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  • PAO TMKUnaudited Interim CondensedConsolidated Financial StatementsThree-month period ended March 31, 2016

  • Ernst & Young LLCSadovnicheskaya Nab., 77, bld. 1Moscow, 115035, RussiaTel: +7 (495) 705 9700

    +7 (495) 755 9700Fax: +7 (495) 755 9701www.ey.com/ru

    , 115035, ., 77, . 1.: +7 (495) 705 9700

    +7 (495) 755 9700: +7 (495) 755 9701: 59002827

    A member firm of Ernst & Young Global Limited

    Report on review of interim condensed consolidated financial statements

    To the Shareholders and Board of Directors PAO TMK

    Introduction

    We have reviewed the accompanying interim consolidated statement of financial position of PAOTMK and its subsidiaries (Group) as of March 31, 2016 and the related interim consolidatedincome statement, interim consolidated statement of comprehensive income, interimconsolidated statement of changes in equity and interim consolidated statement of cash flows forthe three-month period then ended and condensed explanatory notes. Management isresponsible for the preparation and presentation of these interim condensed consolidatedfinancial statements in accordance with IAS 34, Interim Financial Reporting (IAS 34). Ourresponsibility is to express a conclusion on these interim condensed consolidated financialstatements based on our review.

    Scope of review

    We conducted our review in accordance with International Standard on ReviewEngagements 2410, Review of Interim Financial Information Performed by the IndependentAuditor of the Entity. A review of interim financial statements consists of making inquiries,primarily of persons responsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might be identifiedin an audit. Accordingly, we do not express an audit opinion.

    Conclusion

    Based on our review, nothing has come to our attention that causes us to believe thatthe accompanying interim condensed consolidated financial statements are not prepared, in allmaterial respects, in accordance with IAS 34.

    May 18, 2016

    Moscow, Russia

  • PAO TMK

    Unaudited Interim Condensed Consolidated Financial Statements

    Three-month period ended March 31, 2016

    Contents

    Unaudited Interim Consolidated Income Statement .................................................................... 4Unaudited Interim Consolidated Statement of Comprehensive Income ..................................... 5Unaudited Interim Consolidated Statement of Financial Position .............................................. 6Unaudited Interim Consolidated Statement of Changes in Equity ............................................. 7Unaudited Interim Consolidated Statement of Cash Flows ......................................................... 9

    Notes to the Unaudited Interim Condensed Consolidated Financial Statements ..................... 101) Corporate Information .......................................................................................................... 102) Significant Accounting Policies ............................................................................................ 103) Segment Information ............................................................................................................ 124) Cost of Sales ........................................................................................................................ 145) Selling and Distribution Expenses ........................................................................................ 156) General and Administrative Expenses................................................................................... 157) Research and Development Expenses ................................................................................... 158) Other Operating Income and Expenses ................................................................................. 159) Income Tax .......................................................................................................................... 1610) Acquisition of Subsidiaries ................................................................................................... 1611) Cash and Cash Equivalents ................................................................................................... 1712) Inventories ........................................................................................................................... 1713) Property, Plant and Equipment ............................................................................................. 1814) Goodwill and Other Intangible Assets .................................................................................. 1915) Trade and Other Payables ..................................................................................................... 2016) Provisions and Accruals ....................................................................................................... 2017) Interest-Bearing Loans and Borrowings ................................................................................ 2118) Fair Value of Financial Instruments ...................................................................................... 2119) Related Parties Disclosures ................................................................................................... 2320) Contingencies and Commitments.......................................................................................... 2421) Equity................................................................................................................................... 2622) Subsequent Events ................................................................................................................ 27

  • The accompanying notes are an integral part of these unaudited interimcondensed consolidated financial statements.

    4

    PAO TMK

    Unaudited Interim Consolidated Income Statement

    Three-month period ended March 31, 2016

    (All amounts in thousands of US dollars, unless specified otherwise)

    Three-month period ended March 31,NOTES 2016 2015

    Revenue 3 761,335 1,134,055Cost of sales 4 (607,519) (881,781)Gross profit 153,816 252,274

    Selling and distribution expenses 5 (58,825) (67,758)Advertising and promotion expenses (909) (1,786)General and administrative expenses 6 (48,185) (53,066)Research and development expenses 7 (3,255) (4,052)Other operating income/(expenses) 8 (6,692) (3,602)Operating profit 35,950 122,010

    Foreign exchange gain/(loss), net 49,420 (23,604)Finance costs (63,762) (66,449)Finance income 3,239 3,856Gain/(loss) on changes in fair value of derivative financial

    instruments 18 (17,585) Share of profit/(loss) of assoiates (63) 34Profit/(loss) before tax 7,199 35,847

    Income tax benefit/(expense) 9 6,992 (6,072)Profit/(loss) for the period 14,191 29,775

    Attributable to:Equity holders of the parent entity 15,412 30,104Non-controlling interests (1,221) (329)

    14,191 29,775

    Earnings/(loss) per share attributable to the equity holders ofthe parent entity, basic and diluted (in US dollars) 0.02 0.03

  • The accompanying notes are an integral part of these unaudited interimcondensed consolidated financial statements.

    5

    PAO TMK

    Unaudited Interim Consolidated Statement of Comprehensive Income

    Three-month period ended March 31, 2016

    (All amounts in thousands of US dollars)

    Three-month period ended March 31,NOTES 2016 2015

    Profit/(loss) for the period 14,191 29,775

    Items that may be reclassified subsequently to profit or loss:Exchange differences on translation to presentation currency (a) 17,220 (34,692)

    Foreign currency gain/(loss) on hedged net investment in foreignoperations (b) 21 (iii) 37,166 (34,787)

    Income tax (b) 21 (iii) (7,433) 6,95729,733 (27,830)

    Movement on cash flow hedges (a) 21 (iv) 27 (342)Income tax (a) 21 (iv) (10) 71

    17 (271)

    Other comprehensive income/(loss) for the period, net of tax 46,970 (62,793)Total comprehensive income/(loss) for the period, net of tax 61,161 (33,018)

    Attributable to:Equity holders of the parent entity 59,971 (30,513)Non-controlling interests 1,190 (2,505)

    61,161 (33,018)

    (a) Other comprehensive income/(loss) for the period, net of income tax, was attributable to equity holders of the parent entityand to non-controlling interests as presented in the table below:

    Three-month period ended March 31,2016 2015

    Exchange differences on translation to presentation currencyattributable to:

    Equity holders of the parent entity 14,809 (32,516)Non-controlling interests 2,411 (2,176)

    17,220 (34,692)Movement on cash flow hedges attributable to:Equity holders of the parent entity 17 (271)

    17 (271)

    (b) The amount of foreign currency gain/(loss) on hedged net investment in foreign operation, net of income tax, was attributableto equity holders of the parent entity.

  • The accompanying notes are an integral part of these unaudited interimcondensed consolidated financial statements.

    6

    PAO TMK

    Unaudited Interim Consolidated Statement of Financial Position

    as at March 31, 2016

    (All amounts in thousands of US dollars)

    NOTES March 31, 2016 December 31, 2015ASSETSCurrent assets

    Cash and cash equivalents 11 213,201 305,205Trade and other receivables 593,549 511,720Inventories 12 764,028 784,552Prepayments and input VAT 121,225 97,090Prepaid income taxes 15,667 15,915Other financial assets 179 1,707,849 172 1,714,654

    Non-current assetsInvestme

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