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Sibur-Russian Tires Formed

(Clacton, U.K./Tyres & Accessories) Sibur-Holding has completed the formation of Sibur-Russian Tires and has transferred stakes in companies to Sibur Russian Tyre’s books.

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Omskshina, Yarshina, Voltyre-Prom, Matador-Omskshina and Uralshina Saranskrezinotehnik now all come under the new name.

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“In 2008, the new holding is planned to be sold wholly or in parts, also a possibility of an IPO is considered,” Russian analysts added.

The holding company’s sales are expected to total $1.2 billion in 2008 against $700 million this year. Net margin is believed to be at the 5% level. Capital expenditure is projected to amount to $350 million, $150-$200 million of which will be directed to the new whole steel cord truck tyre plant construction. Moreover, it was reported that car tyre market was not the target for the Sibur-Russian tyres, and main activities would be aimed at truck and agricultural tyre production.

On Jan. 1, Gazprom subsidiary, Sibur Holding, transferred the management of its tyre operations to affiliate Sibur-Russky Shina. According to Centre Invest analysts, Omsk regional administration officials recently reported that Omskshina, a Sibur subsidiary, will withdraw from Sibur’s synthetic rubber tolling scheme after early 2007.

Similar decisions affecting other Sibur Holding tyremakers (including Yarshina and Voltair-prom) are expected. Sibur-Russky Shina has recently said it will abandon tolling schemes perhaps within 18 months.

“While we consider these proposals as positive for Sibur Holding subsidiaries, we note final decisions have still to be made. Moreover, the elimination of tolling at these companies may simply usher in other forms of transfer pricing like those still applied at Nizhnekamskshina and Amtel-Povolzhye,” the analysts observed.

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Tolling arrangements or processing schemes are situations where companies only generate revenue from processing raw materials. Companies in such agreements don’t buy raw materials and don’t sell end-products. Russian financial sources explain that these schemes “distort financial performance of the company. And [are] the reason of low profitability of Sibur tyre subsidiaries.”

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