26 Nov 2013 09:29
OAO TMK / Miscellaneous 26.11.2013 10:29 Dissemination of a UK 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 2013 AND 9M 2013 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, 2013. Summary 3Q 2013 and 9M 2013 Results (In millions of U.S.$, unless stated otherwise) 3Q 2Q Chang- 9M 9M Chang- 2013 2013 e, % 2013 2012 e, %Sales volumes, thousand 1,022 1,117 -9% 3,197 3,156 1%tonnesRevenue 1,487 1,649 -10% 4,861 5,056 -4%Gross profit 283 355 -20% 1,007 1,152 -13%Income before tax 54 61 -12% 227 351 -36%Net income 35 40 -13% 160 250 -36%Earnings per GDR(1), basic, 0.16 0.20 -20% 0.76 1.16 -34%U.S.$Adjusted EBITDA(2) 182 250 -27% 705 809 -13%Adjusted EBITDA margin, % 12% 15% 14% 16% 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. In the first quarter of 2013, management amended its definition of AdjustedEBITDA. For the updated methodology please refer to the FinancialStatements for the three-months period ended March 31, 2013.3Q 2013 Highlights Sales Sales (thousand tonnes) 3Q 2013 2Q 2013 Change, %Seamless 534 645 -17%Welded 488 472 3%Total 1,022 1,117 -9% - Total pipe sales decreased by 9% quarter-on-quarter to 1,022 thousand tonnes, mainly due to a reduction in OCTG and line pipe sales in Russia. - Seamless pipe sales decreased by 17% compared to the prior quarter and amounted to 534 thousand tonnes. Seamless OCTG pipe volumes fell by 17% quarter-on-quarter due to seasonally lower demand from oil and gas producers and performance of traditionally preplanned general overhauls at the Russian plants. - Welded pipe sales grew by 3% from the prior quarter to 488 thousand tonnes mostly due to welded industrial and OCTG pipe volumes growth. Financials - Revenue for the third quarter was $1,487 million, a decrease of 10% over the second quarter of 2013, mainly due to lower sales of seamless pipe primarily in the Russian division and a negative effect of currency translation. - Adjusted EBITDA decreased by 27% quarter-on-quarter to $182 million due to reduction of seamless pipe volumes in the Russian division as a result of seasonally lower demand and general overhauls. Adjusted EBITDA margin was 12%. - Net income was $35 million for the third quarter, as compared to $40 million in the second quarter of 2013. Net income margin was 2% for the third quarter of 2013. - As of September 30, 2013, total debt remained almost flat compared to the level as of June 30, 2013 and amounted to $3,775 million. TMK's weighted average nominal interest rate amounted to 6.77% as of September 30, 2013 as compared to 6.67% as of June 30, 2013. 9M 2013 Highlights Sales Sales (thousand tonnes) 9M 2013 9M 2012 Change, %Seamless 1,805 1,876 -4%Welded 1,392 1,280 9%Total 3,197 3,156 1% - Total pipe sales grew by 1% to 3,197 thousand tonnes compared to the first nine months of 2012, mainly due to higher volumes of LD pipe in the Russian division and welded OCTG pipe in the American division. - Seamless pipe sales decreased by 4% compared to the first nine months of 2012 and amounted to 1,805 thousand tonnes due to lower volumes in the Russian and European divisions. Seamless OCTG pipe volumes slightly decreased by 1% year-on-year. - Welded pipe sales increased by 9% year-on-year to 1,392 thousand tonnes largely as a result of higher volumes of large diameter (LD) and welded OCTG pipe. Financials - Revenue decreased by 4% year-on-year to $4,861 million mainly due to weaker results of the American and European divisions and a negative effect of currency translation. - Adjusted EBITDA decreased by 13% year-on-year to $705 million negatively affected by weaker pricing and an unfavorable sales mix mostly in the American and European divisions. Adjusted EBITDA margin amounted to 14% for the first nine months of 2013. - Net income was $160 million for the first nine months of 2013 as compared to $250 million for the first nine months of 2012, as a result of a decrease in gross profit partially offset by lower operating expenses and finance costs. - As of September 30, 2013, total debt decreased by $110 million to $3,775 million compared to $3,885 million as of December 31, 2012 mainly due to the Rouble's depreciation against the U.S. dollar. Net repayment of the debt amounted to $28 million for the first nine months of 2013. TMK's weighted average nominal interest rate decreased by 22 basis points to 6.77% as of September 30, 2013 compared to December 31, 2012. - Net debt increased by $42 million in the first nine months of 2013 compared to the level as of December 31, 2012 and amounted to $3,698 million as of September 30, 2013. The Net Debt-to-EBITDA ratio was 4.0x. Recent Developments - In August 2013, TMK received an official notice of product approval from Abu Dhabi Company for Offshore Oil Operations (ADCO). Volzhsky Pipe Plant (VTZ), a TMK subsidiary, was acknowledged by ADCO as an approved vendor of threaded pipes with TMK PF premium connections. - In August 2013, TMK launched its new state-of-the-art electric arc furnace at Tagmet. In November 2013, the Company shut down its last open-hearth furnace. - In October 2013, TMK completed shipments of tubular products for the construction of deep water pipelines at the Lukoil's Filanovsky oil and gas condensate field in the North Caspian Sea. - In October 2013, TMK completed its contract shipments of LD pipe for the international pipeline Central Asia - China in the amount of more than 100 thousand tonnes of longitudinal LD pipe with external and inner coating. - In November 2013, the Extraordinary General Meeting of Shareholders voted to approve interim dividends for the first six months of 2013 in the amount of RUR1.04 per share (approximately USD 0.13 per GDR). A total of RUR 975,089,537.76 (approximately USD 30.0 mln) will be paid out as dividend by January 10, 2014. 3Q and 9M 2013 Segment Results (In millions of U.S.$, unless stated otherwise) 3Q 2Q Chang- 9M 9M Chang- 2013 2013 e, % 2013 2012 e, %Sales volumes (thousandtonnes)Russia 719 820 -12% 2,325 2,333 0%Americas 263 255 3% 746 692 8%Europe 41 42 -3% 126 131 -4%RevenueRussia 998 1,164 -14% 3,439 3,501 -2%Americas 426 413 3% 1,208 1,298 -7%Europe 63 72 -13% 214 257 -17%Gross ProfitRussia 212 290 -27% 824 847 -3%Americas 58 50 17% 145 243 -40%Europe 12 14 -14% 38 62 -38%Adjusted EBITDARussia 134 208 -36% 588 571 3%Americas 42 33 26% 95 195 -51%Europe 7 9 -23% 21 43 -51% Russia 3Q 2013 Highlights In the third quarter of 2013, revenue decreased by 14% to $998 million fromthe prior quarter mainly due to a decrease in seamless pipe sales due toseasonal factor coupled with the general overhauls at some plants. Besidethis, at Seversky pipe plant general overhauls ran simultaneously with theinstallation of FQM pipe rolling mill, that resulted in prolonged repairworks. Revenue for the Russian division was also impacted by a negativeeffect of currency translation. Gross profit for the third quarter of 2013 declined by 27%quarter-on-quarter to $212 million largely due to decrease in seamless OCTGand line pipe sales, an unfavorable product mix of welded pipe sales and anegative effect of currency translation. Gross profit margin was 21%. Adjusted EBITDA for the third quarter of 2013 decreased by 36% from theprior quarter to $134 million following a decline in gross profit. AdjustedEBITDA margin decreased to 13% in the third quarter of 2013 from 18% in theprior quarter of 2013. 9M 2013 Highlights For the first nine months of 2013, revenue decreased by 2% to $3,439million mainly due to a negative effect of currency translation and lowerseamless pipe sales. A decline in revenue was partially offset by higherLD pipe sales primarily for Central Asia-China and Northern Caspianpipelines. Gross profit for the first nine months of 2013 decreased by 3% year-on-yearto $824 million mainly as a result of lower pricing and unfavorable productmix of welded pipe, which was partially offset by higher volumes. Grossprofit margin remained almost flat compared to the first nine months of2012 and amounted to 24%. For the first nine months of 2013, adjusted EBITDA increased by 3%year-on-year to $588 million due to decrease of commercial expenses.Adjusted EBITDA margin improved to 17% for the first nine months of 2013,from 16% for the first nine months of 2012. Americas 3Q 2013 Highlights In the third quarter of 2013, revenue increased by 3% from the priorquarter to $426 million, primarily driven by higher seamless pipe volumesand better product mix. Gross profit for the third quarter of 2013 increased by 17%quarter-on-quarter to $58 million mostly due to a favorable sales mix ofseamless pipe. Gross profit margin improved to 14% in the third quarter of2013 from 12% in the second quarter of 2013. In the third quarter of 2013, adjusted EBITDA grew by 26% to $42 millioncompared to the prior quarter mainly as a result of higher gross profit.Adjusted EBITDA margin improved to 10% in the third quarter of 2013, from8% in the second quarter of 2013. 9M 2013 Highlights For the first nine months of 2013, revenue decreased by 7% year-on-year to$1,208 million mainly due to the deterioration of the pricing environmentin the U.S. following an increase in import volumes. Gross profit for the first nine months of 2013 declined by 40% year-on-yearto $145 million primarily due to weaker pricing in welded and seamlesspipe, not fully offset by lower raw materials prices. Gross profit margindecreased to 12% for the first nine months of 2013 from 19% for the firstnine months of 2012. Adjusted EBITDA for the first nine months of 2013 declined by 51%year-on-year to $95 million mainly due to significantly lower gross profit.Adjusted EBITDA margin fell to 8% for the first nine months of 2013, from15% for the first nine months of 2012. Europe 3Q 2013 Highlights In the third quarter of 2013, revenue decreased by 13% from the priorquarter to $63 million largely due to lower sales of steel billets. Gross profit for the third quarter of 2013 decreased by 14%quarter-on-quarter to $12 million due to decline in steel billets salescoupled with unfavorable pricing of seamless pipe. Gross profit margindecreased to 19% in the third quarter of 2013 from 20% in the secondquarter of 2013. Adjusted EBITDA in the third quarter of 2013 decreased by 23%quarter-on-quarter to $7 million mostly due to lower gross profit. AdjustedEBITDA margin in the third quarter of 2013 declined to 11% against 12% inthe prior quarter. 9M 2013 Highlights For the first nine months of 2013, revenue decreased by 17% year-on-year to$214 million as a result of a weaker pricing and an unfavorable sales mix. Gross profit for the first nine months of 2013 declined by 38% year-on-yearto $38 million as falling average selling prices of pipe products outpacedfalling scrap prices. Gross profit margin decreased to 18% for the firstnine months of 2013 from 24% for the first nine months of 2012. Adjusted EBITDA for the first nine months of 2013 fell by 51% year-on-yearto $21 million largely as a result of a decrease in gross profit. AdjustedEBITDA margin for the first nine months of 2013 decreased to 10% from 17%for the first nine months of 2012. 3Q and 9M 2013 Market Conditions Russia In the third quarter of 2013, the Russian pipe market slightly increased by1% from the prior quarter mainly as a result of higher welded pipeconsumption still being negatively affected by decreased demand forseamless pipe due to seasonality. For the first nine months of 2013, theRussian pipe market increased by 5% year-on-year largely due to higherconsumption of oil and gas pipe grades supported by a high level ofdrilling activity, e.g. amount of meters drilled increased by 5%year-on-year. Demand for seamless OCTG and line pipe declined in the third quarter of2013 over the prior quarter by 21% and 14% respectively in majority due toseasonally lower consumption of oil and gas grades. At the same time forthe first nine months of 2013 consumption of seamless OCTG and line pipeincreased significantly year-on-year by 22% and 4% respectively, supportedby growth of drilling activity in Russia, including steady development ofunconventional drilling. The LD pipe market in Russia in the third quarter of 2013 decreased by 9%compared to the prior quarter. For the first nine months of 2013 LD pipemarket in Russia declined by 5% year-on-year. Both periods were negativelyaffected by completion of some major pipeline projects and postponement ofconstruction of the new ones. In the third quarter of 2013, the seamless and welded industrial pipemarket in Russia grew by 21% and 11% over the prior quarter respectively,impacted by seasonally high demand from machinery and constructionindustry. For the first nine months of 2013, seamless industrial pipemarket declined by 6% year-on-year due to weaker consumption in themachinery industry after Russia's entrance into WTO. For the first ninemonths of 2013, welded industrial pipe market increased by 5% year-on-yeardue to higher construction activity in Russia. Americas In the first nine months of 2013 commodity prices have increased comparedto the same period of 2012 with natural gas prices improving year-over-yearto average $3.69/MMbtu. According to Baker Hughes, the natural gas rigcount gained 21 rigs or 6% in the third quarter 2013. The U.S. rig countaveraged 1,770 compared to 1,761 in the second quarter of 2013, but on anine-month comparison was lower at 1,763 in 2013 versus 1,955 in 2012.Through continued improvement in drilling efficiencies, the number ofonshore wells per rig increased 6% to average 5.21 wells per rig from 4.92wells per rig in 2012. Though the rig count declined, more pipe per rig was used as operatorstrend toward more horizontal and directional drilling. However, slightgains in OCTG consumption did not outpace the increased volume of totalshipments which resulted in a quarter-on-quarter increase of inventory. Thethird quarter averaged 5.7 months of inventory, a level that was lastreached in the third quarter of 2010, according to Preston Pipe and Tube.Increased supply and low priced imports, particularly from South Koreacontinued to apply downward pressure on pricing levels. Year-on-year theaverage composite market price for OCTG seamless and welded products weredown 9% and 10% respectively (Pipe Logix). Prices stabilized in the thirdquarter as OCTG price composites for both seamless and welded products wereflat following the filing of unfair trade cases against nine countries.Pending a favorable outcome of the OCTG anti-dumping investigation, pricesfor this product would likely improve as domestic mills will have a levelmarket. Line pipe shipments were challenged with low demand as shipmentsdecreased nearly 9% year-over-year. Prices also decreased for welded andseamless, imported and domestic line pipe categories, according to PipeLogix. The third quarter industrial pipe shipments were down withmechanical and line pipe demand decreasing the most. Europe Throughout the first nine months of 2013, the European market environmentremained challenging. End-users continued to focus on spot ordersanticipating more favorable payment terms. Lower number of active projectscoupled with investor pessimism resulted in decreasing consumption oftubular goods which also put negative pressure on prices for industrialpipe. Increased competition, resulting from lower exports by the Europeancompanies, also negatively affected the pricing environment. 4Q and FY 2013 Outlook In the fourth quarter of 2013, the Company observes a recovery on its mainmarkets. In particular, seamless OCTG and line pipe sales in the Russiandivision are growing. LD pipe volumes are expected to be higher compared tothe third quarter of 2013 due to TMK's supply to Gazprom's South Corridorproject. In the U.S. TMK expects volumes to continue to increase asdrilling operations in Canada ramp up for the winter season and colderweather in the U.S. supports natural gas prices. Overall, TMK believes thatthe fourth quarter results will significantly exceed the results of thethird quarter of 2013. 3Q / 9M 2013 IFRS Financial Statements are available at:http://www.tmk-group.com/files/IFRS_TMK_9m2013_USD.pdf 3Q / 9M 2013 IFRS Results Conference Call: TMK's management will hold a conference call to present the third quarter /nine months 2013 financial results today, November 26, 2013, at 09:00 NewYork / 14:00 London / 18:00 Moscow. To join the conference call please register on-linehttps://eventreg1.conferencing.com/webportal3/reg.html?Acc=975352&Conf=188954or dial: International call-in Number: +44 20 7162 0025US call-in Number: +1 334 323 6201Conference ID: 939118(We recommend that participants register on-line to avoid waiting in aqueue or to start dialing in 5-10 minutes prior to ensure a timely start tothe conference call) The conference call replay will be available through November 29, 2013: UK replay number: +44 20 7031 4064US toll replay number: +1 954 334 0342Replay access code: 939118 *** 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 2012, TMK's pipe shipments totaled4.22 million tonnes. The largest share of TMK's sales belongs to highmargin oil 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 production assets structure: 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. 26.11.2013 EquityStory.RS, LLC's 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: MSCLSE Ticker: TMKSSequence Number: 1782Time of Receipt: Nov 26, 2013 10:23:37 End of Announcement EquityStory.RS, LLC News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.