Post on 31-Aug-2019
Disclaimer
No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or
completeness of the information contained herein and, accordingly, none of the Company, or any of its shareholders or
subsidiaries or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the
use of this presentation.
This presentation contains certain forward-looking statements that involve known and unknown risks, uncertainties and other
factors which may cause the Company's actual results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements. OAO TMK does not undertake
any responsibility to update these forward-looking statements, whether as a result of new information, future events or
otherwise.
This presentation contains statistics and other data on OAO TMK’s industry, including market share information, that have been
derived from both third party sources and from internal sources. Market statistics and industry data are subject to uncertainty
and are not necessarily reflective of market conditions. Market statistics and industry data that are derived from third party
sources have not been independently verified by OAO TMK. Market statistics and industry data that have been derived in whole
or in part from internal sources have not been verified by third party sources and OAO TMK cannot guarantee that a third party
would obtain or generate the same results.
2
3
1Q 2015 vs 4Q 2014 Summary Financial Highlights
Sales decreased QoQ mainly due to the lower volumes across
all pipe segments
Adjusted EBITDA decreased QoQ mainly due to a negative effect
of currency translation coupled with weaker sales in the Russian
and American divisions
Revenue fell QoQ as a result of lower pipe sales and a
negative effect of currency translation
Net profit was $30 million as compared to a net loss for
4Q2014, which had resulted mostly from a foreign exchange
loss of $198 million
-19% QoQ
-19% QoQ
Source: TMK data
-24% QoQ
1,2371,004
0
250
500
750
1,000
1,250
4Q2014 1Q2015
Thousand t
onnes
1,500
1,134
0
400
800
1,200
1,600
4Q2014 1Q2015
U.S
.$ m
ln227
185
15%16%
0%
3%
6%
9%
12%
15%
18%
0
50
100
150
200
250
4Q2014 1Q2015
EB
ITD
A M
arg
in,
%
U.S
.$ m
ln
-254
30
-40
-20
0
20
40
4Q2014 1Q2015
U.S
.$ m
ln
1Q 2015 vs 1Q 2014 Summary Financial Highlights
Sales declined YoY mostly as a result of lower
volumes of OCTG and industrial pipe
Adjusted EBITDA remained relatively flat YoY
Revenue fell YoY mainly as a result of a negative
effect of currency translation
Net profit was $30 million as compared to a net loss
for 1Q 2014
Source: TMK data
-2% YoY -23% YoY
Relatively flat YoY
1,026 1,004
0
300
600
900
1,200
1Q2014 1Q2015
Thousand t
onnes
1,466
1,134
0
300
600
900
1,200
1,500
1Q2014 1Q2015
U.S
.$ m
ln184 185
13%
16%
0%
3%
6%
9%
12%
15%
18%
0
50
100
150
200
1Q2014 1Q2015
EB
ITD
A M
arg
in,
%
U.S
.$ m
ln
-16
30
-20
-10
0
10
20
30
40
1Q2014 1Q2015
U.S
.$ m
ln
4
Recent Developments
Contracts awarded
In March 2015, TMK and Gazprom Burenie, one of Russia’s largest drilling
companies, signed a strategic three-year contract, under which TMK acts
as a leading supplier of drill pipe to the company.
Shipments
In March 2015, TMK shipped high-tech casing pipe, including TMK UP
premium connections, for Tatneft to produce super-viscous oil at the
Ashalchinskoye field in Tatarstan.
In April 2015, TMK supplied high-tech super chrome (13Cr) steel premium
pipe to Rospan International, one of the Rosneft's subsidiaries and
operator of Vostochno-Urengoiskoe and Novo-Urengoiskoe gas
condensate fields.
In April 2015, TMK started LD pipe deliveries for Power of Siberia gas
transmission system by Gazprom. Throughout 2015 and beginning of
2016, the Company plans to deliver more than 150 thousand tonnes of LD
pipe for the project.
5
Launching new production
In March 2015, TMK launched production of billets for drill pipe joints with
annual capacity of around 150 thousand billets.
11%12%
14%
21%
29%31%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 1Q 2015
%
0
1
2
3
4
5
6
7
8
9
10
11
12
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15E
20
16E
20
17E
Mln
tonnes
Russian Market Overview
Share of horizontal drilling is growing
Growing oil drilling market in Russia
Source: Companies data, Citi equity research
Key considerations
In 1Q2015, the Russian pipe market decreased by 15%
compared to the prior quarter, mainly as a result of stock
adjustments made by the majority of consumers on the
back of uncertain economic situation. At the same time,
the market increased by 7% YoY due to higher LD pipe
consumption.
Even though demand for OCTG pipe decreased by 3%
QoQ and by 5% YoY, drilling in Russia increased by 3%
over the prior quarter and by 14% compared to 1Q2014.
Line pipe market fell by 12% over the prior quarter and
increased by 3% YoY. Consumption of pipe for oil and gas
industry was negatively affected by customers’ inventory
adjustments.
Industrial pipe market declined by 24% QoQ and by 17%
YoY.
The LD pipe market in Russia decreased by 10% QoQ,
mainly due to higher volumes for Power of Siberia project
along with significant demand for maintenance needs of
Transneft supplied in 4Q2014. The YoY growth of 76%
was driven by increasing consumption for projects like
Bovanenkovo-Ukhta, South Corridor and Power of Siberia
as well as maintenance needs of Gazprom and Transneft.
Source: Citi equity research, TMK data
Non-Energy
Energy
6
0
20
40
60
80
100
120
0
400
800
1,200
1,600
2,000
2,400
Jan-09 Jan-10 Feb-11 Mar-12 Mar-13 Apr-14 May-15
Cru
de
Oil
Pri
ce
($
/Bb
l)
US
Rig
Cou
nt
Oil Gas Crude Oil WTI Spot
U.S. Market Overview
Drop in rig count followed drop in oil prices
OCTG inventories, at 8.4 months of consumption in March
2015, are expected to continue rising in 2Q 2015
Source: Preston Pipe & Tube Report
Source: Baker Hughes, Bloomberg
Key Considerations
In 1Q2015, drilling activity both for oil and natural gas was
significantly affected by the drop in energy commodity prices.
According to Baker Hughes rig count, the average number of
oil rigs decreased by 29% compared to the prior quarter and
by 22% YoY. At the same time, the average number of gas
rigs decreased by 15% over the prior quarter and by 16% YoY.
Lower drilling activity during the quarter resulted in reduced
overall OCTG consumption. According to Preston Pipe
Report, OCTG consumption decreased by 25% QoQ and by
16% YoY.
At the same time shipments continued to grow during 1Q2015
driven mainly by imports (particularly from Korea) which
caused an oversupply in the OCTG market. This resulted in an
increase in inventory levels, which grew to 8.4 during 1Q2015
compared to 4.5 months during the previous quarter.
The growth in OCTG imports combined with weaker
consumption led to price deterioration. According to Pipe
Logix, in 1Q2015, both welded and seamless OCTG prices
decreased by 8% QoQ. YoY, welded OCTG prices increased
by slightly more than 1%, while seamless OCTG prices were
down less than 1%. Line pipe shipments and prices followed
similar trends.
7
3
6
9
12
15
18
1.8
2.2
2.6
3.0
3.4
3.8
Jan-09 Jan-10 Feb-11 Feb-12 Feb-13 Mar-14 Mar-15
Mo
nth
s o
f In
ve
nto
ry
Ab
so
lute
In
ve
nto
ry, m
ln to
nn
es
Monthly Absolute Inventory Months of Inventory
702
534630
374
0
150
300
450
600
750
Seamless Welded
Thousand t
onnes
4Q2014 1Q2015
912
27747
770
184 50
0
200
400
600
800
1,000
Russia America Europe
Thousand t
onnes
4Q2014 1Q2015
1Q 2015 vs 4Q 2014 Sales by Division and Group of Product
Source: TMK data
Sales by Division
4%
-34%
Russian division sales decreased QoQ mainly due to lower
industrial and line pipe volumes.
American division sales fell QoQ due to lower OCTG and line
pipe volumes.
European division sales increased QoQ due to higher seamless
industrial pipe volumes.
Seamless pipe sales declined QoQ mainly as a result of weaker
industrial and line pipe volumes in the Russian division, as well
as lower OCTG pipe sales in the American division.
Welded pipe sales fell QoQ mostly due to lower sales of OCTG
in the American division and welded industrial pipe in the
Russian division.
Total OCTG sales decreased by 17% QoQ due to lower
volumes in the American division.
-30%
-16%
-10%
Sales by Group of Product
8
1,040
1,775
1,240
971
1,778
1,180
0
400
800
1,200
1,600
2,000
Russia America Europe
U.S
.$ /
tonne
4Q2014 1Q2015
948
492
60
748
327
59
0
200
400
600
800
1,000
Russia America Europe
U.S
.$ m
ln
4Q2014 1Q2015
1Q 2015 vs 4Q 2014 Revenue by Division
Revenue Revenue per Tonne*
Source: Consolidated IFRS Financial Statements, TMK data
Revenue for the Russian division decreased due to a negative effect of
currency translation.
Revenue for the American division dropped mainly due to a significant
decrease in volumes, particularly of OCTG pipe, on the back of lower
drilling activity and reduced exploration and production spending.
Revenue for the European division remained relatively flat as a negative
effect of currency translation was offset by the growth resulting from
higher sales of seamless pipe and a favorable product mix.
Russian division revenue per tonne decreased QoQ due to a
negative effect of currency translation, which was not offset by
higher RUB prices.
American division revenue per tonne remained relatively flat QoQ.
European division revenue per tonne declined QoQ due to a
negative effect of currency translation.
* Revenue /tonne for the Russian and American divisions is calculated as total
revenue divided by pipe sales. Revenue for the European division is calculated as
total revenue divided by (pipe+billet sales)
Note:
Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.
-34%
-21%
-2%
-7%
-5%
0.1%
9
162
59
6
145
2812
0
30
60
90
120
150
180
Russia America Europe
U.S
.$ m
ln
4Q2014 1Q2015
Adjusted EBITDA Adjusted EBITDA Margin
1Q 2015 vs 4Q 2014 Adjusted EBITDA by Division
Source: TMK Consolidated IFRS Financial Statements, TMK data
-11%
-52%
Note:
Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.
Russian division Adjusted EBITDA fell as a growth resulting from
a better pricing and product mix of welded and seamless pipe
was offset by a negative effect of currency translation and lower
volumes.
American division Adjusted EBITDA dropped, affected by
unfavorable market conditions, which resulted in lower volumes
and weaker pricing for welded and seamless pipe.
European division Adjusted EBITDA increased largely due to a
better sales mix as a result of growing share of seamless pipe in
total sales.
Russian division Adjusted EBITDA margin increased QoQ
mainly due to favorable pipe product mix and higher prices.
American division Adjusted EBITDA margin fell due weaker
pricing for welded and seamless pipe.
European division Adjusted EBITDA margin increased due
to better product mix.
83%
17%
12%
11%
19%
9%
20%
0%
3%
6%
9%
12%
15%
18%
21%
Russia America Europe
%
4Q2014 1Q2015
10
640
386
630
374
0
100
200
300
400
500
600
700
Seamless Welded
Thousand t
onnes
1Q2014 1Q2015
727
25148
770
184 50
0
120
240
360
480
600
720
840
Russia America Europe
Thousand t
onnes
1Q2014 1Q2015
1Q 2015 vs 1Q 2014 Sales by Division and Group of Product
Source: TMK data
Sales by Division
Sales by Group of Product
-2%
-27%
Russian division sales increased YoY mostly due to higher LDP
volumes, as well as stronger sales of seamless line pipe.
American division sales fell YoY due to lower volumes across all
pipe segments.
European division sales grew YoY due to higher seamless
industrial pipe volumes.
Seamless and welded pipe sales declined YoY mostly due to
lower volumes in the American division.
Total OCTG sales fell by 13% YoY mainly due to lower volumes
in the American and Russian divisions.
-3%
4%
6%
11
1,350
1,665
1,297
971
1,778
1,180
0
400
800
1,200
1,600
2,000
Russia America Europe
U.S
.$ /
tonne
1Q2014 1Q2015
981
418
67
748
327
59
0
200
400
600
800
1,000
Russia America Europe
U.S
.$ m
ln
1Q2014 1Q2015
12
1Q 2015 vs 1Q 2014 Revenue by Division
Revenue Revenue per Tonne*
Source: Consolidated IFRS Financial Statements, TMK data\
Revenue for the Russian division fell due to a negative effect of
currency translation.
Revenue for the American division decreased due to lower sales
of seamless and welded pipe with the most significant fall in
welded OCTG volumes.
Revenue for the European division fell due to a negative effect of
currency translation.
Russian division revenue per tonne decreased YoY as a
result a negative effect of currency translation.
American division revenue per tonne increased due to a
better pricing and sales mix.
European division revenue per tonne fell due to a
negative effect of currency translation.
* Revenue/tonne for the Russian and American divisions is calculated as total
revenue divided by pipe sales. Revenue for the European Division is calculated as
total revenue divided by (pipe+billet sales)
Note:
Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.
-22%
-12%
-28% -9%
7%
-24%
153
24 7
145
2812
0
40
80
120
160
Russia America Europe
U.S
.$ m
ln
1Q2014 1Q2015
Adjusted EBITDA Adjusted EBITDA Margin
1Q 2015 vs 1Q 2014 Adjusted EBITDA by Division
Source: TMK Consolidated IFRS Financial Statements, TMK data
15%
-5%
Note:
Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.
Russian division Adjusted EBITDA decreased, as a growth
resulting from more favorable pricing and product mix was offset
by a negative effect of currency translation. The decrease was
also partially offset by lower selling, general and administrative
expenses.
American division Adjusted EBITDA increased mainly due to
lower selling, general and administrative expenses.
European division Adjusted EBITDA grew due to higher
seamless pipe volumes coupled with lower selling, general and
administrative expenses.
Russian division Adjusted EBITDA margin increased
largely due to favorable pricing and sales mix.
American division Adjusted EBITDA margin increased due
to better pricing and sales mix.
European division Adjusted EBITDA margin grew as a
result of favorable sales mix and higher prices.
56%
16%
6%
11%
19%
9%
20%
0%
3%
6%
9%
12%
15%
18%
21%
Russia America Europe
%
1Q2014 1Q2015
13
Seamless – Core to Profitability
Source: Consolidated IFRS Financial Statements, TMK data
Sales of seamless pipe generated
61% of total Revenue in 1Q 2015.
Gross Profit from seamless pipe
sales represented 75% of 1Q 2015
total Gross Profit.
Gross Profit Margin from seamless
pipe sales amounted to 27% in 1Q
2015.
Note:
Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.
1Q 2015 Gross Profit Breakdown
14
Seamless75%
Welded23%
Other operations
2%
U.S.$ mln(unless stated otherwise)
1Q 2015QoQ,
%
YoY,
%
Volumes- Pipe, kt 630 -10% -2%
Revenue 697 -21% -29%
Gross Profit 189 -7% -20%
Margin, % 27%
Avg Revenue / Tonne (U.S.$) 1,107 -12% -28%
Avg Gross Profit / Tonne
(U.S.$)300 3% -19%
Volumes- Pipe, kt 374 -30% -3%
Revenue 384 -32% -9%
Gross Profit 57 -43% 48%
Margin, % 15%
Avg Revenue / Tonne (U.S.$) 1,027 -3% -7%
Avg Gross Profit / Tonne
(U.S.$)153 -19% 53%
SE
AM
LE
SS
WE
LD
ED
Working Capital Position as of March 31, 2015
Inventories (Days)
Accounts Receivable (Days)
Accounts Payable (Days)
Cash Conversion Cycle (Days)
Source: TMK data
7276
8086 83
97
0
20
40
60
80
100
2010 2011 2012 2013 2014 1Q 2015
15
91 9097 96
89
105
0
20
40
60
80
100
120
2010 2011 2012 2013 2014 1Q 2015
75
64
73 7366
77
0
20
40
60
80
100
2010 2011 2012 2013 2014 1Q 2015
5650
56
6360
69
0
20
40
60
80
2010 2011 2012 2013 2014 1Q 2015
Debt Maturity Profile as of March 31, 2015
As of March 31, 2015, total financial
debt amounted to U.S.$3,087 mln
84% of total financial debt is long-
term
Weighted average nominal interest
rate totalled 9.04%
As of March 31, 2015, borrowings
with a floating interest rate
represented U.S.$487 million, or
16%, borrowings with a fixed
interest rate – U.S.$2,549 million, or
84%
Credit Ratings:
– S&P: B+, Negative;
– Moody’s: B1, Negative.
Note: TMK management accounts. Figures above are based on non-IFRS measures, estimates from TMK
management
399
688
527
15
385
500500
0
100
200
300
400
500
600
700
2015 2016 2017 2018 2019 2020
U.S
.$ m
ln
Bank Loans Bonds
16
Debt Profile as of March 31, 2015
Debt Breakdown by Source of Borrowings
Debt Breakdown by Currency
More than U.S.$600 mln of undrawn committed credit lines to
cover short-term debt
Just 14% of Debt is Secured with Assets and Mortgages
Source: TMK data
Note: TMK management accounts. Figures above are based on non-IFRS
measures, estimates from TMK management.
Note: TMK management accounts. Figures above are based on non-IFRS
measures, estimates from TMK management.
Bank Loans67%
Bonds33%
USD 65%
RUR 32%
EUR 3%
Source: TMK data
17
Secured14%
Unsecured86%
0
100
200
300
400
500
600
Year 2015 Year 2016 Year 2017 Year 2020 Unlim
U.S
.$ m
ln
Utilized Credit Facilities
Unutilized Credit Facilities
Outlook
For the full year of 2015, TMK expects demand for LD pipe to be the main driver in the
Russian pipe market offsetting lower consumption in other market segments. The
Company expects the Russian OCTG pipe market to remain relatively stable throughout
2015 and TMK’s OCTG market share in Russia to grow.
In the U.S., TMK expects the rig count to bottom-out during the second quarter of 2015
followed by a moderate increase in drilling activity during the second half of the year.
Although demand for OCTG will improve, higher level of distributor inventory will initially
delay increases in demand for new production and shipments. As such, TMK expects
demand from oil and gas companies to initially recover in the fourth quarter of the year, at
which point a recovery in prices should follow.
The environment in the European market for the second quarter of 2015 and for the rest of
2015 will remain challenging due to high competition, especially from the Eastern European
producers.
In 2015, the Company expects to maintain volumes and the margin at the level of 2014.
18