23 May 2014 09:47
OAO TMK / Miscellaneous 23.05.2014 09:47 Dissemination of a Regulatory Announcement, transmitted byEquityStory.RS, LLC - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.--------------------------------------------------------------------------- TMK ANNOUNCES 1Q 2014 IFRS RESULTS The following contains forward looking statements concerning future events.These statements are based on current information and assumptions of TMKmanagement concerning known and unknown risks and uncertainties. OAO TMK ('TMK' or 'the Company'), one of the world's leading producers oftubular products for the oil and gas industry, announces today itsunaudited consolidated IFRS financial results for the three months endingMarch 31, 2014. Summary 1Q 2014 Results (In millions of U.S.$, unless stated otherwise) 1Q 4Q Change, 1Q Change, 2014 2013 % 2013 %Sales volumes, thousand tonnes 1,026 1,090 -6% 1,058 -3%Revenue 1,466 1,571 -7% 1,725 -15%Gross profit 281 351 -20% 369 -24%Foreign exchange loss, net -63 -9 n/a -5 n/aIncome/loss before tax -14 86 n/a 112 n/aNet income/loss -16 55 n/a 85 n/aEarnings/loss per GDR(1), basic, -0.07 0.25 n/a 0.40 n/aU.S.$Adjusted EBITDA(2) 184 247 -25% 273 -32%Adjusted EBITDA margin, % 13% 16% 16% Note: Certain monetary amounts, percentages and other figures included inthis press release are subject to rounding adjustments. Totals therefore donot always add up to exact arithmetic sums. (1) One GDR represents four ordinary shares (2) Adjusted EBITDA is determined as profit/(loss) for the period excludingfinance costs and finance income, income tax (benefit)/expense,depreciation and amortization, foreign exchange (gain)/loss,impairment/(reversal of impairment) of non-current assets, movements inallowances and provisions (except for provision for bonuses), (gain)/losson disposal of property, plant and equipment, (gain)/loss on changes infair value of financial instruments, share of (profit)/loss of associatesand other non-cash items.1Q 2014 Highlights Sales Sales (thousand tonnes) 1Q 2014 4Q 2013 Change, 1Q 2013 Change, % %Seamless 640 617 4% 625 2%Welded 386 473 -18% 433 -11%Total 1,026 1,090 -6% 1,058 -3% 1Q 2014 vs. 4Q 2013 - Total pipe sales decreased by 6% from the prior quarter to 1,026 thousand tonnes, mainly due to lower sales of welded pipe. - Seamless pipe volumes increased by 4% over the prior quarter to 640 thousand tonnes. Seamless OCTG pipe sales grew by 2% from the fourth quarter of 2013. - Welded pipe sales decreased by 18% from the prior quarter to 386 thousand tonnes mostly due to lower sales of welded line and industrial pipe, as well as weaker consumption of LDP in Russia. 1Q 2014 vs. 1Q 2013 - Total pipe sales decreased by 3% year-on-year largely due to lower consumption of large diameter pipe (LDP). - Seamless pipe sales grew by 2% compared to the first quarter of 2013 mostly due to higher volumes in the American division. Seamless OCTG pipe sales increased by 12% year-on-year. - Welded pipe volumes decreased by 11% compared to the first quarter of 2013 mostly due to lower sales of LDP and welded line pipe. Financials 1Q 2014 vs. 4Q 2013 - Revenue was $1,466 million, a decrease of 7% over the fourth quarter of 2013, mainly due to lower welded pipe sales and a negative effect of currency translation. - Adjusted EBITDA decreased by 25% quarter-on-quarter to $184 million mainly due to lower volumes and unfavorable product mix of welded pipe in the Russian division and decreasing prices in the American division coupled with growing coil prices. Adjusted EBITDA margin was 13% compared to 16% in the fourth quarter of 2013. - Net loss was $16 million as compared to net profit of $55 million for the fourth quarter of 2013. Net loss was affected by the foreign exchange loss in the amount of $63 million for the first quarter of 2014. - As of March 31, 2014, total debt decreased by $100 million compared to December 31, 2013 to $3,594 million partially as a result of the Rouble's depreciation against the U.S. dollar. TMK's weighted average nominal interest rate decreased by 14 bps compared to December 31, 2013 and amounted to 6.58%. - Net repayment of borrowings for the first quarter of 2014 amounted to $8 million. - Net debt decreased by $75 million in the first quarter of 2014 compared to December 31, 2013 and amounted to $3,526 million as of March 31, 2014. 1Q 2014 vs. 1Q 2013 - Revenue fell by 15% compared to the first quarter of 2013 mostly due to lower LDP volumes as well as a negative effect of currency translation. - Adjusted EBITDA dropped by 32% year-on-year mostly due to unfavorable pricing and product mix of seamless pipe and lower LDP volumes in the Russian division. Adjusted EBITDA margin was 13% compared to 16% in the first quarter of 2013. - Net loss was $16 million for the first quarter of 2014 as compared to net profit of $85 million for the first quarter of 2013. - As of March 31, 2014, total debt decreased by $255 million compared to March 31, 2013. TMK's weighted average nominal interest rate decreased by 44 bps compared to March 31, 2013. - Net debt decreased by $201 million in the first quarter of 2014 compared to March 31, 2013. Recent Developments - In March 2014, TMK and Baker Hughes Incorporated announced their intention to jointly develop integrated well completion solutions. Targeted at both onshore and offshore fields, the solutions will provide turnkey well completions based on the technical and manufacturing capabilities of both companies. - In April 2014, TMK signed an agreement with Gazprom Neft to apply a pricing formula to pipe products. The pricing formula is based on market prices for commodities and raw materials used in pipe production. - On April 24, 2014, the Board of Directors recommended the AGM to adopt a resolution to pay final dividends for 2013 in the amount of RUB 0.78 per ordinary share. Total dividends will amount to RUB 731,317,153.32 (approximately $20.5 (3) million). Given the payment of interim dividends for the first 6 months of 2013 in the amount of RUR 975,089,537.76 (approximately $29.9 million), overall dividends for 2013 will correspond to 25% of TMK's consolidated 2013 IFRS net income, which is in compliance with the Company's Dividend policy. - In May 2014, TMK signed a long-term contract with Yamal LNG for 2014-2020, with overall demand for premium tubular products during this period estimated at 48 thousand tonnes. - In May 2014, TMK shipped LD pipe for Gazprom's Bovanenkovo-Ukhta pipeline construction. Under the project, TMK plans to ship a total of 45,000 tonnes. - In May 2014, TMK signed a memorandum of understanding with Sakhalin Energy Investment Company Ltd. (Sakhalin Energy), operator at Sakhalin-II. The memorandum provides a framework for cooperation on TMK's tubular product qualification and certification with a view to testing its suitability for Sakhalin Energy's operations. (3) As of April 24, 2014, the Russian Central Bank exchange rate stood at35.6625 RUB/USD1Q 2014 Segment Results (In millions of U.S.$, unless stated otherwise) 1Q 2014 4Q 2013 Change, % 1Q 2013 Change, %Sales (thousand tonnes)Russia 727 760 -4% 786 -8%America 251 281 -11% 228 10%Europe 48 49 -3% 44 9%RevenueRussia 981 1,044 -6% 1,277 -23%America 418 457 -8% 369 13%Europe 67 70 -5% 79 -15%Gross ProfitRussia 224 268 -16% 321 -30%America 44 67 -35% 36 21%Europe 13 16 -15% 12 11%Adjusted EBITDARussia 153 188 -19% 247 -38%America 24 50 -51% 20 21%Europe 7 10 -24% 6 26% Russia 1Q 2014 vs. 4Q 2013 Revenue decreased by 6% to $981 million from the fourth quarter of 2013 dueto a negative effect of currency translation. Gross profit declined by 16% quarter-on-quarter to $224 million mainly dueto lower welded pipe volumes, unfavorable LDP sales mix and a negativeeffect of currency translation. Gross profit margin decreased to 23% forthe first quarter of 2014 from 26% for the prior quarter. Adjusted EBITDA amounted to $153 million, a decline of 19% compared to thefourth quarter of 2013, following the decrease in gross profit. AdjustedEBITDA margin fell to 16% in the first quarter of 2014 compared to 18% inthe prior quarter. 1Q 2014 vs. 1Q 2013 Revenue dropped by 23% year-on-year largely as a result of lower LDPvolumes and a negative effect of currency translation. Gross profit decreased by 30% year-on-year mainly as a result ofunfavorable pricing and product mix of seamless pipe and a negative effectof currency translation. Gross profit margin decreased to 23% in the firstquarter of 2014 from 25% in the first quarter of 2013. Adjusted EBITDA fell by 38% year-on-year mainly due to lower gross profit.Adjusted EBITDA margin fell to 16% in the first quarter of 2014 compared to19% in the first quarter of 2013. America 1Q 2014 vs. 4Q 2013 Revenue decreased by 8% from the fourth quarter of 2013 to $418 million,primarily due to lower welded OCTG and line pipe sales. Gross profit fell by 35% quarter-on-quarter to $44 million mostly due tounfavorable market conditions, which resulted in weaker pricing for weldedand seamless pipe, coupled with higher raw materials prices. Gross profitmargin declined to 10% in the first quarter of 2014 from 15% in the fourthquarter of 2013. Adjusted EBITDA dropped by 51% quarter-on-quarter to $24 million followinga decrease in gross profit. Adjusted EBITDA margin fell to 6% in the firstquarter of 2014 from 11% in the prior quarter. 1Q 2014 vs. 1Q 2013 Revenue increased by 13% compared to the first quarter of 2013 due tohigher seamless pipe volumes. Gross profit grew by 21% year-on-year. Gross profit margin remained flat at10% compared to the first quarter of 2013. Adjusted EBITDA increased by 21% compared to the first quarter of 2013following the growth in gross profit. Adjusted EBITDA margin improved to 6%in the first quarter of 2014 from 5% in the first quarter of 2013. Europe 1Q 2014 vs. 4Q 2013 Revenue decreased by 5% quarter-on-quarter to $67 million as a result oflower steel billet sales. Gross profit fell by 15% from the fourth quarter of 2013 to $13 million,largely due to lower gross profit of seamless pipe, primarily resultingfrom rising costs that were not offset by an increase in sales prices.Gross profit margin decreased to 20% in the first quarter of 2014 from 22%in the fourth quarter of 2013. Adjusted EBITDA decreased by 24% over the fourth quarter of 2013 to $7million following a decline in gross profit. Adjusted EBITDA margin fell to11% in the first quarter of 2014 from 14% in the prior quarter. 1Q 2014 vs. 1Q 2013 Revenue fell by 15% compared to the first quarter of 2013 due to asignificant drop in steel billet volumes. Gross profit increased by 11% year-on-year due to the growth in seamlesspipe sales. Gross profit margin improved to 20% in the first quarter of2014 from 15% in the first quarter of 2013. Adjusted EBITDA increased by 26% year-on-year due to the gross profitgrowth. Gross profit margin improved to 11% in the first quarter of 2014from 7% in the first quarter of 2013. 1Q 2014 Market Conditions Russia In the first quarter of 2014, the Russian pipe market decreased by 3% fromthe prior quarter mainly as a result of seasonal decline of the weldedindustrial pipe market. The year-on-year decrease amounted to 2% and wasmainly driven by lower seamless OCTG and line pipe consumption as a resultof weaker drilling activity in the first quarter of 2014 compared to thesame period of 2013. Demand for seamless OCTG pipe in the first quarter of 2014 increased by 14%over the prior quarter primarily due to the seasonal stock-up period by theoil and gas majors. The seamless OCTG pipe market decreased by 13% comparedto the first quarter of 2013. The LD pipe market in Russia in the first quarter of 2014 decreased by 5%compared to the prior quarter mainly as a result of a reduction in pipelineconstruction activity by Gazprom. The year-on-year growth of 18% was theresult of a growing demand from Gazprom's South Stream project commenced inearly 2013. In the first quarter of 2014, the seamless industrial pipe market in Russiaincreased by 7% over the prior quarter and by 3% compared to the sameperiod of 2013 mainly as a result of higher sales to distributors. Thewelded industrial pipe market decreased by 10% quarter-on-quarter and by 3%year-on-year mainly due to seasonal factors and lower construction activityin the first quarter of 2014. America In the first quarter of 2014, certain energy commodity prices increasedover the prior quarter and compared to the same period of 2013, withaverage Henry Hub (HH) natural gas prices increasing by 49% from the fourthquarter of 2013 and by 35% year-on-year to $5.20/MMBtu. The growth inprices was mainly due to abnormal draw-downs in natural gas storage as aresult of an abnormally long winter. Nevertheless the economics for oil drilling continue to be more attractivethan those for natural gas drilling, and a shift from natural gas to oildrilling continues. According to Baker Hughes, the average number of oilrigs increased by 49 rigs compared to the prior quarter and by 102 rigsyear-on-year and. In contrast, the average number of gas rigs decreased by26 rigs over the prior quarter and by 79 rigs year-on-year. According to Preston Pipe Report, welded OCTG shipments increased by 3%quarter-on-quarter and by 13% year-on-year, while seamless OCTG shipmentsdecreased by 6% over the prior quarter and increased by 17% year-on-year.The opposite trend in the last quarter can be explained by the continuingshift from natural gas to oil drilling, which generally requires lowergrade pipe. According to Pipe Logix, in the first quarter of 2014, quarter-on-quarterwelded OCTG prices decreased by 1% and seamless OCTG prices decreased by2%, due to price pressure from unfairly traded imports. Year-on-year,prices decreased 4% and 5%, respectively. Line pipe prices have remainedrelatively flat. Shipments of welded mostly low-priced OCTG importsincreased by 3% over the prior quarter and by 17% year-on-year. Europe In the first quarter of 2014, demand for seamless pipe slightly increasedquarter-on-quarter and year-on-year mainly due to distributors stocking uptheir inventories while pipe consumption still remained at a low level.End-users continued to focus on strict inventory management and mostly spotorders, anticipating more favorable payment terms, that negatively affectedpipe prices. FY 2014 Outlook For the full year 2014, the Company observes an increase of the pipe marketin Russia mainly due to higher consumption of oil and gas pipe grades as aresult of horizontal drilling growth and further development ofunconventional oil and gas reserves. Moreover, possible commencement ofGazprom's Eastern program could significantly contribute to further marketgrowth. In the U.S. TMK expects further improvement in drilling activity throughout2014, as well as in the percentage of horizontal and directional rigs,which now make up 78% of the total U.S. rig count. Recent cut-backs inwelded OCTG production by key domestic players, along with possiblereductions in welded OCTG imports in anticipation of the final decision onthe OCTG trade case, should bring inventory levels down which could triggerpossible price improvement. The environment in the European pipe market, which is going through alasting recession, will remain largely unchanged in 2014 compared to 2013. For the second quarter of 2014 TMK expects an improvement of resultscompared to the first quarter of 2014. TMK believes the second half 2014results could exceed the results for the first half of 2014 given the startof the Gazprom's Eastern program and other positive developments ofexternal factors in Russia and the U.S. 1Q 2014 IFRS Financial Statements are available at:http://www.tmk-group.com/files/IFRS_TMK_3m2014_usd.pdf 1Q 2014 IFRS Results Conference Call: TMK's management will hold a conference call to present the first quarterfinancial results today, May 23, 2013, at 09:00 New York / 14:00 London /17:00 Moscow. To join the conference call please register on-line https://eventreg1.conferencing.com/webportal3/reg.html?Acc=975352&Conf=190573or dial: International call-in Number: +44 20 7031 0088US call-in Number: +1 334 323 6201Conference ID: 944935(We recommend that participants register on-line to avoid waiting in aqueue or to start dialing in 5-10 minutes prior to ensure a timely start tothe conference call) The conference call replay will be available through May 30, 2014: UK replay number: +44 20 7031 4064US toll replay number: +1 954 334 0342Replay access code: 944935 *** For further information regarding TMK please visit www.tmk-group.com ordownload the YourTube iPad application from the App Storehttps://itunes.apple.com/ru/app/yourtube/id516074932?mt=8&ls=1 or contact: TMK IR Department:Marina Badudina Tel: +7 (495) 775-7600 IR@tmk-group.com TMK PR Department:Ilya ZhitomirskyTel: +7 (495) 775-7600PR@tmk-group.com *** TMK (www.tmk-group.com) TMK (LSE: TMKS) is a leading global manufacturer and supplier of steelpipes for the oil and gas industry, operating 28 production sites in theUnited States, Russia, Canada, Romania, Oman, UAE, and Kazakhstan and twoR&D centers in Russia and the USA. In 2013, TMK's pipe shipments totaled4.3 million tonnes. The largest share of TMK's sales belongs to high marginoil country tubular goods (OCTG), shipped to customers in over 80countries. TMK delivers its products along with an extensive package ofservices in heat treating, protective coating, premium connectionsthreading, warehousing and pipe repairing. TMK's securities are listed on the London Stock Exchange, the OTCQXInternational Premier trading platform in the U.S. and on the MoscowExchange MICEX-RTS. TMK's assets structure by division: Russian division: American division:Volzhsky Pipe Plant; 12 plants of TMK IPSCO;Seversky Tube Works; OFS International LLC.Taganrog Metallurgical European division:Works; TMK-ARTROM;Sinarsky Pipe Plant; TMK-RESITA.TMK-CPW; Middle East Division:TMK-Kaztrubprom; TMK GIPI (Oman);TMK-INOX; Threading & Mechanical Key Premium LLC (Abu-TMK-Premium Service; Dhabi).TMK Oilfield Services. 23.05.2014 EquityStory.RS, LLC's Distribution Services include RegulatoryAnnouncements, Financial/Corporate News and Press Releases.Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: EnglishCompany: OAO TMK 40/2a Pokrovka 105062 Moscow RussiaPhone: +7 495 775-7600Fax: +7 495 775-7601E-mail: tmk@tmk-group.comInternet: tmk-group.comISIN: US87260R2013Category Code: MSCTIDM: TMKSSequence Number: 2059Time of Receipt: May 23, 2014 09:46:24 End of Announcement EquityStory.RS, LLC News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.