24 Aug 2015 09:08
OAO TMK / Miscellaneous 24.08.2015 09:08 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 2015 AND 1H 2015 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 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 30,2015. Summary 2Q and 1H 2015 Results (In millions of U.S.$, unless stated otherwise) 2Q 1Q Change, 1H 1H Change, 2015 2015 % 2015 2014 %Sales volumes, thousand 978 1,004 (3%) 1,981 2,101 (6%)tonnesRevenue 1,162 1,134 2% 2,296 2,982 (23%)Gross profit 241 252 (5%) 493 566 (13%)Foreign exchange gain/loss, 30 (24) n/a 7 (31) n/anetProfit before tax 53 36 48% 89 62 44%Net profit 47 30 59% 77 45 73%Earnings per GDR(1), basic, 0.21 0.13 64% 0.35 0.21 67%U.S.$Adjusted EBITDA(2) 172 185 (7%) 356 375 (5%)Adjusted EBITDA margin, % 15% 16% 16% 13% 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 2015 HighlightsSales Sales (thousand tonnes) 2Q 2015 1Q 2015 Change, %Seamless 604 630 (4%)Welded 373 374 0%Total 978 1,004 (3%) - Total pipe sales decreased by 3% from the prior quarter to 978 thousand tonnes, primarily due to significantly lower sales in the American division partially offset by stronger performance of the Russian division. - Seamless pipe volumes decreased by 4% from the prior quarter to 604 thousand tonnes, as a result of weaker seamless OCTG sales in the American division. Seamless OCTG sales declined by 6% from the first quarter of 2015. - Welded pipe sales remained relatively flat quarter-on-quarter at 373 thousand tonnes as lower welded pipe volumes in the American division were offset by strong welded pipe sales in the Russian division. Financials - Revenue increased by 2% to $1,162 million over the first quarter of 2015, mainly as a result of higher welded pipe sales in the Russian division, particularly stronger LD pipe volumes. - Adjusted EBITDA reduced by 7% quarter-on-quarter to $172 million, primarily due to a negative adjusted EBITDA for the American division, which amounted to negative $16 million. Adjusted EBITDA margin slightly declined to 15% compared to 16% for the prior quarter. - Net profit was $47 million as compared to $30 million for the first quarter of 2015. Foreign exchange gain in the second quarter of 2015 was $30 million compared to foreign exchange loss in the amount of $24 million in the first quarter of 2015. - As of June 30, 2015, total debt amounted to $3,048 million, a $39 million decrease compared to March 31, 2015. Weighted average nominal interest rate increased by 3 bps compared to March 31, 2015 and amounted to 9.07%. - Net debt decreased by $96 million compared to March 31, 2015 and amounted to $2,884 million as of June 30, 2015. Net Debt-to-EBITDA ratio slightly decreased to 3.67x as of June 30, 2015 compared 3.70x as of March 31, 2015. 1H 2015 Highlights Sales Sales (thousand tonnes) 1H 2015 1H 2014 Change, %Seamless 1,234 1,273 (3%)Welded 747 828 (10%)Total 1,981 2,101 (6%) - Total pipe volumes decreased by 6% year-on-year to 1,981 thousand tonnes, mostly due to weaker sales in the American division. - Seamless pipe volumes decreased by 3% compared to the same period of 2014 to 1,234 thousand tonnes, mainly as a result of lower seamless OCTG volumes in the American division. Seamless OCTG pipe sales fell by 10% year-on-year. - Welded pipe sales decreased by 10% from the first half of 2014 to 747 thousand tonnes, primarily due to lower welded OCTG volumes in the American division offset by stronger LD pipe sales in the Russian division. Financials - Revenue was $2,296 million, a decrease of 23% over the first half of 2014, mainly as a result of a negative effect of currency translation. Excluding this effect, revenue would have increased by $404 million year-on-year. - Adjusted EBITDA decreased by 5% compared to the same period of 2014 to $356 million. Growth in the Russian and European divisions was offset by weaker adjusted EBITDA in the American division due to lower sales and weaker prices. Adjusted EBITDA margin improved to 16% compared to 13% in the first half of 2014. - Net profit was $77 million as compared to $45 million for the first half of 2014. Foreign exchange gain in the first half of 2015 was $7 million compared to foreign exchange loss in the amount of $31 million for the same period of 2014. - As of June 30, 2015, total debt decreased by $175 million compared to December 31, 2014 and amounted to $3,048 million. TMK's weighted average nominal interest rate increased by 181 bps compared to December 31, 2014 to 9.07% as of June 30, 2015. - Net repayment of borrowings for the first half of 2015 amounted to $228 million. - Net debt decreased by $85 million compared to December 31, 2014 and amounted to $2,884 million as of June 30, 2015. Net Debt-to-EBITDA ratio marginally declined to 3.67x as of June 30, 2015 compared to 3.69x as of December 31, 2014. Recent Developments - In June 2015, TMK-ARTROM, TMK's subsidiary in Romania, commissioned a new workshop to produce precision pipe for the needs of automotive industry and hydraulic cylinder manufacturing with the annual capacity of 25 thousand tonnes of pipe. - In June 2015, TMK and Rosneft signed a partnership agreement focusing on R&D cooperation in the field of development, production and implementation of high-tech lubricants. - In July 2015, TMK launched construction of the R&D facility in Skolkovo Innovation Center with the scheduled opening in the first quarter of 2017. Estimated investments in the project amount to RUB 3 bn. 2Q 2015 and 1H 2015 Segment Results (In millions of U.S.$, unless stated otherwise) 2Q 2015 1Q 2015 Change, % 1H 1H Change, % 2015 2014Sales (thousand tonnes)Russia 845 770 10% 1,615 1,514 7%America 83 184 (55%) 267 493 (46%)Europe 50 50 0% 100 93 7%RevenueRussia 958 748 28% 1,706 2,011 (15%)America 150 327 (54%) 477 833 (43%)Europe 55 59 (6%) 114 138 (18%)Gross ProfitRussia 236 195 21% 431 445 (3%)America (8) 41 n/a 33 93 (64%)Europe 13 16 (21%) 29 28 4%Adjusted EBITDARussia 179 145 23% 324 300 8%America (16) 28 n/a 12 58 (80%)Europe 9 12 (22%) 20 16 26% Russia 2Q 2015 vs. 1Q 2015 Revenue increased by 28% from the first quarter of 2015 to $958 million, asa result of the growth in welded pipe volumes, particularly in LDP sales. Gross profit grew by 21% quarter-on-quarter to $236 million, due to highersales of welded pipe following stronger demand for LD pipe. Gross profitmargin declined to 25% from 26% in the previous quarter. Adjusted EBITDA increased by 23% compared to the first quarter of 2015 to$179 million, following a growth in gross profit. Adjusted EBITDA marginremained relatively flat compared to the prior quarter and amounted to 19%. 1H 2015 vs. 1H 2014 Revenue decreased by 15% year-on-year to $1,706 million, largely due to anegative effect of currency translation. Excluding this effect, revenuewould have grown by $759 million. Gross profit declined by 3% year-on-year to $431 million, as a growthresulting from more favorable pricing and product mix was offset by anegative effect of currency translation. Excluding the currency translationeffect, gross profit would have increased by $233 million. Gross profitmargin increased to 25% from 22% for the first half of 2014. Adjusted EBITDA grew by 8% year-on-year to $324 million. Adjusted EBITDAmargin improved to 19% from 15% for the first half of 2014. America 2Q 2015 vs. 1Q 2015 Revenue fell by 54% over the prior quarter to $150 million, primarily dueto a significant decrease in pipe volumes, particularly OCTG, following aslowdown in drilling activity and a drop in exploration and productionspending. Gross loss amounted to $8 million compared to gross profit of $41 millionin the first quarter of 2015. Further slide in drilling activity coupledwith lower E&P spending led to a contraction of demand for OCTG andnegatively affected prices. Adjusted EBITDA amounted to minus $16 million compared to $28 million inthe first quarter of 2015, due to a gross loss. 1H 2015 vs. 1H 2014 Revenue dropped by 43% compared to the first half of 2014 to $477 million,due to lower welded and seamless pipe sales on the back of unfavorableconditions in the U.S. pipe market. Gross profit decreased by 64% year-on-year to $33 million, mainly as aresult of lower pipe sales and negative pricing environment. Gross profitmargin decreased to 7% from 11% for the first half of 2014. Adjusted EBITDA dropped by 80% compared to the same period of 2014 to $12million following a significant decrease in gross profit. Adjusted EBITDAmargin fell to 2% from 7% for the first half of 2014. Europe 2Q 2015 vs. 1Q 2015 Revenue decreased by 6% quarter-on-quarter to $55 million, mainly as aresult of a weaker pricing. Gross profit fell by 21% from the first quarter of 2015 to $13 million, dueto unfavorable pricing environment on the European market. Gross profitmargin decreased to 24% from 28% for the first quarter of 2015. Adjusted EBITDA fell by 22% over the prior quarter to $9 million followinga decrease in gross profit. Adjusted EBITDA margin declined to 16% from 20%for the first quarter of 2015. 1H 2015 vs. 1H 2014 Revenue fell by 18% compared to the first half of 2014 to $114 million,largely as a result of a negative effect of currency translation. Gross profit remained relatively flat at $29 million compared to the firsthalf of 2014, as a growth resulting from a favorable sales mix was offsetby a negative effect of currency translation. Gross profit margin improvedto 26% from 20% in the first half of 2014 due to higher share of seamlesspipe volumes in total sales. Adjusted EBITDA increased by 26% year-on-year to $20 million, as a resultof the marginal growth in gross profit and lower selling and administrativeexpenses. Adjusted EBITDA margin improved to 18% from 12% in the first halfof 2014. 2Q and 1H 2015 Market Conditions Russia In the second quarter of 2015, the Russian pipe market increased by 14%compared to the prior quarter, mainly due to a seasonal growth of thewelded industrial pipe market and higher LD pipe consumption. For the firsthalf of 2015, the Russian pipe market increased by 8% year-on-year drivenprimarily by stronger LD pipe demand. In the second quarter of 2015, consumption of OCTG remained flat over theprior quarter while the line pipe market decreased by 20%, mainly as aresult of stock adjustments made by the majority of consumers in the firstquarter of 2015. For the first half of 2015, demand for OCTG decreased by5% year-on-year, while line pipe consumption remained flat. The industrial pipe market grew by 27% quarter-on-quarter following a usualseasonal upward trend. For the first half of 2015, consumption ofindustrial pipe decreased by 18% over the same period of 2014, mainly dueto lower demand from construction industry. The LD pipe market increased by 20% compared to the prior quarter. For thefirst half of 2015, LD pipe consumption rose by 92% year-on-year. Thegrowth in both periods was driven by increasing demand for construction ofthe major oil and gas pipeline projects. America According to Baker Hughes, the average number of rigs in the second quarterof 2015 fell by 35% compared to the prior quarter and by 36% in the firsthalf of 2015 over the first half of 2014. The decrease was due to thecontinuing slump in oil prices, which resulted in a lower demand for OCTGand growth of pipe inventories. According to Preston Pipe Report, OCTG shipments in the second quarter of2015 fell by 31% quarter-on-quarter. The decrease was driven by weak demandand high volumes of welded OCTG import. In the first half of 2015, OCTGshipments decreased by 32% over the same period of 2014. In the second quarter of 2015, the number of months of OCTG inventory levelincreased to 9.8 compared to 8.4 the previous quarter due to lower OCTGconsumption and higher level of imports. According to Pipe Logix, in the second quarter of 2015, average compositeOCTG seamless and welded prices fell by 11% and 13% respectively comparedto the first quarter of 2015, while in the first half of 2015 both averagecomposite OCTG seamless and welded prices decreased by 6% and 5%respectively, over the same period of 2014. Europe In the second quarter of 2015, the European pipe market remained underpressure from growing competition. Pipe production capacities were stillunderused, which allowed customers to negotiate more favorable paymentterms. Both factors continued to drive pipe prices down during the firsthalf of 2015. 2H and FY 2015 Outlook For the full year 2015, TMK expects the LD pipe to remain a major driver inthe Russian pipe market, offsetting weaker demand in other pipe segments,in particular, lower consumption of seamless and welded industrial pipe asa result of a slowdown in construction and machine building industries. TMKbelieves the Company can further strengthen its position in the RussianOCTG market following its import substitution programme. In the U.S., TMK expects the end of the decline in the rig count in thefourth quarter and a gradual recovery in drilling activity thereafter.Additionally, OCTG pricing is expected to further decline in the thirdquarter of 2015 due to excess levels of inventory. In the European pipe market, TMK expects no major improvements in the thirdquarter of 2015 with a slow recovery in the fourth quarter of the year. Overall, the Company retains the positive dynamics in the most profitablesegments of the business and confirms its earlier expectations for the fullyear 2015 that volumes and margins will remain relatively stable comparedto the full year 2014. 2Q and 1H 2015 IFRS Financial Statements are available at:www.tmk-group.com/media_en/texts/34/tmk_ifrs_6m2015_usd_en.pdf 2Q 2015 and 1H 2015 IFRS Results Conference Call: TMK's management will hold a conference call to present the second quarterfinancial results today, August 24, 2015, at 09:00 New York / 14:00 London/ 16:00 Moscow. To join the conference call please dial: UK Local: +44 20 3427 1916UK Toll Free: 0800 279 5004Russia: +7 495 213 0977U.S. Local: +1 212 444 0481U.S. Toll Free: 1 877 280 2342Conference ID: 6616042(We recommend that participants to start dialing-in 5-10 minutes prior toensure a timely start of the conference call) *** 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:Alexander GoryunovTel: +7 (495) 775-7600PR@tmk-group.com *** TMK (www.tmk-group.com) TMK (LSE: TMKS) is a leading global manufacturer and supplier of steel pipefor oil and gas industry, operating 30 production sites in the UnitedStates, Russia, Canada, Romania, Oman, UAE and Kazakhstan with two R&Dcenters in Russia and the USA. In 2014, TMK's pipe shipments totalled 4.4million 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 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. 24.08.2015 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: 2811Time of Receipt: Aug 24, 2015 09:07:21 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.