21 Nov 2014 09:25
OAO TMK / Miscellaneous 21.11.2014 10:25 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 3Q 2014 AND 9M 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 nine months ending September30, 2014. Summary 3Q and 9M 2014 Results (In millions of U.S.$, unless stated otherwise) 3Q 2Q Chang- 9M 9M Chang- 2014 2014 e, % 2014 2013 e, %Sales volumes, thousand tonnes 1,065 1,075 -1% 3,166 3,197 -1%Revenue 1,526 1,516 1% 4,509 4,861 -7%Gross profit 294 285 3% 860 1,007 -15%Foreign exchange gain/loss, -73 32 n/a -104 -40 n/anetIncome/loss before tax 2 76 -97% 64 227 -72%Net income/loss -7 60 n/a 37 160 -77%Earnings/loss per GDR(1), -0.04 0.28 n/a 0.18 0.76 -77%basic, U.S.$Adjusted EBITDA(2) 202 190 6% 577 705 -18%Adjusted EBITDA margin, % 13% 13% 13% 14% 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. 3Q 2014 Highlights Sales Sales (thousand tonnes) 3Q 2014 2Q 2014 Change, %Seamless 585 634 -8%Welded 480 442 9%Total 1,065 1,075 -1% - Total pipe sales remained almost flat compared to the second quarter of 2014 and amounted to 1,065 thousand tonnes as higher large-diameter pipe (LDP) and seamless industrial pipe volumes were offset by weaker OCTG pipe sales. - Seamless pipe volumes decreased by 8% from the prior quarter to 585 thousand tonnes mainly as a result of lower seamless OCTG and line pipe sales mainly in the Russian division following a seasonally weaker demand. - Welded pipe sales increased by 9% from the prior quarter to 480 thousand tonnes mostly due to higher sales of LDP in Russia. Financials - Revenue increased by 1% to $1,526 million over the second quarter of 2014, mainly as a result of higher LDP volumes in the Russian division and stronger seamless pipe sales in the American division. - Adjusted EBITDA increased by 6% quarter-on-quarter to $202 million mainly due to higher prices of seamless pipe and stronger seamless OCTG sales in the American division and favorable product mix of welded pipe in the Russian division. Adjusted EBITDA margin remained almost flat at 13% compared to the second quarter of 2014. - Net loss was $7 million as compared to net profit of $60 million for the second quarter of 2014. Foreign exchange loss in the third quarter of 2014 was $73 million compared to a foreign exchange gain in the amount of $32 million in the second quarter of 2014. - As of September 30, 2014, total debt decreased by $208 million compared to June 30, 2014 to $3,546 million as a result of the Rouble's depreciation against the U.S. dollar. TMK's weighted average nominal interest rate remained nearly flat compared to June 30, 2014 and amounted to 7.09%. - Net debt decreased by $123 million in the third quarter of 2014 compared to June 30, 2014 and amounted to $3,508 million as of September 30, 2014. 9M 2014 Highlights Sales Sales (thousand tonnes) 9M 2014 9M 2013 Change, %Seamless 1,858 1,805 3%Welded 1,308 1,392 -6%Total 3,166 3,197 -1% - Total pipe sales declined by 1% year-on-year to 3,166 thousand tonnes as stronger seamless OCTG pipe sales were offset by lower welded pipe volumes, particularly LDP. - Seamless pipe volumes increased by 3% year-on-year and amounted to 1,858 thousand tonnes mostly due to higher sales of seamless OCTG pipe in the Russian and American divisions. Seamless OCTG pipe sales grew by 8% compared to the first nine months of 2013. - Welded pipe sales decreased by 6% year-on-year to 1,308 thousand tonnes mostly due to lower LDP volumes. Financials - Revenue was $4,509 million, a decrease of 7% over the first nine months of 2013, mainly due to a negative effect of currency translation. - Adjusted EBITDA decreased by 18% year-on-year to $577 million mainly due to a negative effect of currency translation and higher prices for raw materials required for seamless pipe in the Russian division and welded pipe in the American division. Adjusted EBITDA margin was 13% compared to 14% for the first nine months of 2013. - Net profit was $37 million as compared to $160 million for the first nine months of 2013. Foreign exchange loss amounted to $104 million compared to $40 million for the same period of 2013. - As of September 30, 2014, total debt decreased by $148 million compared to December 31, 2013. TMK's weighted average nominal interest rate increased by 37 bps compared to December 31, 2013. - Net debt decreased by $92 million in the first nine months of 2014 compared to December 31, 2013. Recent Developments - In September 2014, TMK ran ISO 13679:2002 CAL IV tests on the premium connection ТМК UP PF with lubricant-free coating GreenWell. All samples successfully passed abrasion resistance, gas tightness and ultimate load tests. - In September 2014, TMK signed a special pricing agreement on large diameter pipe (LPD) shipments for Gazprom's Power of Siberia project. The new conditions will improve TMK's capacity utilization planning and sales mix. The prepayments will enable the company to incrementally reduce its debt. - On October 31, 2014, TMK's Board of Directors recommended that shareholders approve interim dividends for the first six months of 2014 for a total of RUB 393,786,159.48 (approximately USD 9.07 mln). Board of Directors decided to convene an Extraordinary General Meeting of Shareholders (EGM) in the form of an absentee voting on December 25, 2014. - In November 2014, TMK signed an agreement with Magnitogorsk Iron & Steel Works (MMK) to apply a formula-based price for wide hot rolled sheets shipped to TMK enterprises. - 3Q 2014 and 9M 2014 Segment Results (In millions of U.S.$, unless stated otherwise) 3Q 2014 2Q 2014 Change, % 9M 9M Change, % 2014 2013Sales (thousand tonnes)Russia 772 787 -2% 2,286 2,325 -2%America 249 242 3% 742 746 -1%Europe 44 46 -3% 137 126 9%RevenueRussia 1,014 1,030 -2% 3,025 3,439 -12%America 441 415 6% 1,274 1,208 5%Europe 72 71 0% 210 214 -2%Gross ProfitRussia 222 221 0% 667 824 -19%America 56 49 15% 149 145 3%Europe 16 15 11% 44 38 16%Adjusted EBITDARussia 151 147 3% 451 588 -23%America 42 34 23% 100 95 5%Europe 9 9 4% 26 21 21% Russia 3Q 2014 vs. 2Q 2014 Revenue decreased by 2% to $1,014 million from the second quarter of 2014mainly as a result of a negative effect of currency translation. Excludingthis negative effect revenue growth would have amounted to $18 million. Gross profit remained almost flat compared to the prior quarter andamounted to $222 million. Gross profit margin increased to 22% from 21% forthe prior quarter. Adjusted EBITDA amounted to $151 million, a growth of 3% compared to thesecond quarter of 2014 mainly as a result of a fairly unchanged grossprofit and lower SG&A expenses. Adjusted EBITDA margin increased to 15%compared to 14% in the prior quarter. 9M 2014 vs. 9M 2013 Revenue dropped by 12% year-on-year to $3,025 million largely due to anegative effect of currency translation. Gross profit decreased by 19% year-on-year to $667 million mainly as aresult of unfavorable product mix of seamless pipe, higher raw materialsprices and a negative effect of currency translation. Gross profit margindecreased to 22% from 24% for the first nine months of 2013. Adjusted EBITDA fell by 23% year-on-year to $451 million mainly due to adecrease in gross profit. Adjusted EBITDA margin declined to 15% comparedto 17% for the same period of 2013. America 3Q 2014 vs. 2Q 2014 Revenue was $441 million, an increase of 6% over the prior quarter,primarily due to higher seamless OCTG pipe sales. Gross profit increased by 15% quarter-on-quarter to $56 million mostly dueto improved prices and higher volumes of seamless pipe. Gross profit marginwent up to 13% from 12% in the second quarter of 2014. Adjusted EBITDA grew by 23% quarter-on-quarter to $42 million following anincrease in gross profit. Adjusted EBITDA margin improved to 9% compared to8% in the prior quarter. 9M 2014 vs. 9M 2013 Revenue increased by 5% compared to the first nine months of 2013 to $1,274million due to higher seamless pipe volumes. Gross profit grew by 3% year-on-year to $149 million mainly as a result ofhigher volumes and improved product mix of seamless pipe. Gross profitmargin remained almost flat at 12% compared to the first nine months of2013. Adjusted EBITDA increased by 5% compared to the same period of 2013 to $100million, following the growth in gross profit and a decline in otheroperating expenses. Adjusted EBITDA margin remained flat at 8% compared tothe first nine months of 2013. Europe 3Q 2014 vs. 2Q 2014 Revenue remained almost flat quarter-on-quarter and amounted to $72million. Gross profit increased by 11% from the second quarter of 2014 to $16million. Gross profit margin improved to 23% compared to 21% in the secondquarter of 2014. Adjusted EBITDA remained fairly unchanged compared to the second quarter of2014. Adjusted EBITDA margin increased to 13% from 12% in the previousquarter. 9M 2014 vs. 9M 2013 Revenue decreased by 2% compared to the first nine months of 2013 to $210million due to lower sales of steel billets. Gross profit increased by 16% year-on-year to $44 million due to the growthin seamless pipe volumes. Gross profit margin improved to 21% from 18% inthe first nine months of 2013. Adjusted EBITDA rose by 21% year-on-year to $26 million due to the increasein gross profit. Adjusted EBITDA margin went up to 12% from 10% in thefirst nine months of 2013. 3Q and 9M 2014 Market Conditions Russia In the third quarter of 2014, the Russian pipe market increased by 9% fromthe prior quarter mainly due to the growth of LD pipe market. For the firstnine months of 2014, Russian pipe market increased by 5% compared to thesame period of 2013 as the year-on-year growth in LD pipe demand was offsetby lower OCTG pipe consumption. In the third quarter of 2014, consumption of seamless OCTG pipe fell by 19%quarter-on-quarter mainly as a result of a seasonally lower demand. For thefirst nine months of 2014, seamless OCTG pipe market decreased by 8%year-on-year largely due to weaker drilling activity. In the third quarter of 2014, the LD pipe market in Russia rose by 39% overthe prior quarter and for the first nine month of 2014, LD pipe consumptionincreased by 29% year-on-year. Growth of the LD pipe market for bothperiods was mainly driven by higher demand from Gazprom and Transneftprojects. In the third quarter of 2014, the seamless and welded line pipe marketincreased by 38% and 25% quarter-on-quarter respectively largely as aresult of a lower base in the second quarter of 2014. At the same time, forthe first nine months of 2014, seamless and welded line pipe consumptionremained almost flat compared to the same period of 2013. In the third quarter of 2014, the seamless and welded industrial pipemarket increased by 3% and 4% respectively compared to the second quarterof 2014. For the first nine months of 2014, seamless industrial pipeconsumption declined by 4% year-on-year, while welded industrial pipeconsumption grew by 5% over the same period. America According to Baker Hughes, in the third quarter of 2014, the total averagerig count was up by 51 rigs to 1,903 rigs from the prior quarter. Totalaverage rig count also increased by 82 rigs in the first nine months of2014 compared to the same period of 2013. The respective increases weremainly due to a 5% gain in the average number of horizontal and directionalrigs combined, quarter-on-quarter, and an 11% gain for the first ninemonths of the year compared to the same period of 2013. In the thirdquarter of 2014, the number of wells per rig remained relatively flat bothquarter-on-quarter and year-on-year during the first nine months of 2014.Despite this, more pipe per rig was consumed as the trend towards morehorizontal and directional drilling and longer wells continued. Also, these positive trends in drilling activity, consumption and OCTGprices were in spite of falling commodity prices. In the third quarter of2014, both WTI crude oil and Henry Hub natural gas average spot pricesdeclined by 5% and 14 % respectively compared to the second quarter of2014. With regards to OCTG products, apparent consumption per rig increased inthe third quarter of 2014 by 2% to 884 tonnes over the prior quarter, andby 17% to 2,610 for the first nine months of the year compared to the sameperiod of 2013. The combination of more rigs and more tonnes per rigresulted in a 24% quarter-on-quarter gain in OCTG consumption, whichoutpaced the increase in total shipments, leading to a quarter-on-quarterdecrease in OCTG inventories. The third quarter months of OCTG inventoryaveraged 4.5 months, which is the lowest level observed since the secondquarter of 2012. This compares to an average of 4.6 months during the firsthalf of the year. For line pipe products, seamless and welded line pipe shipments in thethird quarter of 2014 increased by 15% and by 2% respectively compared tothe prior quarter. For the first nine months of 2014, seamless line pipeshipments remained relatively flat over the same period of the previousyear, but welded pipe shipments declined by 14%, the result of overallweaker demand. Following the successful result of the U.S. OCTG trade case OCTG pricescontinue to gradually strengthen. According to Pipe Logix, the averagecomposite market prices for seamless and welded OCTG pipe were up by 5% and7% respectively compared to the previous quarter. For the first nine monthsof 2014, prices remained nearly unchanged compared to the same period of2013. In the third quarter of 2014, prices for line pipe showed some improvementas importers exhibited some self-restraint in anticipation of the recentlyfiled line pipe trade case against Korea and Turkey. Pending a favorableoutcome of the welded line pipe anti-dumping investigation, prices for thisproduct could improve in 2015. Europe In the third quarter of 2014, pipe consumption was at a low level mostlydue to a traditional summer slowdown in business activity in Europe. Thegrowth in demand for seamless industrial pipe, the European division's coreproduct, remained limited. However the European pipe market continues itsgradual recovery after a lasting stagnation. 4Q and FY 2014 Outlook For the fourth quarter of 2014, the Company observes an increase of thepipe market in Russia mainly due to higher consumption of LD pipe forGazprom's projects and seasonally stronger demand for OCTG pipe. In the U.S. TMK expects fourth quarter drilling activity to remain stablenotwithstanding a continued decline in oil prices. A seasonal increase inCanadian drilling activity and colder weather in the U.S. should supporthigher natural gas prices. TMK also expects U.S. OCTG prices to continue torecover as inventories of low priced imports continue to be consumed andremoved from the market. The European pipe market is expected to largely remain unchanged in thefourth quarter of 2014. Overall, TMK expects stronger set of results in the fourth quarter of 2014. *** 3Q and 9M 2014 IFRS Financial Statements are available at:http://www.tmk-group.com/files/IFRS_TMK_9m2014_usd.pdf 3Q 2014 and 9M 2014 IFRS Results Conference Call: TMK's management will hold a conference call to present the third quarterfinancial results today, November 21, 2014, at 09:00 New York / 14:00London / 17:00 Moscow. To join the conference call please dial: UK Local: +44 20 3427 1916UK Toll Free: 0800 279 5736Russia: +7 495 705 94 50U.S. Local: +1 646 254 3388U.S. Toll Free: 1 877 280 2342Conference ID: 1793992(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 November 24, 2014: UK Local: +44 20 3427 0598UK Toll Free: 0800 358 7735U.S. Local: +1 347 366 9565U.S. Toll Free: 1 866 932 5017Access Code: 1793992 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. 21.11.2014 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: 2413Time of Receipt: Nov 21, 2014 10:24:02 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.