oil refineries are to be

reconstructed

Oil refining development

34

Trebs & Titov (140 MMt, 2,151 km)

Prirazlomnoye

http://www.transneft.ru/

TGC-13 (Enisei) Investments 2010-2015: RUB 10 bn

TGC-9 Investments 2010-2015: RUB 28 bn


TGC-7 (Volga) Investments 2010-2015: RUB 11 bn



TGC-3 (Mosenergo) Investments 2010-2015: RUB 39 bn


TGC-12 (Kuzbas) Investments 2010-2015: RUB 21 bn


TGC-10 (Fortum) Investments 2010-2015: RUB 47 bn




Source: Frost & Sullivan report 2009

Nuclear Power Plants HMS participation confirmed Projects under construction Planned projects

Leningradskaya-II

Kalininskaya

Rostovskaya

Novovoronezhskaya-II

Beloyarskaya

Kurskaya Smolenskaya

Kolskaya

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

New Milestone Projects Thermal and Nuclear Power Utilities

South

Rostovskaya

Summary of total investments in power generating capacity

Selected nuclear power plant projects abroad using Russian technology

Number of power units to be constructed or reconstructed

Additional generation capacity, MW

Investments 2010-2015 (RUB bn)

TGC n/a 13,627 359

OGC n/a 11,962 467

Nuclear plants (Russia)

41 21,500 808

Nuclear plants (Foreign)

17 17,880 1,940

Name Country No of power units / Unit capacity (MW)

Investments 2010-2015 (RUB bn)

Belene NPP Bulgaria 1 / 1,000 128

Tianwan NPP China 2 / 1,000 86

Kudankulam NPP India 2 / 1,000 65

Mokhovtse NPP Slovakia 2 / 440 53

Akkuyu NPP Turkey 4 / 1,200 27

Other projects

Ukraine 2 / 1,200

1,581 Belarus 2 / 1,200

Armenia 1 / 1,200

Vietnam 1 / 1,200

35

Kirov

Perm

Barnaul

Petrozavodsk

Vladimir

Rostov-on-Don

Azov

Kaluga

Tver

Orenburg

Omsk

Tyumen Krasnodar

393471

606724

844

1,011

311372295

2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

Source: Frost & Sullivan report 2009, Media sources 1 Figures have been taken from various media sources; they are not final and may change in the

future

2 The “Clean Water” program is a nationwide large investment plan aimed at improving drinking water quality.

Capex in water projects, RUB bn (2007–2015)

Source: Frost & Sullivan report 2009

Large-scale State Programs Total Capex 2010-

2015 (RUB bn) Capex period

Federal Program "Zhilische" (public housing)

620 2011-2015

Regional programs "Clean Water“2 (unconfirmed budget)

520 2011-2017

Water Strategy of Russian Federation until 2020 (excl. "Clean Water")

351 2009-2020

Reconstruction of Grozny utilities 105 2010-2011

St. Petersburg Water Utilities Development Program

103 2010-2025

JSC RKS JSC Evraziysky JSC Rosvodokanal

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

New Milestone Projects Water Utilities

Central Asia

Recently undertook turnkey construction of pumping stations in Turkmenistan and Uzbekistan

Presence in water markets of Tajikistan and Kyrgyzstan

Offices in Ashkhabad (Turkmenistan) and Tashkent (Uzbekistan)

South

Moscow

Kaliningrad

St. Petersburg

Volgograd Kazan

N.Novgorod

Yaroslavl

Ekaterinburg

Sochi

Samara

FIFA World Cup 2018 Investment 2010-2018: RUB 1.6 trn1

Olympic Games in Sochi in 2014 Investment 2010-2014: RUB 930 bn1

Asia-Pacific Economic Cooperation Summit in Vladivostok in 2012 Investment 2010-2012: RUB 660 bn1

Vladivostok

Export markets

Leading integrated water utilities

36

Number of new pumping stations for increasing capacity 21

To supply Komsomolsk and Khabarovsk refineries 9

To supply Primorsk refinery 4

No information at the present time 8

Number of contracted pumping stations 20

Pumping stations under construction by HMS 12

Pumping stations constructed by Sulzer 7

Pumping stations under construction by Turbonasos 2

East Siberia – Pacific Ocean pipeline

Source: Company data, Transneft

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

North

Krasnoyarsk region

1 2

3 4 5

6 7

8

9

10

11

12 13 14 15

16 17

18

19

20

23 24

25

26 27

28 29 30

31 32 33

34

35

36

37

38

39

40

41

Buryat region

Chita region

RUSSIA

MONGOLIA

Irkutsk Chita

Ust’-Kut

Yakutsk

Skovorodino

Blagoveschensk

Vladivostok

Taishet

Irkutsk region

Khabarovsk region

Sea of Okhotks

CHINA

Total number of pumping stations 41

22 21

37

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

Zapolyarnoe-Pur-pe pipeline

Projected Zapolyarnoe–Pur-pe pipeline

Inlet pipelines from main perspective oilfields (with production level over 2mln tons in 2020)

New OPS

Maximum level of pumping capacity by 2020, mtpa

Main OPS – main oil-pumping station of the future Zapolyarnoe-Pur-per pipeline

OPS – oil-pumping station

Legend

Inlet pipelines

Inlet point Oilfield License holder Max capacity

in 2020, mt

Main OPS 1 Vostochno-Messoyakhinskoe Slavneft * 10.9

Main OPS 1 Zapadno-Messoyakhinskoe Slvaneft 2.4

Total Main OPS 1 13.3

OPS 2 Russkoe TNK-BP 6.8

OPS 2 Zapolyarnoe Gazprom 2.3

OPS 2 Tazovskoe Gazprom 1.0

OPS 2 Northern Urengoyskoe Gazprom n/a

OPS 2 Salekaptskoe Lukoil 0.3

Total OPS 2 10.9

OPS 3 Urengoyskoe Gazprom 7.4

OPS 3 Pestsovoe Gazprom n/a

OPS 3 En-Yakhinskoe Gazprom n/a

OPS 3 Samburgskoe SeverEnergiya ** 0.2

OPS 3 Yaro-Yakhinskoe SeverEnergiya 0.5

OPS 3 License plot of Western Urengoyskoe TNK-BP 1.1

Total OPS 3 9.7

Total capacity to Pur-pe 34.0-45.0

* TNK-BP and Gazprom Neft have per 50% share ** Gazprom holds 51%; this shareholding should be sold to Novatek

Source: Public sources, Transneft site

Capacity, mtpa up to 45

Total length, km 488

Projected cost, RUB bn 120

Total length of inlet pipelines, km 1,200

Project figures Construction period 2012-2016

1st stage 2014

2nd stage 2015

3rd stage 2016

Implementation

1st stage

2nd stage

3rd stage

38

Gazprom Neft7%

10,10913,994

6,049

6,567

9M 2010 9M 2011

Large clients, Rub mn Others, Rub mn

Transneft33%

Rosneft10%

Gazprom Neft7%

TNK-BP5%

Dulisma3%

Lukoil2%

Hors Group2%

Stroygazconsulting2%

Surgutneftegaz2%Gazprom

1%

Salym Petroleum1%

Others32%

Rosneft23%

Transneft16%

Orion Stroy6%

Gazprom Neft6%

TNK-BP5%

Surgutneftegaz2%

Salym Petroleum1%

Lukoil1%

Hors Group1%

Dulisma1%

Others38%

Stable growth of revenue generated by Other clients

received from replacement and modernization works

Sharp increase in contracts’ quantity from Transneft,

Rosneft and Gazprom Neft played its role in a

substantial revenue growth

New types of contracts include:

– Integrated pump-based solutions (i.e. pumping

stations for Transneft)

– Turnkey projects (i.e. Srednebotuibunskoe oil &

gas fields)

– Aftermarket contracts

Source: Company data * Large client - a client that brings revenue more than Rub 100 mn per period

39

Diversified and Well-established Customer Base

Revenue by Clients*, 9M 2011 vs. 9M2010 Comments

Case study: Gazprom Neft’s revenue breakdown

9M 2010 Total revenue

Rub 16,158 mn

9M 2011 Total revenue

Rub 20,560 mn

Revenue structure by clients

Rub mn

9M 2011


Gazpromneft-Vostok36.21%

Gazpromneft-Hantos23.31%

Gazpromneft-NNG21.85%

Gazpromneft-Noyabrskneftegas

18.38%

Gazpromneft-ONPZ0.24%

Competitive Environment in Russia


Limited R&D

Small scale of operations

Pump manufacturing is a non-core business for most of players

Products are often not in direct competition with HMS product line

Key names: NPO Frunze, Votkinsk Plant, Uralhydromash

Not well-positioned in terms of operational efficiency due to limited scale of operations

Global players

Lack of local engineering expertise

Water pumps: KSB, Grundfos

Oil trunk pumps: Sulzer, Flowserve

Power: Weir, KSB

Not well-positioned in terms of price of products

Chinese players

Lack of relevant technologies to produce customized pumps

No brand names

No established relationships with Russian clients

Customized Pumps Standard Pumps

Russian players

40

41

Russia

China

Kazakhstan

Belarus

Ukraine

India

UAE

Uzbekistan

Turkmenistan

Iraq

Vietnam

Kyrgyzstan

Tajikistan

Export Markets

Central Asia

Recently undertook turnkey construction of pumping station on Amu Darya river in Turkmenistan and construction of pumping station on water-storage basin Arnasai in Uzbekistan

Rapidly growing sales of modular equipment to oil and gas sector in Kazakhstan

Presence in water markets of Tajikistan and Kyrgyzstan

Offices in Ashkhabad (Turkmenistan) and Tashkent (Uzbekistan)

Europe

Office in Milan *

Iraq

Significant installed base of HMS pumps, particularly in oil and gas, from Soviet and post Soviet periods

Office in Baghdad diversifies customer base, currently undertakes projects for Oil Ministry and BP

The UAE

Office in Dubai *

Nuclear Exports

Long history of HMS involvement in Rosatom’s foreign as well as domestic projects

International agreements in place for the construction of 19 reactors in China, India, Belarus, Turkey, Ukraine, Armenia, Slovakia, Bulgaria and Vietnam using Russian technology

― Current tenders for development of 16 other reactors worldwide

Source: Company data, media sources Note: * To be opened at 2011-end

HMS office

Italy Bulgaria

Turkey

Livny

Russia

Ukraine

Tomsk

Nizhnevartovsk

Tyumen

Dimitrovgrad

Nizhnevartovskremservice (NRS)

Services: Maintenance and repair of pump equipment, drilling and other oil and gas field equipment

HMS Neftemash

Products: Modular equipment for oil and gas and water industries

Sibneftavtomatika (SibNA)

Products: High-precision measuring equipment for oil, gas and water flow rates

Tomskgazstroy (TGS)

Services: Trunk oil and gas pipeline and auxiliary facilities construction

Sibkomplektmontazhnaladka (SKMN)

Services: Design, construction and commissioning of oil and gas field projects

Rostov Vodokanalproekt (RVKP)

Services: Project design for water utilities

Rostov

Sumy

42

HMS Household pumps

Products: Household vibration pumps

HMS Group

Headquarters

Promburvod (PBV)

Products: Water well submersible pumps

Livnynasos (LN)

Products: Water well submersible pumps

Nasosenergomash (NEM)

Products: Pumps for thermal and nuclear power generation and oil & gas industry

VNIIAEN, associate 47%

Description: R&D center for pumps used in nuclear, thermal power generation, oil and gas industry

Dimitrovgradhimmash (DGHM), associate 40%

Products: Equipment for oil and chemical industries and pumps for oil refining

HMS Pumps

Products: Industrial pumps for oil and gas, power generation

Giprotyumenneftegaz (GTNG)

Services: Project and construction design of oil and gas facilities

Belarus

Minsk

Moscow

Bavleny

Industrial pumps Modular equipment EPC


Production Assets

Bobruisk Machine Building Plant (BMBP)

Products: Pumps for oil refining and metals & mining

Bobruisk

Sibneftemash

Products: Tanks and vessels for oil and oilfield service companies

Growth Strategy: Selective Acquisitions in Key Segments

Source: Company data 1 The Group has an option to acquire 11.0% of the voting shares’ current quantity of its associate, DGKhM, in 2012, as a result HMS Group will own 51.0% of the voting shares of DGKhM

Flow control solutions in oil and gas

Pumps for oil and gas, chemical and petrochemical applications

Modular equipment, tanks and vessels

Dimitrovgradkhimmash (DGKhM)1

Increase of market share

Diversification of product offering

Expansion into new segments

Water Pumps for wet-pit sewage applications

Pumps for water utilities, nuclear and thermal power generation

Modular equipment for wastewater treatment


Strengthening positions in water segment


Expansion into wastewater treatment segment

Power Pumps for nuclear and thermal power generation, marine applications

Pumps for nuclear and thermal power generation, oil refining, chemical and petrochemical applications

Pumps for thermal power generation, water utilities



Other Pumps for oil refining and metals and mining

Pumps for oil refining, oil transportation, water utilities and vessels

Pumps for oil transportation, oil refining, metals and mining

Pumps for chemical applications, nuclear power generation, water utilities


Expansion into new segments


Core Focus for Potential Acquisitions Acquisition Objectives and Rationale

Oil & Gas

43

Calculations

All figures in millions of Russian Rubles, unless otherwise stated

Management of the Group assesses the performance of operating segments based on a measure of adjusted EBITDA, which

is derived from the consolidated financial statements prepared in accordance with IFRS

EBITDA is defined as operating profit/loss adjusted for other operating income/expenses, depreciation and amortization,

impairment of assets, provision for obsolete inventory, provision for impairment of accounts receivable, unused vacation

allowance, defined benefits scheme expense, warranty provision, provision for legal claims, provision for VAT and other taxes

receivable, other provisions, excess of fair value of net assets acquired over the cost of acquisition. This measurement basis

excludes the effects of non-recurring income and expenses on the results of the operating segments

EBIT is calculated as Gross margin minus Distribution & transportation expenses minus General & administrative expenses

Total debt is calculated as Long-term borrowings plus Long-term financial lease liabilities plus Short-term borrowings plus

Short-term financial lease liabilities

Net debt is calculated as Total debt minus Cash & cash equivalents at the end of the period

Working capital is calculated as Inventories plus Trade and other receivables minus Trade and other payables

ROCE is calculated as EBIT LTM divided by Average Capital Employed (total debt + total equity), where EBIT equals Gross

profit minus SG&A, and Total debt equals the above formula

Backlog is calculated as the preceding backlog plus new or additional customer orders booked during the reporting period, less

amounts of contract value booked as revenue under ‘‘Russian GAAP’’ on an unconsolidated basis under the relevant

contracts, plus or minus adjustments made in the judgment of the Group’s management. The Group may also make certain

adjustments to bookings to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price

terms under contracts or orders, or other factors affecting the amount of potential revenue which the Group believes may be

recognized under such contracts. The Group’s backlog estimates are not an indication of potential revenues. Actual revenues

and other measures of financial performance under IFRS may differ materially from any estimate of backlog, and changes in

backlog between periods may have limited or no correlation to changes in revenue or any other measure of financial

performance under IFRS

Notes to the presentation and formulas used for some figures’ calculations

44

The information contained herein has been prepared using information available to HMS Group (“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.

Disclaimer

45

hms group investor presentation

Investor Relations

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