TMKS.L Regulatory News (TMKS)

5 Mar 2008 07:25

OAO TMK05 March 2008 March 5, 2008 PRESS RELEASE TMK Announces Preliminary Results for 2007 This trading update contains forward looking statements concerning futureevents. Forward looking statements are based on current information andassumptions of TMK management concerning known and unknown risks anduncertainties. Preliminary financial figures have not been audited and candiffer from actual results. TMK will present audited IFRS full year 2007 resultsin May 2008. OAO TMK ("TMK" or "the Company"), one of the world's largest oil and gas pipeproducers, and the market leader of the Russian pipe industry, today providesthe following trading update in advance of the publication of its preliminaryresults for the year ended 31st December 2007, which will be announced in May2008. 2007 was a successful yet challenging year for the Company given the scale ofongoing investment projects at its mills. Nevertheless, TMK managed to continueimproving its production and overall financial results. For FY 2007, TMK expects revenues to exceed $4 billion USD, an increase of about20% over 2006, on the back of strong demand for pipes and a favourable pricingenvironment. Increase in EBITDA for 2007 is expected to be in the area of 15%;EBITDA margin for the full year is expected to be slightly lower than for thefirst half of 2007 and the full year 2006. Profitability in the second half of2007 was negatively affected by the ongoing installation of a PQF mill atTagmet. A related seamless rolling mill stoppage since October, necessary toinstall the new mill, resulted in deteriorating product mix and increasing shareof fixed costs. As previously stated, in 2007 TMK increased shipments of tubular goods by 1.9%over 2006. Seamless pipes shipments increased by 4.2% compared to 2006. It isworth noting that this growth in seamless pipe shipments was achieved during theextensive upgrading of production facilities. In 2007, TMK managed to achieve higher than expected prices for its products.TMK's prices for seamless OCTG pipes increased by 20% during 2007, while TMK'sprices for seamless line pipes rose by 14%. Seamless industrial pipe prices grewby around 12%. Growth in TMK's large diameter welded pipe prices was in the area of 20%, abovetrends in the prices of coils and plates. Prices for industrial welded pipeswere relatively flat in 2007 as a result of intensifying competition. Despite some weakness observed in the global markets, particularly in NorthAmerica, the Russian seamless pipe market remained strong, fuelled by increasingE&P spending from Russian oil and gas companies. The Russian pipe market grew by13%, while the seamless OCTG pipes market increased by 15%. Given the more favourable situation in the Russian market, TMK increased itsdomestic sales by decreasing exports from its Russian plants by 8%.Consequently, the share of non-Russian sales volumes decreased to 28.5%. The largest customers for TMK's pipes in the Russian market remained TNK-BP,Gazprom, Surgutneftegas, Rosneft, and Lukoil. In 2007, for the second year in a row, prices for scrap increased considerably.TMK prices for scrap and pig iron increased by as much as 30%. Increase in prices for coils and plates in the fourth quarter 2007 compared tothe fourth quarter 2006 was in the area of 6-7% with a notable spike in themiddle of this period. 2008 promises to be a key year for the development of TMK capacities with fourmajor equipment launches in the pipeline - a PQF mill at Tagmet, a largediameter longitudinal pipe mill and a seamless capacity upgrade at Volzhsky andan electric arc furnace at Seversky. Despite significant additional capacitycoming online, TMK expects moderate growth in volumes since the new equipmentrequires several months to attain operational capacity. This will provide forcapacity debottlenecking by the beginning of 2009. TMK expects the situation on the global pipe markets to improve, as thedestocking in the U.S. seems to be coming to end. As a result, the Company expects visible improvements in financials; however,rapidly rising steel prices might constrain margins. Launching new capacity willhave a positive impact on the Company's product mix and profitability startingfrom 2009. OAO "TMK" (www.tmk-group.com) Founded in 2001, TMK (LSE: TMKS) is the largest pipe producer in Russia and oneof the three global market leaders. In 2007, TMK shipped over 3 million tonnes of pipes. TMK supplies to companiesin more than 60 countries. TMK production facilities are located in Russia and Romania: • Volzhsky Pipe Plant; • Seversky Tube Works; • Taganrog Metallurgical Works; • Sinarsky Pipe Plant; • SC TMK-ARTROM SA; • SC TMK-Resita SA; • TMK Oilfield Services: •Orsky Machine Building Plant; •Truboplast pipe coating company; •TMK Pipe Maintenance Department; •TMK Central Pipe Yard. For further information please contact: TMK PR Department:Sergey Ilin Email: PR@tmk-group.comTel: +7 495 775 7600 ext. 2149 TMK IR Department:Alexei RatnikovEmail: IR@tmk-group.comTel: +7 495 775 7600 ext. 2078 www.tmk-group.com This information is provided by RNS The company news service from the London Stock Exchange