26 Aug 2014 09:02
OAO TMK / Miscellaneous 26.08.2014 09:02 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 2Q 2014 AND 1H 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 its interimconsolidated IFRS financial results for the six months ending June 30,2014. Summary 2Q and 1H 2014 Results (In millions of U.S.$, unless stated otherwise) 2Q 1Q Chang- 1H 1H Chang- 2014 2014 e, % 2014 2013 e, %Sales volumes, thousand tonnes 1,075 1,026 5% 2,101 2,175 -3%Revenue 1,516 1,466 3% 2,982 3,374 -12%Gross profit 285 281 1% 566 724 -22%Foreign exchange gain/loss, 32 -63 n/a -31 -44 -30%netIncome/loss before tax 76 -14 n/a 62 173 -64%Net income/loss 60 -16 n/a 45 125 -64%Earnings/loss per GDR(1), 0.28 -0.07 n/a 0.21 0.56 -62%basic, U.S.$Adjusted EBITDA(2) 190 184 3% 375 523 -28%Adjusted EBITDA margin, % 13% 13% 13% 15% 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 2Q 2014 Highlights Sales Sales (thousand tonnes) 2Q 2014 1Q 2014 Change, %Seamless 634 640 -1%Welded 442 386 14%Total 1,075 1,026 5% - Total pipe sales increased by 5% from the prior quarter to 1,075 thousand tonnes, mainly due to higher sales in Russia across all types of welded pipe, and especially large-diameter pipe (LDP) volumes. - Seamless pipe volumes decreased by 1% from the prior quarter to 634 thousand tonnes as a result of lower seamless industrial pipe sales. Seamless OCTG pipe volumes grew by 3% from the first quarter of 2014 due to higher sales in the Russian division. - Welded pipe sales increased by 14% from the prior quarter to 442 thousand tonnes mostly due to higher sales of LDP in Russia. Financials - Revenue increased by 3% to $1,516 million over the first quarter of 2014, mainly as a result of higher welded pipe sales in the Russian division. - Adjusted EBITDA increased by 3% quarter-on-quarter to $190 million mainly due to favorable product mix in the American division. Adjusted EBITDA margin remained flat at 13% compared to the first quarter of 2014. - Net profit was $60 million as compared to net loss of $16 million for the first quarter of 2014. Foreign exchange gain in the second quarter of 2014 was $32 million compared to foreign exchange loss in the amount of $63 million in the first quarter of 2014. - As of June 30, 2014, total debt increased by $160 million compared to March 31, 2014 to $3,753 million partially as a result of the Rouble's appreciation against the U.S. dollar. TMK's weighted average nominal interest rate increased by 46 bps compared to March 31, 2014 and amounted to 7.04%. - Net debt increased by $105 million in the second quarter of 2014 compared to March 31, 2014 and amounted to $3,631 million as of June 30, 2014. 1H 2014 Highlights Sales Sales (thousand tonnes) 1H 2014 1H 2013 Change, %Seamless 1,273 1,271 0%Welded 828 905 -9%Total 2,101 2,175 -3% - Total pipe sales decreased by 3% year-on-year to 2,101 thousand tonnes, mostly due to lower LDP sales in Russia. - Seamless pipe volumes remained flat year-on-year and amounted to 1,273 thousand tonnes as higher seamless OCTG sales were offset by lower seamless line and seamless industrial pipe volumes. Seamless OCTG pipe sales grew by 8% compared to the first half of 2013. - Welded pipe sales decreased by 9% from the first half of 2013 to 828 thousand tonnes mostly due to lower sales of LDP. Financials - Revenue was $2,982 million, a decrease of 12% over the first half of 2013, mainly due to lower LDP sales in the Russian division and a negative effect of currency translation. - Adjusted EBITDA decreased by 28% year-on-year to $375 million mainly due to unfavorable price and product mix of seamless pipe in the Russian division, lower LDP sales and a negative effect of currency translation. Adjusted EBITDA margin was 13% compared to 15% in the first half of 2013. - Net profit was $45 million as compared to $125 million for the first half of 2013. - As of June 30, 2014, total debt increased by $60 million compared to December 31, 2013. TMK's weighted average nominal interest rate increased by 32 bps compared to December 31, 2013. - Net debt increased by $31 million in the first half of 2014 compared to December 31, 2013. - Recent Developments - On June 19, 2014, the annual shareholders' meeting approved a final dividend for 2013 in the amount of 731 million Russian roubles ($21million at the exchange rate at the date of approval) or 0.78 Russian roubles ($0.02) per ordinary share. Total dividend amount for 2013 including interim dividends amounts to 1.7 billion Russian roubles. - On June 27, 2014, TMK's Board of Directors decided to increase the share capital by the issuance of additional shares in the amount of 56,000,000 shares under open subscription. - In July 2014, TMK and LUKOIL signed an R&D cooperation programme for 2014-2016 aimed at the launch of import-substituting and new types of high-performance tubular products. - In July 2014, TMK Gulf International Pipe Industry (TMK GIPI) LLC, TMK's Omani plant, was awarded an 18,400 tonnes of OCTG order from the foremost exploration and production company in the Sultanate, Petroleum Development Oman (PDO). 2Q 2014 and 1H 2014 Segment Results (In millions of U.S.$, unless stated otherwise) 2Q 2014 1Q 2014 Change, % 1H 1H Change, % 2014 2013Sales (thousand tonnes)Russia 787 727 8% 1,514 1,606 -6%America 242 251 -3% 493 483 2%Europe 46 48 -5% 93 86 9%RevenueRussia 1,030 981 5% 2,011 2,440 -18%America 415 418 -1% 833 782 6%Europe 71 67 7% 138 151 -9%Gross ProfitRussia 221 224 -1% 445 612 -27%America 49 44 11% 93 86 7%Europe 15 13 11% 28 26 7%Adjusted EBITDARussia 147 153 -3% 300 455 -34%America 34 24 39% 58 53 9%Europe 9 7 21% 16 15 12% Russia 2Q 2014 vs. 1Q 2014 Revenue increased by 5% to $1,030 million from the first quarter of 2014mainly as a result of the growth in welded pipe volumes and especially inLDP sales. Gross profit declined by 1% quarter-on-quarter to $221 million due tounfavorable sales mix in welded pipe. Gross profit margin decreased to 21%from 23% for the prior quarter. Adjusted EBITDA amounted to $147 million, a decline of 3% compared to thefirst quarter of 2014, following a decrease in gross profit and a growth inother operational expenses. Adjusted EBITDA margin fell to 14% compared to16% in the prior quarter. 1H 2014 vs. 1H 2013 Revenue dropped by 18% year-on-year to $2,011 million largely due to lowerLDP sales and a negative effect of currency translation. Gross profit decreased by 27% year-on-year to $445 million mainly as aresult of unfavorable pricing and product mix of seamless pipe, lower LDPvolumes and a negative effect of currency translation. Gross profit margindecreased to 22% from 25% in the first half of 2013. Adjusted EBITDA fell by 34% year-on-year to $300 million mainly due to adecrease in gross profit. Adjusted EBITDA margin declined to 15% comparedto 19% in the first half of 2013. America 2Q 2014 vs. 1Q 2014 Revenue was $415 million, a decrease of 1% over the prior quarter,primarily due to lower seamless and welded pipe sales, which was partiallycompensated by higher pricing and favorable sales mix. Gross profit increased by 11% quarter-on-quarter to $49 million mostly dueto improved sales mix of both seamless and welded pipe. Gross profit marginwent up to 12% from 10% in the second quarter of 2014. Adjusted EBITDA grew by 39% quarter-on-quarter to $34 million following anincrease in gross profit and a decline of SG&A expenses. Adjusted EBITDAmargin improved to 8% compared to 6% in the prior quarter. 1H 2014 vs. 1H 2013 Revenue increased by 6% compared to the first half of 2013 to $833 milliondue to higher seamless pipe volumes. Gross profit grew by 7% year-on-year to $93 million mainly as a result ofhigher volumes, pricing and favorable product mix of seamless pipe. Grossprofit margin remained flat at 11% compared to the first half of 2013. Adjusted EBITDA increased by 9% compared to the first half of 2013 to $58million following the growth in gross profit. Adjusted EBITDA marginremained flat at 7% compared to the first half of 2013. Europe 2Q 2014 vs. 1Q 2014 Revenue increased by 7% quarter-on-quarter to $71 million as a result ofhigher steel billets sales. Gross profit went up by 11% from the first quarter of 2014 to $15 million.Gross profit margin improved to 21% from 20% in the first quarter of 2014. Adjusted EBITDA increased by 21% over the prior quarter to $9 millionfollowing a growth in gross profit. Adjusted EBITDA margin increased to 12%from 11% in the first quarter of 2014. 1H 2014 vs. 1H 2013 Revenue fell by 9% compared to the first half of 2013 to $138 million dueto a significant drop in steel billet sales. Gross profit increased by 7% year-on-year to $28 million due to the growthin seamless pipe volumes. Gross profit margin grew to 20% from 17% in thefirst half of 2013 as a result of higher share of seamless pipe volumes intotal sales. Adjusted EBITDA increased by 12% year-on-year to $16 million due to thegross profit growth. Adjusted EBITDA margin improved to 12% from 10% in thefirst half of 2013. 2Q and 1H 2014 Market Conditions Russia In the second quarter of 2014, the Russian pipe market increased by 10%from the prior quarter mainly as a result of a seasonal growth of thewelded industrial pipe market. In the first half of 2014, the Russian pipemarket remained flat compared to the first half of 2013 as the growth inwelded industrial pipe and LDP market was offset by lower seamless OCTG andline pipe consumption due to weaker drilling activity in the first half of2014. In the second quarter of 2014, consumption of seamless OCTG pipe remainedmainly at the same level as the prior quarter while seamless line pipemarket decreased by 9% due to seasonally lower demand. The LD pipe market in Russia in the second quarter of 2014 decreased by 3%compared to the prior quarter. For the first half of 2014, the LD pipemarket increased by 11% year-on-year due to higher demand from Gazprom'sSouth Stream project. In the second quarter of 2014, the seamless and welded industrial pipemarket in Russia increased by 4% and 29% compared to the previous quarterrespectively, mainly due to higher seasonal demand from machinery andconstruction industries. For the first half of 2014, welded industrial pipeconsumption went up by 6% year-on-year, while seamless industrial pipemarket remained almost flat. America According to the Preston Pipe and Tube Report, in the second quarter of2014, U.S. OCTG consumption increased by 6% quarter-on-quarter and by 21%in the first half of 2014 compared to the same period in 2013, reflectingan increase in rig count and particularly the increase in horizontal rigs,which generally consume more OCTG pipe per well. Thus, the Baker Hughes average number of rigs in the second quarter of 2014increased by 73 rigs over the prior quarter and by 56 rigs in the firsthalf of 2014 over the first half of 2013. Better economics for oil playscontinued to support the addition of oil rigs: in the second quarter of2014 the average number of oil rigs rose by 101 rigs from the first quarterof 2014 and by 116 in the first half of 2014 compared to the first half of2013. In contrast, the average number of gas rigs declined in the secondquarter of 2014 by 28 rigs quarter-on-quarter and by 58 rigs in the firsthalf of 2014 over the same period of 2013. In the second quarter of 2014, U.S. OCTG shipments went up by 16% comparedto the prior quarter and by 24% in the first half of 2014 over the sameperiod of 2013, led by a surge in imports from the trade-case-subjectcountries prior to the Commerce Department's decision deadline. As aresult, the total OCTG inventory level increased. However, the averagenumber of months of OCTG inventory declined due to higher consumption. According to Pipe Logix, in the second quarter of 2014 the averagecomposite OCTG seamless and welded prices were up 1.5 % and 0.5%respectively compared to the first quarter of 2014, while in the first halfof 2014 both the average composite OCTG seamless and welded pricesdecreased by 3% year-on-year. Europe In the second quarter of 2014, the European market continued its slowrecovery after a lasting stagnation. However, pipe consumption stillremained at a rather low level with end-users continuing to focus on spotorders, in anticipation of more favorable payment terms. Customers keptinventories at a minimum level for their ongoing needs creating additionalpressure on prices and volumes. 2H and FY 2014 Outlook For the second half of 2014, the Company observes an increase of the pipemarket in Russia mainly due to higher consumption of LD pipe as a result ofthe commencement of Gazprom's Power of Siberia project. In the U.S. TMK expects commodity prices to further support robust drillingactivity throughout 2014. Following the final OCTG Trade Case decision theflow of imports and inventory levels should gradually decrease, whichshould positively influence the pricing environment. The European pipe market is expected to largely remain unchanged in thesecond half of 2014. Overall, for the second half of the year TMK expects a stronger set ofresults due to growing LD pipe sales, higher seamless pipe prices in Russiain line with stable raw materials prices as well as a gradual recovery onthe U.S. market. 2Q and 1H 2014 IFRS Financial Statements are available at:http://www.tmk-group.com/files/IFRS_TMK_6m2014_usd.pdf 2Q 2014 and 1H 2014 IFRS Results Conference Call: TMK's management will hold a conference call to present the second quarterfinancial results today, August 26, 2013, at 09:00 New York / 14:00 London/ 17:00 Moscow. To join the conference call please dial: International call-in Number: +44 145 254 1003US call-in Number: +1 646 741 2120Russian call-in Number: +7 499 677 1040Conference ID: 91048028(We recommend that participants to start dialing-in 5-10 minutes prior toensure a timely start of the conference call) The conference call replay will be available through September 2, 2014: International Replay Number: +44 145 255 0000US Replay Number: +1 866 247 4222Russian Replay Number: +7 499 677 1064Replay Access Code: 91048028 *** For further information regarding TMK please visit www.tmk-group.com, aswell as download 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. 26.08.2014 The EquityStory.RS, LLC 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: 2205Time of Receipt: Aug 26, 2014 09:00:06 End of Announcement EquityStory.RS, LLC News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.