hms group investor presentation june 2011

HMS Group Investor Presentation

June 2011

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

2

Agenda

WHO WE ARE 4

HMS at a Glance 5

History of Growth: Industry Consolidation 6

Shareholder Structure and Corporate Governance 7

FINANCIAL PERFORMANCE IN 2010 & 1Q 2011 8

Financial Performance for 2010 9

EBITDA Development in 2010 10

Revenue & EBITDA Contribution by Segments 2010 11

Financial Highlights for 1Q 2011 12

EBITDA Development in 1Q 2011 13

Revenue & EBITDA Contribution by Segments 1Q 2011 14

CAPEX & Working Capital in 1Q 2011 15

2011 & 2012 BUSINESS UPDATE & OUTLOOK 16

HMS is the Leader on Growing Markets 17

Backlog Analysis 18

Demand Shifts to Integrated Solutions 19

Selected End-market Projects for Mid-term 20

Sources of Best-in-class Margins & Growth 21

CONTACTS 22

APPENDIX 23

3

WHO WE ARE

4

Key investment highlights Key financial indicators for 2005-2010

Attractive industry fundamentals: impressive prospects of oil & gas, nuclear and thermal power and water sectors in Russia and the CIS

The leading provider of flow control solutions in Russia and the CIS, including high-capacity pump systems up to 12 MW

Advanced R&D capabilities: basis for high-margin & sustainable performance and growth

Diversified and well-established customer base with more than 4,000 clients

Operational and product quality excellence

History of resilient financial growth and strong backlog

Strong management team: company founders and top professionals

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”

Source: Company data

Industrial pumps

Revenue Rub 4,427 mln

EBITDA adj. Rub 1,285 mln

Modular equipment


EBITDA adj. Rub 143 mln

EPC


EBITDA adj. Rub 150 mln

Revenue Rub 7,051 mln EBITDA adj. Rub 1,588 mln

New photo

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

Profit for the period Rub 991 mln

4,498

6,724

13,399 14,046

14,772

23,070

744 830 1,423 1,644 1,890

3,519

16.5%

12.3%

10.6%

11.7%

12.8%

15.3%

2005 2006 2007 2008 2009 2010

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

* 1Q 2011 Key Financials

* * *

5

2007–2008

2003

2009–Today

Oil and gas production Oil transportation Water utilities

2004–2006

1993–2002

EPC Modular Equipment Design and Manufacturing

Pump Design and

Manufacturing Pump Trading

Construction Modular Equipment Design and Manufacturing

Pump Design and


Modular Equipment Design and Manufacturing

Pump Design and


Pump Design and


Pump Trading

Power generation

History of Growth: Industry Consolidation

From pumps to integrated solutions

6

http://rosneft.ru/news/photogallery/Upstream/Overview/2/

Vladimir Lukyanenko Member of the Board Non-executive Director

Artem Molchanov Member of the Board

Managing Director (CEO)

Shareholder Structure and Corporate Governance

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


Board of Directors Comments

Shareholders Structure

Kirill Molchanov Member of the Board

First Deputy CEO (CFO)

German Tsoy Chairman of the Board Non-executive Director

Yury Skrynnik Member of the Board Director for Strategic

Marketing

Nikolay Yamburenko Member of the Board

Head of Industrial Pumps

Philippe Delpal Member of the Board

Independent Non-executive Director

Andreas Petrou Member of the Board Non-executive Director

Cyprus

Gary Yamamoto Member of the Board

Independent Non-executive Director

Founders

7

Free-float36.9%

Vladimir Lukyanenko

24.0%

Other managers

21.8%

German Tsoy17.3%

FINANCIAL PERFORMANCE IN 2010 & 1Q 2011

8

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 mln

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%


9

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*

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

Comments World HRC price performance in 2010

EBITDA Development in 2010

expenses

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

Strong revenue growth in all business units

Focus on innovative high-margin contracts

Effective cost control


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

Source: Bloomberg

22%

500

550

600

650

700

750

800

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

World hot rolled coil price index performance, $/tonne

10

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

Industrial 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


Industrial 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


11

Significant yoy & qoq growth

Financial Highlights for 1Q 2011


Rub, mln 1Q 2011 1Q 2010 chg, yoy 4Q 2010 chg, qoq

Revenue 7,051 3,835 +84% 6,912 +2%

Gross profit 2,072 774 +168% 1,845 +12%

EBITDA 1,588 431 +269% 1,268 +25%

Operating profit 1,378 117 +1,083% 883 +56%

Net income (loss) 991 (89) n/a 492 +101%

Total debt 2,688 5,629 -52% 4,648 -42%

Gross margin 29% 20% +919bps 27% +270bps

EBITDA margin 23% 11% +1,130bps 18% +417bps

Operating margin 20% 3% +1,651bps 13% +676bps

Net income margin 14% (2%) +1,638bps 7% +692bps

12

117 10

(210)

(4) (1)(89)

1,378

4

(133)

9

(267)

991

(400)

(200)

0

200

400

600

800

1,000

1,200

1,400

Operatingprofit

Financeincome

Financecosts

Share ofresults ofassociates

Income taxexpense

Netincome

1Q 2010 1Q 2011

70.6%

2.1% 6.4%

1.3% 19.5% 2.0% 1.0% 22.5%

Revenue Cost of sales Distribution &transportexpenses

General &administrative

expenses

Other expenses Operating profit Depreciation &amortisation

Others EBITDA*

expenses Source: Company data

operating expenses

operating expenses 5.7bn vs 3.7bn in 1Q’10 | +52.6% yoy revenue in 1Q’11 | +83.9% yoy

0

10,000

1Q 2010 1Q 2011

Net income drivers in 1Q’10 vs 10’11, Rub mln

EBITDA Development in 1Q 2011

Key EBITDA drivers in 1Q’10 vs 1Q’11, % of revenue

Comments


EBITDA increased by 269% yoy to Rub 1,588 mln primarily due to:

Execution of large high-margin infrastructure contracts in oil transportation

Margins growth in other segments of a pump market


Low EBITDA in 1Q 2010

Effective cost control by hedging of raw materials & supplies prices

Effective SG&A cost control and economy of scale

Higher-than-average profitability of construction contracts

As a result, EBITDA margin increased to 22.5%

Organic EBITDA, excluding consolidation of GTNG, grew by 244% yoy to Rub 1,481 mln

Net income grew to Rub 991 mln in 1Q 2011 compared to a net loss of Rub 89 mln in 1Q 2010 due to the growth of operating profit and reduction of finance costs

79.8%

4.0% 12.5%

0.7% 3.0%

2.1% 6.1%

11.2%

Revenue Cost of sales Distribution &

transport

expenses

General &

administrative

expenses

Other expenses Operating profit Depreciation &

amortisation

Other operating expenses, net &

non-monetary items

EBITDA

13

Modular equipment:

Revenue was down 7% yoy to Rub 1,148 mln, compared to Rub 1,235 mln in the corresponding quarter of 2010

EBITDA increased by 3% yoy to Rub 143 mln in 1Q 2011, compared to Rub 138 mln in 1Q 2010

EBITDA margin was up to 12.4%

These changes reflect average quarterly fluctuations

Highlights by core segments, Rub mln Comments

Industrial Pumps:

Revenue increased by 198% yoy and amounted to Rub 4,427 mln, primarily due to the execution of large-scale projects for the delivery of integrated pumping systems as well as a stable order intake of regular contracts

EBITDA up 446% yoy, mainly as a result of large high-margin contracts in oil transportation, growing profit margin for other types of pumping equipment, as well as a low EBITDA base in 1Q 2010

EBITDA margin grew to 29.0%

Revenue & EBITDA Contribution by Segments


Industrial Pumps

Modular equipment

EPC EPC:

Revenue grew by 34% yoy to Rub 1,452 mln, primarily due to the consolidation of GTNG

EBITDA was up 119% yoy and totaled Rub 150 mln following the consolidation of GTNG

EBITDA margin increased to 10.3%

Organic revenue, excluding the impact of the GTNG acquisition, decreased by 15% yoy, and organic EBITDA was down by 37% yoy

1,488

4,427

235

1,285

15.8%

29.0%

1Q 2010 1Q 2011


1,235 1,148

138 143

11.2%

12.4%

1Q 2010 1Q 2011


1,086

1,452

69 150

6.3%

10.3%

1Q 2010 1Q 2011


ebitda +446%

revenue +198%

ebitda +3%

revenue -7%

ebitda +119%

revenue +34%

14

Key highlights in 1Q‘10 vs 1Q’11 Working capital performance in 4Q’10 vs 1Q’11

Capital expenditures in 1Q’10 vs 1Q’11 Debt position in 1Q’10 vs 1Q’11

CAPEX & Working Capital in 1Q 2011

Source: Company data Source: Company data

total debt -52%

cash -77%


Rub, mln 1Q 2011 1Q 2010 chg, %

Operating cash flow (840) 1,986 -

Investment cash flow (241) (50) -

Free cash flow (1,081) 1,936 -

Financing cash flow 1,415 264 -

Long-term debt 2,132 3,698 (42%)

Short-term debt 556 1,930 (71%)

Net debt 2,005 2,669 (25%)

Total debt to Equity ratio 0.31 2.66 -

Total debt to EBITDA ratio 1.69 13.07 -

HMS’ internal covenant for Net debt/ EBITDA is 2.5x


+70%

5,629

2,6882,960

683

15.8%

8.9%

1Q 2010 1Q 2011

Total debt, RUB mln Cash, Rub mln

Effective interest rate, Q-end

58

235

82

1430.7x

1.6x

1Q 2010 1Q 2011

Organic capex, Rub mln Depreciation & amortization, Rub mln

Capex to D&A ratio, x

2,441

4,147

10.6%

15.8%

4Q 2010 1Q 2011

Working capital, Rub mln Working capital to revenue LTM ratio

15

2011 & 2012 BUSINESS UPDATE & OUTLOOK

16

Associate gas processing and transport units

7.5 12.6

97.5

113.8

2009 2010

20%

68% 86.099.2

67.0

73.4

2009 2010

Pump stations

Leading market share in pumps…

… and modular equipment

Source: Frost & Sullivan report 2010

In 2010, HMS Group expanded its presence in the most key segments

The company’s share grew mainly faster than its core segments

Russian government introduced new fuel specifications, and hence, oil companies undertake refinery’s upgrade mainly in “hot cycle”. The market share decrease in refinery & petrochemicals is attributable to HMS Group’s presence only in standard “cold cycle” pumps. Deferred demand is being created for standard “cold cycle” pumps

Decrease in nuclear non-MPC pumps is attributable to the industry’s specifics expressed in long-term only contracts. Revenue from signed in 2009 contracts will be recognized in 2011

227.24.5

2

22.325.2

15.7

16.0

2009 2010

Oil industry - Water injection

pumps

17.6 16.9

46.959.6

2009 2010

Oil industry - Refining &

petrochemical pumps

18.0

64.9

15.3

19.0

2009 2010

Oil industry - Oil transportation

pumps

21.8

28.0

11.8

13.9

2009 2010

Water utilities - Submersible water

well pumps

13.5

22.7

19.3

24.0

2009 2010

Water utilities - Clean water supply and dry-pit sewage

7.6 9.1

30.3

35.9

2009 2010

Water utilities - Household vibration

pumps

HMS is the Leader on Growing Markets

7.3 6.4

18.2

26.8

2009 2010

Power generation - Nuclear non-MPC

pumps

21.325.2

14.7

22.2

2009 2010

Power generation - Thermal pumps

38.0 41.2

76.5 83.9 41.9 46.7 45.0

33.2 47.3

64.5

33.2

33.6 32.8

37.9 25.5 36.0

13%

8% 19% 152% 25% 42% 19% 30% 31%

-4%

261% 28%

68%

20% -13%

51%

Comments

.153.0 172.6

13%

15%

Automated group metering units

21.7 25.1

50.350.0

2009 2010

4%

16%

75.1 72.0

105.0

126.4

2009 2010

HMS Group revenue, US$ mln Others

2009 2010

HMS Group revenue, US$ mln Others

17

Backlog decreased to Rub 15.8 bn

Backlog reduction is attributable to:

– ESPO revenue recognition

– Decline in low-margin construction component of EPC segment

Oil transportation pumps backlog amounts to Rub 6.5 bn, the most part of revenue to be recognized in 2011

Nuclear pumps backlog amounts to Rub 1.5 bn, the most part of revenue to be recognized in 2011

Other products and services backlog remains stable

Standard pumps and other equipment, sold from the Company’s warehouses, bring up to Rub 2.5 bn of revenue. Usually these products are not considered in backlog calculation

HMS Group expects backlog to grow by 4Q 2011

Backlog structure performance, Rub bn

Backlog Analysis

9.5

22.8

20.6 19.8

15.8

Comments


4.3 4.1 2.8 2.7 1.8

0.4 12.1

10.1 10.1 6.5

1.1

1.3

1.4 1.5

1.5

4.0

5.3

6.2 5.6

6.0

31 Dec 09 31 Mar 10 30 Sep 10 31 Dec 10 31 Mar 11

Construction component of EPC Oil transportation pumps Nuclear pumps Others

18

Trunk pipelines construction, km

<2,500

>10,000

2005-2009 after 2009

Source: Frost & Sullivan report 2009 1 Includes pumps for water injection, oil refining and petrochemicals, oil pipelines, energy generation (thermal and nuclear (excluding MCP)), water utilities pumps, household vibration pumps, as well as integrated solutions and aftermarket 2 Core markets for HMS, includes pump stations, automated group metering units, associated gas processing and transport units

Demand Shifts to Integrated Solutions

Russian markets history and forecast, Rub bn Example of integrated solutions for ESPO-I pipeline

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

79

224

2009 2015E

CAGR 18.8% Pumps1

Modular equipment2

10

22

2009 2015E

CAGR 14.0%

HMS core markets transformational development

Thermal power capacity, GW

<5

>20

2004-2010 after 2010

Oil reserves, bn bbl ~60~75

end of 1999 end of 2009

19

Project Brief description Completion Key metrics Comments

Rosneft

Vankor 2 stage Further development. Capex for 2011 US$ 2.6 bn next stage by 2014 Min capex Rub 480 bn HMS participated in previous stages

Yurubcheno-Tokhomsk oilfield Development

Associated gas utilization program (Komsomolskoe, Priobskoe oilfields)

Achievement of 95% level of associated gas utilization HMS participated in previous stages

Lukoil & Bashneft JV

Trebs and Titov fields Joint development of the fields, in stage of project development. Reserves 141 mt

by 2013 Capex US$5-6 bn HMS has good references for previous

projects

Transneft

ESPO expansion 9 oil-pumping stations to be constructed to deliver oil to Khabarovsk and Komsomolsk refineries by 2015

9 OPS by 2015 HMS participated in previous stages

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

4 OPS by 2015 Capex Rub 120 bn HMS participates in a project design

ESPO expansion 4 OPSs to be constructed to deliver oil to Primorsk refinery by 2017

4 OPS by 2017 HMS participated in previous stages

Pur-pe – Samotlor expansion Construction of 2 OPS. Total capex in 2011 Rub 77 bn 2 OPS by 2017 HMS participated in previous stages

TNK-BP

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

Capex US$ 4.5 bn HMS participates in a project design

Samotlor Further development of an active oilfield in Nizhnevartovsk. by 2014 Capex US$ 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% on 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 US$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

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 US$ 15 bn HMS already submitted technical

survey

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

Rosatom

Belene (Bulgaria) Unit 1 by 2017-18 Capex € 5-6.3 bn

Municipal water

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

previous projects

Grozvodokanal Modernization and reconstruction of water utilities in Chechnya Capex about Rub 100 bn HMS participated in previous stages

Financial and Operational highlights

Selected End-market Projects for Mid-term

Source: Public information, Company data

Increased number of HMS end-market projects

20

Financial and Operational highlights

Sources of Best-in-class Margins & Growth

HMS Group high and sustainable margins are the result of a number of cumulative factors

Mix of growing markets Unfolding innovative projects

Shift in structure of demand

First class customer base

Strong negotiation force over customers

Unique pump R&D Exceptional project design capabilities

End-to-end solutions capabilities: from design to implementation and after-market

Growth through integrated solutions: ahead of market with lower capex

Further bolt-on acquisition growth strategy based on successful track record of integrated acquisitions

United team of founders and high professionals

High market share Technical entry barriers for international majors

Multidecade track record with customers

Installed base

Focus on operations excellence and project execution

REVENUES &

MARGINS

POTENTIAL

21

General Inquiries [email protected] Alexander Rybin Head of Capital Markets Tel: +7 (495) 730-66-12 [email protected] www.grouphms.com 7 Chayanova Str. Moscow 125047 Russia

Inna Kelekhsaeva IR Officer Tel: +7 (495) 730-66-01 [email protected]

Сontacts

22

mailto:[email protected]


http://www.grouphms.com/


APPENDIX

23

Calculations

All numbers 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 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 D&T and SG&A 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 Long-term borrowings plus Long-term financial lease liabilities plus Short-term borrowings plus Short-

term financial lease liabilities minus Cash & cash equivalents

ROCE is calculated as EBIT divided average Debt plus Equity

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

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

24

RUB,’000 31 March 2011 31 December 2010

ASSETS Non-current assets: Property, plant and equipment 5,980,920 5,948,674 Other intangible assets 285,890 310,156 Goodwill 1,783,915 1,783,915 Investments in associates 510,712 507,141 Deferred income tax assets 135,372 130,779 Other long-term receivables 26,597 27,123 Total non-current assets 8,723,406 8,707,788

Current assets: Inventories 3,363,911 2,840,745 Trade and other receivables and other financial assets 8,572,511 10,399,853 Current income tax receivable 62,323 38,086 Prepaid expenses 28,875 39,361 Cash and cash equivalents 683,252 351,086 Restricted cash 5,829 4,978 12,716,701 13,674,109 Non-current assets held for sale 96,095 96,095

Total current assets 12,812,796 13,770,204

TOTAL ASSETS 21,536,202 22,477,992

EQUITY AND LIABILITIES EQUITY Share capital 48,329 42,510 Share premium 3,523,535 210,862 Currency translation reserve (471,187) (234,785) Retained earnings 3,891,200 2,897,296 Other reserves 122,852 38,987

Equity attributable to the shareholders of the Company 7,114,729 2,954,870 Non-controlling interest 1,453,681 1,508,263

TOTAL EQUITY 8,568,410 4,463,133

LIABILITIES Non-current liabilities: Long-term borrowings 2,132,174 3,864,176 Finance lease liability - 9 Deferred income tax liability 950,249 745,762 Pension liability 267,648 262,525 Provisions for liabilities and charges 52,787 35,691

Total non-current liabilities 3,402,858 4,908,163

Current liabilities: Trade and other payables 7,789,261 10,799,358 Short-term borrowings 550,418 775,242 Provisions for liabilities and charges 268,106 312,213 Finance lease liability 5,247 8,446 Pension liability 25,219 24,736 Current income tax payable 21,341 115,340 Other taxes payable 905,342 1,071,361

Total current liabilities 9,564,934 13,106,696

TOTAL LIABILITIES 12,967,792 18,014,859

TOTAL EQUITY AND LIABILITIES 21,536,202 22,477,992


Statement of Financial Position

25


Statement of Comprehensive Income RUB,’000

Three months ended 31 March 2011


Revenue 7,051,377 3,834,974 Cost of sales (4,979,520) (3,060,568)

Gross profit 2,071,857 774,406 Distribution and transportation expenses (150,620) (152,313) General and administrative expenses (450,891) (480,540) Other operating expenses, net (92,228) (25,028)

Operating profit 1,378,118 116,525 Finance income 3,778 9,719 Finance costs (133,292) (209,948) Share of results of associates 9,196 (4,221)

Profit/(loss) before income tax 1,257,800 (87,925) Income tax expense (267,293) (1,395)

Profit/(loss) for the period 990,507 (89,320)

Profit/(loss) attributable to: Shareholders of the Company 996,562 (96,503) Non-controlling interest (6,055) 7,183 Profit/(loss) for the period 990,507 (89,320)

Currency translation differences (289,207) (33,607) Currency translation differences of associates 1,540 392

Other comprehensive loss for the period (287,667) (33,215)

Total comprehensive income/(loss) for the period 702,840 (122,535)

Total comprehensive income/(loss) attributable to: Shareholders of the Company 760,160 (120,628) Non-controlling interest (57,320) (1,907) Total comprehensive income/(loss) for the period 702,840 (122,535)

Basic and diluted earnings per ordinary share for profit/(loss) attributable to the ordinary shareholders (expressed in Rub per share) 8.98 (0.94)

26


Cash Flow Statement RUB,’000



Cash flows from operating activities Profit/(loss) before income tax 1,257,800 (87,925)

Adjustments for: Depreciation and amortisation 143,229 81,510 Loss/(gain) from disposal of property, plant and equipment and intangible assets 1,688 (6,221) Finance income (3,778) (9,719) Finance costs 121,082 208,528 Pension expenses 10,112 38,305 Warranty provision (28,958) (11,857) Write-off of receivables 10,984 - Interest expense related to construction contracts (1,632) (7,787) Provision for impairment of accounts receivable (34,513) 47,634 Investments impairment provision 343 - Provision for obsolete inventories 31,435 89,595 Foreign exchange translation differences 12,210 1,420 Provision for VAT receivable (5,819) - Provisions for legal claims (69,111) 13,209 Share of results of associates (9,196) 4,221 Other non-cash items (179) (2)

Operating cash flows before working capital changes 1,435,697 360,911 Increase in inventories (607,855) (138,274) Decrease/(increase) in trade and other receivables 1,716,233 (1,584,048) (Decrease)/increase in other taxes payable (141,583) 424,768 (Decrease)/increase in accounts payable and accrued liabilities (2,941,933) 3,182,260 Restricted cash (851) (298)

Cash (used in)/generated from operations (540,292) 2,245,319 Income tax paid (177,300) (56,899) Interest paid (122,528) (202,857)

Net cash (used in)/from operating activities (840,120) 1,985,563

Cash flows from investing activities Repayment of loans advanced 453 53 Loans advanced - 4,066 Proceeds from sale of property, plant and equipment and intangible assets 2,226 373 Interest received - 3,323 Purchase of property, plant and equipment (235,326) (57,622) Acquisition of intangible assets (7,948) -

Net cash used in investing activities (240,595) (49,807)

Cash flows from financing activities Repayments of borrowings (4,176,052) (1,131,519) Proceeds from borrowings 2,218,829 1,431,873 Payment for finance lease (3,208) (3,538) Acquisition of non-controlling interest in subsidiaries - (32,362) Cash received from additional share issue of subsidiary 80 - Proceeds from share issue, net of issue costs 3,375,240 -

Net cash from financing activities 1,414,889 264,454

Net increase in cash and cash equivalents 334,174 2,200,210

Effect of exchange rate changes on cash and cash equivalents (2,008) 1,726

Cash and cash equivalents at the beginning of the period 351,086 758,127

Cash and cash equivalents at the end of the period 683,252 2,960,063

27

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

Prirazlomnoye

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

28

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





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

29

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)


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

30

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

Significant Upside from Aftermarket

Water injection pumps

HMS supplies 87%

Other 13%

Total number of pumps: 4,500

Oil trunk pipeline pumps1

HMS supplies 98%

Other 2%

Total number of pumps: 1,044

Note: In red are highlighted the pump’s components that suffer the greatest degree of deterioration during operation of the pump and which can be replaced in order to extend the pump’s operation life

Source: Company data, Frost & Sullivan report 2009

Very large installed base requires repair and maintenance services

Large portion of installed base is outdated, creating opportunity for upgrades as well as replacement

Energy represents 80% of operating cost for a typical pump

Trend for modernization of equipment to increase energy efficiency

Most repair and maintenance historically largely in-house

HMS has contracts with companies including

– TNK-BP (full outsourcing of maintenance of water injection pumps at the Samotlor field)

Exceptional

installed base

Energy efficiency

Outsourcing trend

Source: Frost & Sullivan report 2009, Company data 1 In Transneft’s pipeline system

Key drivers for aftermarket services growth Installed base

Example of pump servicing

31

Advanced R&D Capabilities

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

pump development

– 5 in-house R&D facilities in Russia and the CIS,

centralized research coordination

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

– Current facility allows to test pumps up to 8MW in

power; new facility for pumps up to 14MW under

construction

Deep integration with clients’ R&D

– HMS’ R&D works closely with clients’ R&D divisions in

developing pre-tender documentation and helps clients

adopt new design solutions and technical regulations

– Increases the likelihood of the use of HMS equipment

in projects

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

Oilfields, projected by GTNG

Oilfields, projected by others

Oilfields, projected by GTNG vs others

32

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

33

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 2011-2015

1st stage Dec 2013

2nd stage Dec 2014

3rd stage Dec 2015

Implementation

1st stage

2nd stage

3rd stage

34

170.70.67

147.193.150

69.114.167

200.193.188

227.24.52

207.213.225

137.165.78

Source: Company data * Large client - a client that brings revenue more than Rub 200 mln a year

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)

– Full-cycle projects (i.e. pumping stations in

Turkmenia)

– Project and design contracts for design of new

oilfields and pipelines

35

Revenue Contribution by Clients

FY2010 Total revenue

Rub 23,070 mln

FY2009 Total revenue

Rub 14,772 mln

7,443 8,772

7,329

14,298

2009 2010

Others Large clients

Revenue structure by clients, Rub mln

NK Dulisma1%

Salym Petroleum

2%

Surgutneftegaz3%

Lukoil1%

Orion Stroy4%

TNK-BP8%

Gazprom Neft4%

Transneft6%

Rosneft21%

Others50%

NK Dulisma1%

Salym Petroleum

1%Hors

Group1%

Surgutneftegaz1%

Lukoil2%

Orion Stroy5%

TNK-BP5%

Gazprom Neft8%

Transneft16%

Rosneft22%

Others38%

Comments Revenue by Clients*, 2009 vs 2010

Selected clients

Turkmenistan

http://www.lukoil.com/

hms group investor presentation june 2011

Investor Relations

company data source

company data source

manufacturing pump design

rub mln ebitda

company data

pumping stations

hms group

ebitda contribution