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TMK Announces 2Q 2019 IFRS Results

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Inside Information: This press release does not contain inside information.

Forward-looking statements: The information contained in this press release includes forward-looking statements events. These statements are based on the current opinions and assumptions of the Company's management, taking into account known and unknown risks and uncertainties.

PJSC TMK (“TMK” or the “Group”), one of the world's leading producers of pipes for the oil and gas industry, announces interim consolidated results of operations for the six months ended June 30, 2019. , in accordance with International Financial Reporting Standards (IFRS).

Key figures for Q2 2019

Financial results

- Q2 2019 revenue grew 4% qoq to $ 1,307 million

- Adjusted EBITDA in Q2 Q3 2019 grew 11% qoq to US $ 195 million

- Adjusted EBITDA margin increased 1 p.p. and amounted to 15% in Q2 2019

- Net debt as of June 30, 2019 amounted to USD 2,641 million, which was mainly due to the strengthening of the exchange rate of the ruble against the US dollar

Key events of the Company for the 2nd quarter of 2019

- On June 22, Igor Korytko was appointed General Director of PJSC TMK. Igor Korytko, who previously held the position of Deputy CEO for Performance Management, will continue to implement TMK's strategic initiatives, including digital business transformation, which will allow the Company to strengthen its competitive position.

- In June TMK and NOVATEK signed an Agreement on Strategic Partnership and Cooperation. The agreement contains the basic principles and approaches to organizing the supply of premium casing and tubing manufactured by TMK for NOVATEK and provides for formula pricing, which will ensure production efficiency, timeliness and reliability of supplies. The agreement is valid until the end of 2023


TMK expects that in 2019 pipe consumption by fuel and energy companies in Russia will remain at stable level. The increasing complexity of hydrocarbon production projects in Russia is expected to lead to an increase in demand for high-tech products. TMK expects the EBITDA of the Russian division in 2019 to increase on the back of an increase in pipe sales. EBITDA margin will also slightly improve from 2018

The North American pipe market is likely to remain tense amid volatility in oil and steel prices, slower drilling activity and the fact that oil and gas companies are adhering to stricter discipline in spending on drilling and production budgets, which leads to a decrease in demand for pipe products and creates pressure on pipe prices.

The difficult situation in the European market, along with continuing pressure on pipe prices and seasonal slowdown in activity in Europe in the 3rd quarter may have an impact on the financial results of the European division at the end of 2019.Nevertheless, TMK expects a stable level of demand for industrial seamless pipes in 2019, as well as an improvement in the sales structure of the European division for by increasing the share of high-margin pipe products.

Comment of the General Director TMK Igor Korytko:

“In Q2 2019, TMK performed well compared to the previous quarter due to stronger results in the Russian division, where the quarterly sales volume reached the highest level over the past four years, and there was an improvement in the sales structure due to the growth in demand for high-tech products of TMK. This contributed to a 21% QoQ increase in EBITDA for the Russian division and improved margins.

Despite a temporary increase in debt levels, mainly as a result of the strengthening of the ruble against the US dollar, TMK remains committed to to reduce the level of net debt to EBITDA by the end of the current year to the target level of 3.00x.

We continue to pursue our strategic goals of strengthening our market leadership, improving operational efficiency, developing innovative solutions for our customers using the latest digital technologies and adhering to the best standards in the field of responsible business. ”

Group Results for Q2 & H1 2019

(Millions of US dollars, unless otherwise noted)

Amounts calculated in monetary terms, interest and other numerical indicators,

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