Alexei Maslikov

Product Management Containerboard

November 2019

Russia’s increasing capacity: a spotlight on Ilim’s containerboard projects’

Fastmarkets RISI conference

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Ilim is the largest pulp, board and paper producer in Russia, with assets in Northwestern and Central Russia and Siberia

Bratsk

Ust-Ilimsk

KoryazhmaKommunar

Dmitrov

• Export oriented company

• Geographically dispersed

• Value chain dispersed

Corrugated packaging plant

Pulp and paper millHead office in Saint-Petersburg

>3 Mt

~17k

>90

• Production

• Personnel

• Destination countries

Key facts and figuresIlim’s assets

>1 Mt• Sales to China

Representative office in China

Beijing

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Production volumes: total pulp, board and paper production volumes across Ilim exceed 3.4 Mt, incl. 0.8Mt of packaging materials

Packaging materials White papers Market pulp

Corrugated packaging

0.0

0.6

0.2

0.4

0.8

1.0

0.1

0.5

Mt

0.2

Kraftliner

Fluting

OtherSack Kraft Paper

~0.8 Mt

0.0

0.4

0.2

0,06

Mt

0.12

0.13

~0.4 Mt

Cut-size

Offset paper

Coated papers

Other

0.4

1.2

1.6

0.80.6

0.20.0

1.0

1.4

1.82.02.2

Mt

0.3

0.5

1.2

~2.1 Mt

Bleached softwood kraft pulp

Bleached hardwood kraft pulp

Unbleached kraft pulp

~0.1 Mt

Pine chemicals

~0.1 Mt

Round wood

~2.7 Mm3

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Ilim is the 8th largest virgin containerboard producer globally and #1 in Russia

Source: RISI, Russian Federal State Statistic

TOP-10 virgin containerboard capacity in the world

TOP-10 virgin containerboard capacity in Europe

Containerboardcapacity in Russia

Total >40 players

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Containerboard portfolio

BratskUst-IlimskKoryazhma

Koryazhma:• PM1 – SCF (100% virgin medium)• PM3 – KLB (100% virgin kraftliner)• PM4 – KLB (100% virgin kraftliner)

Main Markets: Russia, EMEA

Bratsk: • PM1 – KLB (100% virgin kraftliner)

Main markets: China and Rest of Asia

… benefiting from the geographical location of its mills to serve the markets in Russia, EMEA and Asia

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Markets are marked for indicative purpose

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Global demand for pulp and paper products will continue growing. Containerboard demand growth contributes the largest increase

Global trendsPaper and board consumption structure

CAGR

+1,9%

+2,4%

-1,2%

+3,5%

-4,8%

X %

0

100

200

300

400

500

600

700

2000 2005

Mt

2010

505

395

2015 2020 2025 2030

4301,9%0,9%

1,5%

Newsprint Containerboard

P&P papersTissue Specialty Service economy

Digitalization

Urbanization

Population growth

E-commercePlastic

substitution

Environmental footprint

GDP growth

Retail growth

Source: RISI

Actual Forecast

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In Russia, P&B consumption is still below the level of developed and some comparable emerging markets

Paper and board consumption per capita International benchmarks

23

4549 50

0

50

P&B consumption,Kg per capita

2000 20132008 20180

60

120

180

240

300

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

Poland

GDP per capita, $k

United States

China

France

P&B consumption,Kg per capita

Brazil RussiaSouth Africa

India

Germany

Italy

Hungary

Sources: RISI, IMF, UN

Size of the bubble corresponds to overall P&P demand in the country

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Demand for containerboard in Russia will grow driven by increasing private consumption

Russian GDP dynamics

-3

-2

-1

0

1

2

3

4

5

1.5

-2.320142010

%

2016201520132011 2012 2017 2018 2019 2020 2021

1.8

2022

4.5 4.33.7

0.70.3

1.72.2

1.11.7 1.8

Contribution to GDP growth

0.75

1.00

0.00

0.25

0.50 0.20.8 0.2

%

0.4-0.2

0.9

-0.1

2019

1.10.3

1.7

0.7-0.4

2020

0.5

1.5

-0.6

2021

1.50.1 0.4

2022

1.7 1.8

Government consumptionPrivate consumption Gross fixed investments

Net exportGDP Growth (actual), %GDP Growth (forecast), %

Source: EIU, Central bank of Russia

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Despite overall containerboard consumption increase incremental demand is met by recycled grades

Virgin containerboard continues losing market share to recycled grades

0,0

3,0

4,5

2,5

1,5

4,0

0,5

2,0

3,5

1,0

2012 2013 2014 2016 …2018 2019 2024

3,2

2,5

2015

3,6

2,83,0

3,4

2,52,8

2017

2,6

2011

4,3

+5%

+4%

Recycled grades Virgin gradesMt

As virgin grades consumption is expected to be flat, Ilim virgin containerboard projects is export-oriented

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Source: Russian Federal Customs

10

90

70

100

0

50

30

60

40

10

20

80

5

96

1

81

97

9

Bn m3

0

38

24

58

5

9

17

23

27 32 113 2 12 04

2

10

4741

16

6 5 5 5 3 3 2

Papua New

Guinea

Woodstocks

Brazil Russia Canada USA China Indonesia Cameroon Gabon Mexico Japan Malaysia Germany Sweden Poland Finland

HW speciesSW species

Russia – #1 position in the World in SW and

#2 in HW

Due to SW availability in Russia, Ilim can expand its kraftliner capacities

Source: McKinsey

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Ilim is implementing several strategic projects to almost double its containerboard capacity by 2024

Major projects

0,0

0,7

1,4

2018 2024

+0,1

+0,6

New KLB Line(Ust-Ilimsk)

PM1 Upgrade(Bratsk)

0,7

1,4

x2Mt

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Virgin containerboard capacityRecycled containerboard capacity

IlimKoryazhma

IlimBratsk

The new KLB mill in Ust-Ilimsk will be the largest containerboard capacity in Russia

IlimUst-Ilimsk

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Upgraded PM line was launched in October 2019

PM1 debottlenecking

CAPEX: $120M

Grade: 100% virgin-based kraftliner

Species: SW and HW species (no OCC)

Capacity: 200kt

Speed: 5 m/min

Productivity: +30% 830 t/day

Basis weight : 90-225gsm

Quality: excellent printing properties

Start-up: 2H 2019

Great team effort to launch PM

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Big Ust-Ilimsk project: a completely new KLB mill using state-of-the-art innovative technologies

New KLB line

CAPEX: $1,2Bn

Grade: 100% virgin-based kraftliner

Species: SW and HW species (no OCC)

Capacity: 600kt

Speed: 1200 m/min

Productivity: 2150 t/day

Basis weight: 80-175gsm

Start-up: 2021

New KLB mill layout in Ust-Ilimsk

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Construction in Ust-Ilimsk has already been started including piling of a foundation for PM

August 2019

September 2019

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After completion of the projects, Ilim will become #7 virgin containerboard producer globally

TOP-10 virgin containerboard capacity in the world in 2018

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Sources: RISI

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Other producers

TOP-10 virgin containerboard capacity in the world in 2024

Capacity expansion ’19-24

Other producers

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