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PAO TMK (TMK or the Group), one of the world's leading manufacturers of pipes for the oil and gas industry, announces its interim consolidated results for the third quarter of 2019 and nine months, ended September 30, 2019, in accordance with International Financial Reporting Standards (IFRS).
9M 2019 Highlights
Financial results
- Revenue for 9M 2019 decreased by 4% compared to the same period last year and amounted to USD 3,667 million; Revenue for the Russian division for 9M 2019 increased by 4% y-o-y to USD 2,719 million.
- 9M 2019 Adjusted EBITDA was USD 508 million , which is 3% lower than the indicator for the same period last year. Adjusted EBITDA of the Russian division for 9M 2019 amounted to USD 438 million, which is 21% higher than in the same period last year.
- Adjusted EBITDA margin was 14% for 9M 2019 ., and the adjusted EBITDA margin of the Russian division is 16% for 9M 2019
- Net debt as of September 30, 2019 amounted to USD 2,671 million.
- Ratio net debt to EBITDA as of September 30, 2019 amounted to 3.89 times.
Key events of the Company for the 3rd quarter of 2019
- In October, TMK and the Saudi Arabian Oil Company (Saudi Aramco) signed a Memorandum of Understanding, which provides for the development of cooperation in areas that are promising for both companies.
- In October, TMK delivered the second batch of casing pipes with TMK UP PF threaded connection Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) within the framework of the Sakhalin-2 oil and gas project. The tubular string was successfully launched into an oil production well from the Molikpaq platform at the Piltun-Astokhskoye field in the Sea of Okhotsk with the participation of TMK supervisors. The order was completed under a long-term contract between TMK and Sakhalin Energy for the supply of premium tubular products.
- In November, TMK and Metalloinvest signed agreements for the supply of hot briquetted iron (HBI) and strip. The HBI agreement will be in effect throughout 2020 and includes a price formula that takes into account market indicators for the cost of metallurgical raw materials on the global and Russian markets. It is expected that in 2020 the supply of HBI to TMK enterprises will amount to about 240 thousand tons and will be carried out by the Lebedinsky mining and processing plant. The agreement for strip is medium-term and provides for supplies in the amount of about 75 thousand tons.
- In November, TMK and the Kazakhstani enterprise Prommashkomplekt LLP, which manufactures products for railways, entered into an agreement for the supply of round billets, which will be valid until 2022 inclusive. According to the document, TMK will annually supply to Prommashkomplekt up to 65 thousand tons of billets produced by the Taganrog Metallurgical Plant (TAGMET).
Forecast
TMK expects In 2019, the consumption of pipes by fuel and energy companies in Russia will remain at a stable level, and the increasing complexity of hydrocarbon production projects in Russia will 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, gas and steel prices, slowing drilling activity and the fact that oil and gas companies have stricter discipline in spending on drilling and production budgets, which leads to lower demand for pipe products and puts pressure on pipe prices.
The situation in the European market is likely to remain difficult, and pressure on prices for pipe products will remain unchanged. These factors may have an impact on the sales of pipe products of the European Division in the fourth quarter of 2019
Comment of TMK CEO Igor Korytko:
“TMK Russian Division Delivered strong 9M 2019 results driven by strong OCTG demand (9% YoY sales growth) and further improvement
