TMK Announces 3Q and 9M 2019 IFRS Results

PAO TMK (“TMK” or “the Group”), one of the world’s leading producers of tubular products for the oil and gas industry, today announces its interim consolidated IFRS financial results for the third quarter of 2019 and nine months ended September 30, 2019.  

9M 2019 Highlights

Financial

- 9M Revenue down 4% y-o-y at $3,667m. Russian division’s 9M Revenue up 4% y-o-y at $2,719m

- 9M Adjusted EBITDA down 3% y-o-y at $508m. Russian division’s 9M Adjusted EBITDA up 21% y-o-y at $438m

- Adjusted EBITDA margin at 14% in 9M 2019. Russian division’s adjusted EBITDA margin at 16% in 9M 2019

- Net debt at $2,671m as at September 30, 2019

- Net debt/EBITDA ratio at 3.89x as at September 30, 2019

Major Developments in 3Q 2019

- In October, TMK and Saudi Arabian Oil Company (Saudi Aramco) signed a memorandum of understanding, which provides for the development of cooperation in prospective areas for both companies.

- In October, TMK supplied a second batch of casing pipes with a threaded connection TMK UP PF to Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) for the Sakhalin-2 oil and gas project. The pipe column was successfully launched from the Molikpak platform at the Piltun-Astokhskoye field in the Sea of Okhotsk, with the involvement of TMK specialists. The order was fulfilled under the long-term renewable contract for the supply of premium tubular oil

- In November, TMK and Metalloinvest signed agreements for the purchase of hot-briquetted iron (HBI) and strip. Under the agreement on HBI, which is effective for the duration of 2020 and includes a pricing formula based on international and domestic Russian market indicators for raw material prices, the supplies of HBI to TMK’s production plants will amount to 240K tonnes and will be executed from one of Metalloinvest’s facilities – Lebedinsky GOK. The agreement on strip is medium-term and provides supplies for 75K tonnes of strip to TMK.

- In November, TMK and Prommashkomplekt LLP, a Kazakh manufacturer of products for railways, signed an agreement effective through 2022 for the supply of up to 65K tonnes of round billets annually from TAGMET.

Outlook

In Russia, TMK expects pipe consumption by domestic oil and gas companies to remain stable in 2019. The increased complexity of hydrocarbon production projects in Russia is expected to result in increased demand for high tech products. TMK anticipates EBITDA at the Russian division to increase for the full-year 2019, supported by an increase in pipe shipments, with the EBITDA margin to be slightly above the level of full-year 2018.

In North America, the market situation is most likely to remain challenging due to oil, gas and steel price volatility, a slowdown in drilling activity and operators focusing on capital discipline – all of which resulting in lower pipe demand and pressure on prices.

In Europe, a challenging market environment and pricing pressure are most likely to remain until the end of the year. This could put pressure on seamless industrial pipe shipments at the European division in the fourth quarter.

Igor Korytko, CEO of TMK, said:

“TMK delivered a solid year-on-year performance at the Russian division in the nine months of 2019, driven by high demand for OCTG (up 9% year-on-year) and a further improvement in the product mix towards a higher share of high-tech products. This translated into a 21% increase in the division’s adjusted EBITDA and stronger margins at 16% in 9M 2019 (up 2 p.p. year-on-year). The Group’s overall 9M 2019 performance was constrained by ongoing softness in the North American market and a challenging market environment in Europe.

With the net debt in 3Q 2019 slightly above the level of the previous quarter, TMK remains focused on its commitment to bringing the net debt-to-EBITDA ratio below 3.00x by the end of this year.

We are positive about the outlook for the full-year 2019 at the Russian division, which is delivering a strong financial performance, driven by stable consumption of our core product – seamless OCTG – and increased demand for high tech products.”

Source: TMK, Photo: Fotolia