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TMK Group Summary 1Q 2019 Results

Steel News - Published on Wed, 22 May 2019

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The Russian pipe market remained generally flat YoY. At the same time the OCTG market increased 8%, while the sales volume of seamless OCTG the main TMK’s product was up 11%, supported by the increasing complexity of hydrocarbon production projects in Russia and a higher share of horizontal drilling (from 44% in 1Q 2018 to 51% in 1Q 2019). In the US, the average rig count increased 8% YoY, according to Baker Hughes, driving higher demand for OCTG pipe, with OCTG consumption growing 4% YoY. In 1Q 2019, conditions in the European pipe market slightly improved compared to the same period of 2018, with higher demand for seamless pipe from domestic customers, increased capacity utilization and a better pricing environment.

In 1Q 2019, the Russian pipe market was flat compared to the previous quarter. Higher demand for large diameter pipe fully compensated for lower demand for line pipe and a slightly weaker Russian OCTG market following more intensified pipe purchases by domestic oil and gas companies in 4Q 2018.

In the US, OCTG consumption in 1Q 2019 was down 2% QoQ following weaker oil prices in 4Q 2018 and a decline in drilling activity, with 27 fewer rigs compared to the previous quarter. Furthermore, in 1Q 2019, domestic pipe producers were affected by higher import pipe supplies as a result of the renewal of pipe shipment quotas under Section 232.

In 1Q 2019, European pipe producers continued to see some slowdown in demand due to higher inventories accumulated by consumers in the last quarters of 2018.

Revenue was generally in line (1% decline compared to 1Q 2018, was mainly due to effect of currency translation at the Russian division).

Adjusted EBITDA increased 9% YoY to USD 175 million, due to a stronger performance at the Russian division, resulting from stronger sales, better pricing and an improved product mix with a higher share of OCTG and large diameter pipe. Adjusted EBITDA margin was up 1 pp YoY to 14% in 1Q 2019.

Total debt decreased from USD 3,127 million as at March 31, 2018 to USD 2,851 million as at March 31, 2019. Net debt decreased from USD 2,710 million as at March 31, 2018 to $2,519 million as at March 31, 2019.

Revenue was generally in line. A 1% decline compared to 4Q 2018 was mainly due to a weaker performance at the American division. However it was almost fully compensated by stronger quarter-on-quarter performance at the Russian division.

Adjusted EBITDA decreased by USD 4 million compared to the previous quarter, to USD 175 million, mainly due to a weaker performance at the American division. Adjusted EBITDA at the Russian division was up by USD 14 million. Adjusted EBITDA margin was flat compared to 4Q 2018 at 14%.

Total debt decreased from to USD 2,867 million as at December 31, 2018 to USD 2,851 million as at March 31, 2019. The weighted average nominal interest rate was up by 5 bps compared to the end of 2018 to 7.34% as at the end of the reporting period. Net debt increased from $2,437 million as at December 31, 2018 to USD 2,519 million as at March 31, 2019, as a result of rouble appreciation against the US dollar. Net repayment of borrowings in Q1 2019 amounted to USD 125 million.

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Posted By : Rabi Wangkhem on Wed, 22 May 2019
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