4 Mar 2016 07:40
PAO TMK / MiscellaneousTMK Announces 4Q 2015 and FY 2015 IFRS Results 04-March-2016 / 08:39 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. --------------------------------------------------------------------------- 04 March 2016 PRESS RELEASE TMK Announces 4Q 2015 and FY 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 auditedconsolidated IFRS financial results for the year ended December 31, 2015. Summary 4Q and FY 2015 Results (In millions of U.S.$, unless stated otherwise) 4Q 3Q Change, FY FY Change, 2015 2015 $ mln 2015 2014 $ mlnSales volumes, thousand 927 963 (36) 3,871 4,402 (531)tonnesRevenue 913 917 (3) 4,127 6,009 (1,882)Gross profit 173 178 (4) 845 1,169 (325)Impairment loss (352) - (352) (352) (153) (199)Foreign exchange gain/ (53) (94) 41 (141) (301) 160(loss), netProfit/(loss) before tax (426) (106) (320) (443) (201) (242)Net profit/(loss) (371) (74) (297) (368) (217) (151)Earnings/(loss) per GDR(1), (0.4 (0.3 (0.08) (1.5 (0.9 (0.59)basic, U.S.$ 0) 2) 8) 9)Adjusted EBITDA(2) 155 125 30 636 804 (168)Adjusted EBITDA margin, % 17% 14% 15% 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.4Q 2015 Highlights Sales Sales (thousand tonnes) 4Q 2015 3Q 2015 Change, %Seamless 604 571 6%Welded 323 391 (18)%Total 927 963 (4)% - Total pipe sales decreased by 4% compared to the prior quarter to 927 thousand tonnes, due to weaker sales in the American division coupled with lower welded line and industrial pipe volumes in the Russian division. - Seamless pipe volumes increased by 6% compared to 3Q 2015 to 604 thousand tonnes, largely as a result of seasonally higher seamless OCTG and line pipe sales in the Russian division. - Welded pipe sales fell by 18% compared to the prior quarter to 323 thousand tonnes, mostly due to lower welded industrial and line pipe volumes in the Russian division. Financials - Revenue remained nearly flat compared to 3Q 2015 and amounted to $913 million. A negative effect of currency translation was largely offset by favorable product mix of seamless and welded pipe in the Russian division. - Adjusted EBITDA grew by $30 million or 24% quarter-on-quarter to $155 million, mostly due to better performance of the Russian division resulting from favorable product mix of seamless and welded pipe. Adjusted EBITDA margin improved to 17% compared to 14% in the previous quarter. - Net loss was $371 million as compared to net loss of $74 million in 3Q 2015. Foreign exchange loss was $53 million compared to $94 million in the prior quarter. - The Company recognized an impairment loss of $352 million, mostly attributable to the goodwill of the American division. There were no impairment charges in 3Q 2015. - As of December 31, 2015, total debt amounted to $2,801 million, a $28 million decrease compared to September 30, 2015, which was partially a result of the rouble's depreciation against the U.S. dollar. Weighted average nominal interest rate increased by 26 bps compared to September 30, 2015 and amounted to 9.06%. - Net debt decreased by $150 million compared to September 30, 2015 and amounted to $2,496 million as of December 31, 2015. Net Debt-to-EBITDA ratio amounted to 3.92x as of December 31, 2015 compared to 3.73x as of September 30, 2015. FY 2015 Highlights Sales Sales (thousand tonnes) FY 2015 FY 2014 Change, %Seamless 2,410 2,560 (6)%Welded 1,461 1,842 (21)%Total 3,871 4,402 (12)% - Total pipe sales decreased by 12% year-on-year to 3,871 thousand tonnes, due to significantly lower pipe volumes in the American division caused by unfavorable market conditions in the U.S. - Seamless pipe volumes declined by 6% compared to FY 2014 to 2,410 thousand tonnes, mostly due to lower seamless pipe sales in the American division. - Welded pipe sales fell by 21% year-on-year to 1,461 thousand tonnes, due to sharp decline in welded OCTG volumes in the American division, which was not fully compensated by record high LD pipe sales in the Russian division. Financials - Revenue fell by $1,882 million or 31% compared to FY 2014 to $4,127 million, mainly due to a sharp decline of sales in the American division and a negative effect of currency translation. - Adjusted EBITDA decreased by $168 million or 21% year-on-year to $636 million, mainly due to weaker results of the American division. Adjusted EBITDA margin improved to 15% compared to 13% for FY 2014, largely as a result of better price and product mix in the Russian division. - Net loss was $368 million as compared to $217 million for FY 2014. Foreign exchange loss amounted to $141 million compared to $301 million for the same period of 2014. - Impairment loss amounted to $352 million compared to $153 million for FY 2014, mostly attributable to the goodwill of the American division in both periods. - As of December 31, 2015, total debt decreased by $422 million to $2,801 million compared to December 31, 2014, partially due to the rouble's depreciation against the U.S. dollar. Net repayment amounted to $193 million for FY 2015. Weighted average nominal interest rate increased by 180 bps to 9.06% compared to December 31, 2014. - As of December 31, 2015, net debt decreased by $474 million to $2,496 million compared to December 31, 2014. Net Debt-to-EBITDA ratio amounted to 3.92x as of December 31, 2015 compared to 3.69x as of December 31, 2014. Recent Developments - In December 2015, TMK shipped premium pipe products with lubricant-free coating GreenWell for LUKOIL-Nizhnevolzhskneft to be utilised at Y. Korchagin oil and gas condensate field in the Caspian Sea. It was the first time the Company's pipe products with lubricant-free coating GreenWell are used in offshore wells. - In December 2015, TMK and Magnitogorsk Iron & Steel Works (MMK) signed an agreement to apply a price formula for hot-rolled heavy plate supplied to TMK. The price formula is based on the direct cost method, and its main variables include cost of raw materials and production cost of steel plate. Based on this formula, the price is also adjusted for inflation and currency exchange rates. The price of steel plate will be revised quarterly. Term of the agreement is 2016-2018. - On December 29, 2015, TMK completed a deal with VTB Bank to raise RUB 10 billion by selling its shares. Part of the shares will be delivered in the course of 2016. TMK has a right to buy the shares back. The funds will be used to reduce debt by repaying bank loans in 2016. - In January 2016, TMK and Rosneft signed a partnership memorandum on the implementation of the program of pipe import substitution for offshore projects. Within the framework of their cooperation, the parties intend to consider possible use of TMK's existing products for Rosneft's offshore projects, along with manufacturing of new types of pipes. 4Q 2015 and FY 2015 Segment Results (In millions of U.S.$, unless stated otherwise) 4Q 2015 3Q 2015 Change, FY FY Change, % 2015 2014 %Russian DivisionSales (thousand tonnes) 812 826 (2)% 3,252 3,198 2%Revenue 761 722 5% 3,189 3,973 (20)%Gross Profit 204 182 12% 817 891 (8)%Adjusted EBITDA 172 132 30% 629 614 3%Adjusted EBITDA Margin, % 23% 18% 20% 15%American DivisionSales (thousand tonnes) 75 98 (24)% 440 1,019 (57)%Revenue 113 152 (26)% 742 1,766 (58)%Gross Profit (41) (10) n/a (18) 223 n/aAdjusted EBITDA (24) (10) n/a (23) 159 n/aAdjusted EBITDA Margin, % (21)% (7)% (3)% 9%European DivisionSales (thousand tonnes) 40 39 2% 178 185 (3)%Revenue 39 43 (7)% 196 270 (27)%Gross Profit 11 6 72% 46 55 (17)%Adjusted EBITDA 7 3 156% 30 32 (7)%Adjusted EBITDA Margin, % 17% 6% 15% 12% Russian Division 4Q 2015 vs. 3Q 2015 Revenue increased by $39 million or 5% to $761 million compared to 3Q 2015,as a negative effect of currency translation was fully offset by favourableproduct mix of seamless and welded pipe, resulting from higher sales ofseamless OCTG and line pipe coupled with stronger volumes of LD pipe. Gross profit grew by $22 million or 12% over the prior quarter to $204million. A negative effect of currency translation was fully compensated byfavourable product mix of seamless and welded pipe. Gross profit marginincreased to 27% compared to 25% in 3Q 2015. Adjusted EBITDA amounted to $172 million, an increase of $40 million or 30%compared to the prior quarter, following growth of gross profit. AdjustedEBITDA margin improved to 23% compared to 18% for the previous quarter. FY 2015 vs. FY 2014 Revenue fell by $784 million or 20% year-on-year to $3,189 million, due toa negative effect of currency translation. Excluding this effect, revenuewould have increased by $1,037 million compared to FY 2014. Gross profit decreased by $74 million or 8% year-on-year to $817 million,mainly as a result of a negative effect of currency translation. Excludingthis effect, gross profit would have increased by $356 million. At the sametime, higher prices and favorable product mix in both seamless and weldedsegments contributed to a gross profit margin improvement to 26% from 22%for FY 2014. Adjusted EBITDA increased by $15 million or 3% year-on-year to $629million, as a decline in gross profit was offset by lower selling andadministrative expenses. Adjusted EBITDA margin improved to 20% compared to15% compared to FY 2014. American Division 4Q 2015 vs. 3Q 2015 Revenue fell by $39 million or 26% over the prior quarter, mainly due tolower volumes of seamless and welded pipe coupled with weaker pricing. Gross loss amounted to $41 million compared to gross loss of $10 million in3Q 2015, largely due to lower sales. Adjusted EBITDA amounted to minus $24 million compared to minus $10 millionin the prior quarter. FY 2015 vs. FY 2014 Revenue dropped by $1,024 million or 58% year-on-year to $742 million, as aresult of significant decline in volumes of both seamless and welded pipe,following a reduction of drilling and E&P spending. Gross loss amounted to $18 million compared to gross profit of $223 millionfor FY 2014, as lower pipe prices were not fully offset by falling rawmaterials prices. Adjusted EBITDA fell by $181 million to minus $23 million compared to FY2014, following a sharp decline of gross profit. European Division 4Q 2015 vs. 3Q 2015 Revenue decreased by $3 million or 7% over the prior quarter to $39million, largely due to unfavourable pricing environment in the Europeanmarket. Gross profit increased by $4 million or 72% from 3Q 2015 to $11 million,largely as a result of a favourable effect of currency translation. Grossprofit margin improved to 27% compared to 14% in 3Q 2015, a result of a lowbase in the previous quarter due to capital repairs of the equipment. Adjusted EBITDA grew by $4 million compared to the previous quarter to $7million, following an increase of gross profit. Adjusted EBITDA marginimproved to 17% from 6% in 3Q 2015. FY 2015 vs. FY 2014 Revenue decreased by $74 million or 27% year-on-year to $196 million,largely due to lower prices for seamless pipe. Gross profit fell by $9 million or 17% compared to FY 2014 to $46 million,as lower pipe prices were not fully offset by falling raw materials prices.At the same time, higher share of seamless pipe volumes in total salesallowed gross profit margin to improve to 24% compared 21% for FY 2014. Adjusted EBITDA decreased by $2 million or 7% year-on-year to $30 million,following a decline in gross profit. Adjusted EBITDA margin grew to 15%from 12% for FY 2014. 4Q and FY 2015 Market Conditions Russia 4Q 2015 In 4Q 2015, the Russian pipe market decreased by 7% compared to the priorquarter, mainly due to seasonally weaker welded industrial pipe demand. Drilling in Russia marginally increased by 1% quarter-on-quarter. At thesame time, OCTG market grew by 15% compared to 3Q 2015, following atraditional start of a stock-up period by oil and gas majors. In 4Q 2015, seamless pipe market in Russia increased by 5%quarter-on-quarter, largely as a result of stronger seamless OCTG and linepipe shipments. Welded pipe market decreased by 12% compared to 3Q 2015, mainly due tosignificantly lower welded industrial pipe demand, which was not fullycompensated by higher welded OCTG and LD pipe shipments. FY 2015 For FY 2015, the Russian pipe market marginally increased by 1% compared toFY 2014, as lower seamless pipe shipments were offset by stronger weldedpipe demand, particularly in LD pipe. OCTG pipe market grew by 3% year-on-year, largely as a result of highershipments of seamless OCTG, supported by strong drilling activity inRussia, which increased by 12% compared to FY 2014. Share of horizontaldrilling in Russia rose to 33% compared to 29% for FY 2014. Seamless pipe market declined by 2% year-on-year, mostly due to lowerseamless and industrial pipe shipments. Welded pipe market in Russia increased by around 2% compared to FY 2014, asa sharp reduction in welded industrial pipe shipments was fully compensatedby growth of LD pipe demand by 30% year-on-year. America 4Q 2015 According to Baker Hughes, the average number of rigs in 4Q 2015 fell by13% compared to the prior quarter, following a continued decline in oilprices. According to the Preston Pipe Report, OCTG shipments fell by 19%quarter-on-quarter. At the same time, the number of months of OCTGinventory decreased to 8.0 compared to 8.4 in the previous quarter. Pipe Logix data shows that, in 4Q 2015, the average composite OCTG seamlessand welded prices decreased by 7% and 9% respectively, compared to 3Q 2015. FY 2015 According to Baker Hughes, the average rig count declined by 47% for FY2015 compared to the same period of 2014. The decrease was due to thecontinuing slump of oil prices, which resulted in a lower demand for OCTGand growth of pipe inventories. OCTG local shipments dropped by 52% over the same period of 2014. Thedecrease was driven by continued weak demand. According to Pipe Logix, both average composite OCTG seamless and weldedprices decreased by 17% compared to FY 2014. Europe In 4Q 2015 and throughout FY 2015, the European pipe market remainedchallenging. Weaker pipe demand combined with rising pipe imports fromUkraine, Belarus and China contributed to highly competitive environmentand put pressure on prices. 1Q 2016 and FY 2016 Outlook In Russia, TMK anticipates its 1Q 2016 sales to be in line with 1Q 2015.For FY 2016, TMK plans to sustain its OCTG volumes year-on-year, providedRussian majors' demand continues to be stable. Overall, the Russiandivision margin is expected to be in line with the level of FY 2015. In the U.S., market conditions continue to be challenging, with weak demandfor oil and gas pipe due to low drilling volumes, large inventories, andcontinued low-priced imports. The American pipe market is not expected torecover before 2017. Pipe consumption in the European pipe market is also expected to remain lowin 1Q 2016 with a gradual improvement no earlier than in 2H 2016. 4Q and FY 2015 IFRS Financial Statements are available at:www.tmk-group.com/media_en/texts/34/TMK_IFRS_12m2015_EN_USD.pdf 4Q 2015 and FY 2015 IFRS Results Conference Call: TMK's management will hold a conference call to present 4Q 2015 and FY 2015financial results today, March 4, 2016, at 09:00 New York / 14:00 London /17:00 Moscow. To join the conference call please dial: UK Local: +44 20 3043 2440UK Toll Free: 0808 238 1774Russia: +7 495 221 6523Russia Toll Free: 8 10 8002 0414011U.S. Local: +1 877 887 4163Conference ID: 50026195#(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 2015, TMK's pipe shipments totalled 3.87million 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. European division:Sinarsky Pipe Plant; TMK-ARTROM;TMK-CPW; TMK-RESITA.TMK-Kaztrubprom; Middle East Division:TMK-INOX; TMK GIPI (Oman).TMK-Premium Service;TMK Oilfield Services;TMK CHERMET. --------------------------------------------------------------------------- 04-March-2016 The EquityStory.RS, LLC Distribution Services includeRegulatory Announcements, Financial/Corporate News and Press Releases.Media 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 Category Code: MSC TIDM: TMKS Sequence Number: 3031 Time of Receipt: 04-March-2016 / 08:38 CET/CEST End of Announcement EquityStory.RS, LLC News Service --------------------------------------------------------------------------- 442621 04-March-2016UK-Regulatory-announcement transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.