19 May 2016 09:35
PAO TMK / Miscellaneous - Urgent PriorityTMK Announces 1Q 2016 IFRS Results 19-May-2016 / 10:35 CET/CESTDissemination of a Regulatory Announcement, transmitted by EquityStory.RS,LLC - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------- May 19, 2016 PRESS RELEASE TMK Announces 1Q 2016 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. PAO TMK ('TMK' or 'the Group'), one of the world's leading producers oftubular products for the oil and gas industry, announces today itsunaudited interim consolidated IFRS financial results for the three monthsended March 31, 2016. 1Q 2016 Highlights Financial - Revenue at $761 million - Adjusted EBITDA at $120 million - Adjusted EBITDA margin at 16% - Net profit at $14 million compared to a net loss in the prior quarter - Net debt at $2,607 million as at March 31, 2016 - Net repayment of borrowings for the quarter amounted to $37 million - Weighted average nominal interest rate at 8.91%, down 15 bps compared to the prior quarter Developments - February 2016: Shipped vacuum insulated tubing pipe with ТМК UP(TM) FMT premium connections to Gazprom Dobycha Yamburg, which develops the Yamburgskoye and Zapolyarnoye oil and gas condensate fields in Yamalo- Nenets Autonomous District. - February 2016: Signed additional agreement with Gazprom to further define pricing formula for large diameter pipe (LDP). Reviewed formula will take into account raw materials costs, steel plate production and transportation costs and LDP production costs, as well as inflation and currency exchange rates. Price for LDP will be revised quarterly. - April 2016: Completed placement of Russian rouble bonds for a total of 5 billion roubles with a 13% coupon per annum payable on a semi-annual basis. The bonds are listed on the Moscow Exchange. - April 2016: Redeemed $177.5 million of 7.75% loan participation notes due 2018. - April 2016: Won tenders for supply of around 130 thousand tonnes of casing and tubing pipe as well as 14 thousand tonnes of premium tubular products to Rosneft and its subsidiaries in 2Q 2016. - April 2016: Signed a Technology Partnership Programme for 2016-2020 with Bashneft, which provides for over 20 joint activities related to development, introduction and piloting of TMK products at Bashneft's oil fields. Outlook - Overall, TMK believes its FY 2016 EBITDA will be above the 1Q 2016 annualized level and remain roughly flat compared to FY 2015. Group Summary 1Q 2016 Results (In millions of US$, unless stated otherwise) 1Q 2016 4Q 2015 Change, 1Q 2015 Change, $ mln $ mlnSales (thousand 852 927 (75) 1,004 (152)tonnes),including:Seamless 568 604 (36) 630 (62)Welded 284 323 (39) 374 (90)Revenue 761 913 (152) 1,134 (373)Gross profit 154 173 (20) 252 (98)Gross profit 20% 19% 22%margin, %Net profit/(loss) 14 (371) 385 30 (16)Earnings/(loss) 0.06 (0.40) 0.47 0.13 (0.07)per GDR(1), basic,U.S.$Adjusted EBITDA(2) 120 155 (35) 185 (65)Adjusted EBITDA 16% 17% 16%margin, % 1Q 2016 IFRS Financial Statements are available at:www.tmk-group.com/media_en/texts/34/TMK_IFRS_3m2016_USD.pdf 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 in allowances andprovisions (except for provision for bonuses), (gain)/loss on disposal ofproperty, plant and equipment, (gain)/loss on changes in fair value offinancial instruments, share of (profit)/loss of associates and other non-cash items. 1Q 2016 Review Market 1Q 2016 vs. 4Q 2015 In 1Q 2016, the Russian pipe market remained almost flat compared to theprevious quarter, with 1% growth quarter-on-quarter in OCTG, where TMK isthe market leader. Against a 7% decrease in drilling activity in Russia,the share of horizontal drilling continued to rise, from 31% in 4Q 2015 to36% in 1Q 2016. In the US, the average number of rigs in 1Q 2016 fell by 27% compared tothe prior quarter (Baker Hughes), following a continued decline in oilprices. OCTG shipments increased by 4% quarter-on-quarter (Preston PipeReport). At the same time, OCTG inventories increased to an average 9.5months compared to 8.0 in the previous quarter. Lower pipe consumption and increased competition along with rising importscontinued to prevail in the European market in 1Q 2016 and put furtherpressure on prices. 1Q 2016 vs. 1Q 2015 In 1Q 2016, the Russian pipe market grew by more than 4% year-on-year. OCTGconsumption rose by 15% compared to the same period of 2015, along with 14%growth in drilling activity in Russia and a pronounced rise in the share ofhorizontal drilling, from 29% in 1Q 2015 to 36% in 1Q 2016. In the US, the average rig count declined by 61% for 1Q 2016 compared tothe same period of 2015 (Baker Hughes). The decrease was due to thecontinuing slump in oil prices, which resulted in lower demand for OCTG andgrowing pipe inventories. Domestic OCTG shipments reduced by 68% over thesame period of 2015, driven by continued weak demand. Both averagecomposite OCTG seamless and welded pipe prices decreased by 30% compared to1Q 2015 (Pipe Logix). There were no major changes in the European market in 1Q 2016 compared to1Q 2015. Financial 1Q 2016 vs. 4Q 2015 The Company's overall performance was affected by the weak results of theAmerican Division in the context of extremely challenging marketconditions. Revenue was down by $152 million quarter-on-quarter due to a furtherdecline in sales at the American division and a negative effect of currencytranslation in the amount of $82 million. Adjusted EBITDA decreased by $35 million compared to 4Q 2015, largely dueto a negative effect of currency translation in the Russian division andweak performance of the American division on the back of unfavorable marketconditions. In 1Q 2016, net profit was $14 million compared to a net loss of $371million in the previous quarter, which had resulted from an impairment lossof $352 million, mostly attributable to the goodwill of the Americandivision. Total debt increased from $2,801 million as at December 31, 2015 to $2,838million as at March 31, 2016, due to rouble appreciation against the U.S.dollar. Net debt was $2,607 million as compared to $2,496 million as atDecember 31, 2015. 1Q 2016 vs. 1Q 2015 Weaker sales at the American division due to falling US drilling activityand lower E&P spending, and a negative effect of currency translationresulted in a $373 million decrease of total revenue in 1Q 2016 compared to1Q 2015. Adjusted EBITDA fell by 35% year-on-year, mostly due to the impact of weakresults at the American division. Adjusted EBITDA margin remained almostflat at 16%. Total debt reduced from $3,087 million as at March 31, 2015 to $2,838million. Weighted average nominal interest rate declined by 13 bps from9.04% as at March 31, 2015 to 8.91% as at the end of the reported period. Net debt decreased by $373 million from March 31, 2015 to $2,607 million.Net repayment of borrowings amounted to $37 million in 1Q 2016 compared to$137 million in 1Q 2015. There was a further reduction in Capex to $24 million compared to $39million in 1Q 2015, with the completion of the Company's strategicinvestment program, and also influenced by rouble depreciation against theU.S. dollar. Outlook In Russia, TMK anticipates 2Q 2016 sales to be in line with the previousquarter, as seasonally lower OCTG consumption will be offset by higherdemand for industrial pipe. For FY 2016, TMK reiterates its previousguidance that OCTG sales will remain flat year-on-year, provided demandfrom Russia's oil and gas majors continues to be stable. Overall, marginsat the Russian division are expected to be in line with FY 2015, supportedby cost cutting program. In the U.S., TMK expects a moderate increase in drilling activity duringthe second half of the year. Although demand for OCTG is expected toimprove, the Company anticipates demand for new production and shipments tolag behind temporarily as a result of larger distributor inventories buildup due to continuously decreasing rig count. As such, TMK expects demandfrom oil and gas companies to initially improve in the fourth quarter ofthe year, at which point prices should begin to recover. Industrial pipe consumption in the European pipe market will be stable in2Q 2016, with a gradual improvement following the start of the constructionseason. TMK believes the American division should demonstrate a gradual improvementin its results after performance bottomed out in 1Q 2016, driven amongother factors by the strict cost-saving program realised in 1Q 2016. TheCompany therefore expects stronger 2Q 2016 consolidated financial resultscompared to 1Q 2016. Overall, TMK believes its FY 2016 EBITDA will be above the 1Q 2016annualized level and remain roughly flat compared to FY 2015, supported bythe stable performance of the Russian division and improved financialresults of the American division. 1Q 2016 Segment Results RUSSIAN DIVISION (In millions of US$, unless stated otherwise) 1Q 2016 4Q 2015 Change, % 1Q 2015 Change, %Sales 759 812 (6)% 770 (1)%(thousandtonnes)Revenue 655 761 (14)% 748 (12)%Gross profit 188 204 (8)% 195 (4)%Gross profit 29% 27% 26%margin, %Adjusted 146 172 (16)% 145 0%EBITDAAdjusted 22% 23% 19%EBITDAmargin, % 1Q 2016 vs. 4Q 2015 - Margins were supported by improvements to the product mix as the Company increased its share of seamless OCTG in total seamless pipe sales. - A negative effect of currency translation affected the Russian division's 1Q 2016 results overall. 1Q 2016 vs. 1Q 2015 - The year-on-year downward trend in performance at the Russian division was due to a negative effect of currency translation. Excluding this effect, revenue would have increased by $35 million and gross profit would have grown by $28 million compared to 1Q 2015. - An improved seamless pipe product mix contributed to higher Adjusted EBITDA margin in 1Q 2016 compared to 1Q 2015. AMERICAN DIVISION(In millions of U.S.$, unless stated otherwise) 1Q 2016 4Q 2015 Change, % 1Q 2015 Change, %Sales (thousand 50 75 (34)% 184 (73)%tonnes)Revenue 65 113 (42)% 327 (80)%Gross profit/ (43) (41) n/a 41 n/a(loss)Gross profit (66)% (36)% 12%margin, %Adjusted EBITDA (32) (24) 30% 28 n/aAdjusted EBITDA (48)% (21)% 9%margin, % 1Q 2016 vs. 4Q 2015 - The American division continued to be affected by falling pipe sales, predominantly in OCTG, combined with a further decline in prices. 1Q 2016 vs. 1Q 2015 - A dramatic year-on-year decrease in rig count combined with E&P spending cuts in the North American market led to a significant decline in pipe sales at the American division, which contributed to a negative financial performance. EUROPEAN DIVISION (In millions of U.S.$, unless stated otherwise) 1Q 2016 4Q 2015 Change, % 1Q 2015 Change, %Sales 43 40 7% 50 (14)%(thousandtonnes)Revenue 41 39 5% 59 (29)%Gross profit 8 11 (20)% 16 (49)%Gross profit 20% 27% 28%margin, %Adjusted 6 7 (9)% 12 (48)%EBITDAAdjusted 15% 17% 20%EBITDAmargin, % 1Q 2016 vs. 4Q 2015 - In 1Q 2016, higher seamless pipe sales at the European division contributed to a quarter-on-quarter revenue growth, while weaker pricing weighed on gross profit and margins. - Adjusted EBITDA decreased quarter-on-quarter, following a decline in gross profit, but was partially offset by lower selling, administrative and other operating expenses. 1Q 2016 vs. 1Q 2015 - Lower seamless pipe sales and weaker pricing affected year-on-year performance at the European division. 1Q 2016 IFRS Results Conference Call: TMK's management will hold a conference call to present 1Q 2016 financialresults today, May 19, 2016, at 09:00 New York / 14:00 London / 16:00Moscow. To join the conference call please dial: UK Local: +44 2030 432440UK Toll Free: 0808 238 1774Russia: +7 495 221 6523Russia Toll Free: 8 10 8002 041 4011U.S. Local: +1 877 887 4163Conference ID: 57861073#(We recommend that participants start dialing-in 5-10 minutes in advance toensure a timely start for the conference call) *** For further information regarding TMK please visit www.tmk-group.com ordownload the YourTube iPad application from the App Store https://itunes.apple.com/ru/app/yourtube/id516074932?mt=8&ls=1 or contact: TMK IR Department:Marina BadudinaTel: +7 (495) 775-7600IR@tmk-group.com TMK PR Department:Alexander GoryunovTel: +7 (495) 775-7600PR@tmk-group.com International Media Relations:Andrew Hayes / Emily DillonTel: +44 (0) 20 7796 4133Edillon@hudsonsandler.com *** TMK (www.tmk-group.com) TMK (LSE: TMKS) is a leading global manufacturer and supplier of steel pipefor oil and gas industry, operating more than 30 production sites in theUnited States, Russia, Canada, Romania, Oman and Kazakhstan with two R&Dcenters in Russia and the USA. In 2015, TMK's pipe shipments totalled 3.9million tonnes. The largest share of TMK's sales belongs to high margin oilcountry tubular goods (OCTG), shipped to customers in over 80 countries.TMK delivers its products along with an extensive package of services inheat treating, protective coating, premium connections threading,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 Works; TMK Completions.Sinarsky Pipe Plant; European division:TMK-CPW; TMK-ARTROM;TMK-Kaztrubprom; TMK-RESITA.TMK-INOX; Middle East Division:TMK-Premium Service; TMK GIPI (Oman).TMK Oilfield Services;TMK CHERMET. --------------------------------------------------------------------------- 19-May-2016 The EquityStory.RS, LLC Distribution Services include RegulatoryAnnouncements, Financial/Corporate News and Press Releases.Archive at www.dgap.de/ukreg --------------------------------------------------------------------------- Language: English Company: PAO TMK 40/2a Pokrovka 105062 Moscow Russia Phone: +7 495 775-7600 Fax: +7 495 775-7601 E-mail: tmk@tmk-group.com Internet: tmk-group.com ISIN: US87260R2013, RU000A0B6NK6 Category Code: MSCU TIDM: TMKS Sequence Number: 3169 Time of Receipt: 19-May-2016 / 10:33 CET/CEST End of Announcement EquityStory.RS, LLC News Service --------------------------------------------------------------------------- 464949 19-May-2016UK-Regulatory-announcement transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.