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Fitch Rating affirmed at B with Stable Outlook

26 May 2020

Industrial Metallurgical Holding (IMH), one of the global leading suppliers of merchant pig iron and the biggest merchant coke producer in Russia, announces its Fitch credit rating affirmed at B with stable outlook. It has also affirmed Koks Finance DAC's senior unsecured notes rating at B/RR4.

The affirmation and Stable Outlook reflect the agency’s expectation of improvement in EBITDA from 2020 due to recovery in coal production after underperformance at two mines in 2019, and better margins from sales of pig iron and coke both to traditional export markets and to domestic market.

Fitch also noted limited operational impact from COVID-19. Operations at all the Company's production facilities have continued normally and there is no plans to suspend any activity. Additional financial sustainability factor is the company's capex flexibilty.

Sergey Frolov, vice-president for strategy and communications of IMH, commented on the event: ”We highly appreciate Fitch’s deep understanding of IMH’s strategy and market position. In the coming years we are going to increase our vertical integration and reach almost complete self-sufficiency in coal and iron ore. In addition, we are going to increase production of our key merchant products as soon as we see potential growth of demand for pig iron both from our traditional export market, from China and from domestic consumers. This should result in substantial rise of cash inflow and improve our margins. Currently we prioritize the deleveraging, this is why we have cut our development capex target level to RUR 4 bln in 2020 (management accounts) with only three large projects left: completion of the blast furnace #1 reconstruction at Tulachermet, construction of new level of the iron ore mine at KMAruda and construction of the second stage of the Tikhova mine. We may postpone our capex in case of less favorable market situation, but at the moment we are in line with our general strategic plan.”

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