DJ EQS-Regulatory: TMK Announces 2Q and 1H 2016 IFRS Results
PAO TMK / Miscellaneous - Urgent Priority
TMK Announces 2Q and 1H 2016 IFRS Results
19-Aug-2016 / 10:01 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS,
LLC - a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
*August 19, 2016 PRESS RELEASE*
*TMK Announces 2Q and 1H 2016 IFRS Results*
_Inside information: This announcement contains inside information._
_Forward-looking statements: The following contains forward-looking
statements concerning future events. These statements are based on current
information and assumptions of TMK management concerning known and unknown
risks and uncertainties. _
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 six months ended June 30, 2016.
*2Q and 1H 2016 Highlights*
*Financial*
- Revenue at $853m in 2Q 2016, up by $91m q-o-q, and $1,614m for 1H 2016,
down by $682m y-o-y
- Adjusted EBITDA at $143m in 2Q 2016, up by $23m q-o-q, and $264m for 1H
2016, down by $93m y-o-y
- Adjusted EBITDA margin at 17% in 2Q 2016 and 16% for 1H 2016
- Net profit at $57m in 2Q 2016 and $71m for 1H 2016
- Net debt at $2,497m as at June 30, 2016
- Net repayment of borrowings in 2Q 2016 amounted to $55m and $91m for 1H
2016
*Developments*
- On August 16, 2016, the share capital of the Company was increased by
41,228,106 ordinary shares with a par value of RUB10 each, by means of an
open subscription at a price of RUB71 per share.
*Outlook*
- TMK anticipates an improved EBITDA performance in 2H 2016 driven by a
gradual improvement at the American division and stable results at the
Russian division. The Company expects the FY 2016 EBITDA margin to remain
flat compared to FY 2015.
*Alexander Shiryaev, CEO of TMK, said*:
'I am pleased to report that a sustained focus on improving efficiencies
throughout the business and on optimising cost structure has enabled TMK to
achieve stable results despite conditions in the US markets, which remain
challenging.
Our diversified business model has continued to benefit us in times of
currency volatility and the management are confident that TMK is
well-positioned to take advantage of anticipated increased demand from oil &
gas customers in our key markets of Russia and the US.
TMK remains committed to de-leveraging and has set a target to achieve a
2.5x Net Debt to EBITDA ratio. In order to achieve this target, the Company
aims to maximize its operating cash flows, further improve its working
capital position and is considering different strategic options, among
others share issue and disposals of certain assets of the Company, including
international assets.'
*Group Summary 2Q and 1H 2016 Results *
_(In millions of US$, unless stated otherwise)_
*1Q *Change, * *1H *1H *Change,
*2Q 2016* 2016* *$ mln* 2016* 2015* *
*$ mln*
Sales
(thousand *896* 852 44 *1,748 1,981 (233)
tonnes), *
including:
Seamless *598* 568 30 *1,167 1,234 (68)
*
Welded *298* 284 14 *582* 747 (166)
Revenue *853* 761 91 *1,614 2,296 (682)
*
Gross *191* 154 37 *345* 493 (149)
profit
_Gross
profit *22%* _20%_ *21%* _21%_
margin, %
_
Net profit *57* 14 42 *71* 77 (6)
Earnings
per
GDR(1), *0.23* 0.06 0.17 *0.29* 0.35 (0.05)
basic,
U.S.$
Adjusted *143* 120 23 *264* 356 (93)
EBITDA(2)
_Adjusted
EBITDA *17%* _16%_ *16%* _16%_
margin, %
_
_2Q and 1H 2016 IFRS Financial Statements are available at:_
www.tmk-group.com/media_en/texts/34/IFRS_TMK_6m2016_USD_en.pdf [1]
Note: Certain monetary amounts, percentages and other figures included in
this press release are subject to rounding adjustments. Totals therefore do
not always add up to exact arithmetic sums.
(1) One GDR represents four ordinary shares
(2) Adjusted EBITDA is determined as profit/(loss) for the period excluding
finance costs and finance income, income tax (benefit)/expense, depreciation
and amortization, foreign exchange (gain)/loss, impairment/(reversal of
impairment) of non-current assets, movements in allowances and provisions
(except for provision for bonuses), (gain)/loss on disposal of property,
plant and equipment, (gain)/loss on changes in fair value of financial
instruments, share of (profit)/loss of associates and other non-cash items.
*2Q and 1H 2016 Review*
_Market_
_2Q 2016 vs. 1Q 2016_
In 2Q 2016, the Russian pipe market contracted by 8% compared to the
previous quarter, mostly due to weaker LDP demand as a result of lower
purchasing activity by Gazprom. The OCTG market decreased by 16%
quarter-on-quarter, predominantly due to the structural changes in OCTG
demand, weighted more towards smaller diameter pipes specifically supplied
for horizontal drilling in existing vertical wells.
In the US, the average number of rigs in 2Q 2016 fell by 24% compared to the
prior quarter (Baker Hughes). OCTG shipments decreased by 43%
quarter-on-quarter (Preston Pipe Report). At the same time, OCTG inventories
increased to an average 10.8 months compared to 9.5 in the previous quarter.
In 2Q 2016, the European pipe market remained nearly unchanged compared to
the previous quarter, with low pipe consumption, strong competition and high
import volumes, which continued to put pressure on prices.
_1H 2016 vs. 1H 2015 _
The Russian pipe market decreased by 6% year-on-year, due to weaker LDP
demand in 1H 2016 compared to the record high volumes in 1H 2015. OCTG
consumption increased by 6% compared to the same period of 2015, supported
by the growth of drilling activity in Russia by 17% year-on-year.
In the US, the average number of rigs in 1H 2016 fell by 57% compared to 1H
2015 (Baker Hughes), following a continued decline in oil prices. OCTG
shipments decreased by 66% year-on-year (Preston Pipe Report). OCTG
inventories increased to an average 10.2 months compared to 8.2 in 1H 2015.
There were no major changes in the European market in 1H 2016 compared to 1H
2015.
_Financial_
_2Q 2016 vs. 1Q 2016_
The Company's strong performance in 2Q 2016 reflected stable results at the
Russian division and improved conditions at the American division as well as
a positive impact of currency translation, which resulted from rouble
appreciation against the US dollar.
Revenue increased by $91 million compared to 1Q 2016, mostly due to a
positive effect of currency translation.
Adjusted EBITDA grew by $23 million compared to the previous quarter,
largely due to a positive effect of currency translation at the Russian
division and lower selling expenses. The adjusted EBITDA margin improved
from 16% in 1Q 2016 to 17% in 2Q 2016.
In 2Q 2016, net profit was $57 million compared to $14 million in the
previous quarter, as a result of stronger results overall.
Total debt decreased marginally from $2,838 million as at March 31, 2016, to
2,829 million as at June 30, 2016.
Net debt decreased by $110 million compared to March 31, 2016, and amounted
to $2,497 million as at June 30, 2016. Net repayment of borrowings amounted
to $55 million in 2Q 2016 compared to $37 million in the previous quarter.
_1H 2016 vs. 1H 2015 _
For 1H 2016, revenue fell by $682 million year-on-year, mostly due to a
negative effect of currency translation and weaker sales at the American
division, as a result of falling US drilling activity and low E&P spending.
The same factors affected adjusted EBITDA for 1H 2016, which fell by $93
million compared to the same period of last year. The adjusted EBITDA margin
remained flat at 16%.
Total debt increased from $2,801 million as at December 31, 2015 to $2,829
million as at June 30, 2016, as a result of rouble appreciation against the
US dollar. The weighted average nominal interest rate increased by 3 bps to
9.09% as at the end of the reported period.
Net debt remained marginally flat as at June 30, 2016 compared to December
31, 2015, and amounted to $2,497 million. Net repayment of borrowings
amounted to $91 million for 1H 2016 compared to $228 million for 1H 2015.
Capex for 1H 2016 was reduced to $63 million, compared with $98 million for
1H 2015.
_Outlook_
In Russia, TMK anticipates 3Q 2016 sales to be lower compared to 2Q 2016,
mostly due to seasonally weaker OCTG demand and pre-planned maintenance
works at TMK's Russian plants. In 4Q 2016, the Company expects seasonally
strong OCTG demand as the Russian oil and gas majors begin to stock up on
pipes. Margins at the Russian division are expected to be similar to FY
2015, supported by strong OCTG demand and TMK's ongoing cost-cutting
program.
In the US, TMK expects a moderate increase in drilling activity during the
second half of the year. The Company anticipates demand for new production
and shipments to be somewhat dampened by the large distributor inventories
built up during 15 months' worth of declining rig count. As such, TMK
expects demand from oil and gas companies to continue to improve in the
fourth quarter of the year, to coincide with the start of a gradual recovery
in prices.
Industrial pipe consumption in the European pipe market will somewhat
decline in 3Q 2016, affected by the holiday season and a seasonal slowdown
of business activity, while prices are expected to remain nearly flat
quarter-on-quarter. In 4Q 2016, the Company expects an improvement in its
sales and financial performance at the European division.
Overall, TMK anticipates an improved EBITDA performance in 2H 2016 driven by
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August 19, 2016 04:01 ET (08:01 GMT)
a gradual improvement at the American division and stable results at the
Russian division. The Company expects the FY 2016 EBITDA margin to remain
flat compared to FY 2015.
*2Q and 1H 2016 Segment Results*
*RUSSIAN DIVISION*
_(In millions of US$, unless stated otherwise)_
*2Q 2016* *1Q *Change, %* *1H *1H *Change,
2016* 2016* 2015* %*
Sales
(thousand *784* 759 3% 1,543 1,615 (4)%
tonnes)
Revenue *731* 655 12% 1,386 1,706 (19)%
Gross *203* 188 8% 391 431 (9)%
profit
_Gross
profit *28%* _29%_ _28%_ _25%_
margin, %_
Adjusted *161* 146 11% 307 324 (5)%
EBITDA
_Adjusted
EBITDA *22%* _22%_ _22%_ _19%_
margin, %
_
_2Q 2016 vs. 1Q 2016_
- Results for 2Q 2016 at the Russian division reflected a positive effect of
currency translation. Excluding this effect, revenue would have been
relatively flat quarter-on-quarter.
- While the Company achieved higher sales of seamless and welded pipe, LD
pipe sales represented a smaller share of the product mix.
_1H 2016 vs. 1H 2015_
- The weaker financial performance of the Russian division in 1H 2016 was
mostly attributable to a negative effect of currency translation. Excluding
this effect, revenue would have remained stable year-on-year and gross
profit would have increased by $63 million compared to 1H 2015.
- Higher prices and a favorable seamless pipe product mix contributed to the
improved adjusted EBITDA margin in 1H 2016 compared to 1H 2015.
*AMERICAN DIVISION *
_(In millions of U.S.$, unless stated otherwise)_
*2Q 2016* *1Q 2016* *Change *1H 2016* *1H *Change
, %* 2015* , %*
Sales
(thousand *65* 50 31% *115* 267 (57)%
tonnes)
Revenue *75* 65 14% *140* 477 (71)%
Gross
profit/(lo *(21)* (43) n/a *(64)* 33 n/a
ss)
_Gross
profit *(28)%* _(66)%_ *(46)%* _7%_
margin, %_
Adjusted *(22)* (32) n/a *(54)* 12 n/a
EBITDA
_Adjusted
EBITDA *(30)%* _(48)%_ *(38)%* _2%_
margin, %
_
_2Q 2016 vs. 1Q 2016_
- Increased sales of both seamless and welded pipe drove improved results at
the American division in 2Q 2016, compared to 1Q 2016.
_1H 2016 vs. 1H 2015_
- Year-on-year, a significant fall in drilling activity combined with E&P
spending cuts in the North American market led to a significant decline in
OCTG sales at the American division, as well as a deterioration of the
pricing environment.
*EUROPEAN DIVISION*
_(In millions of U.S.$, unless stated otherwise)_
*2Q 2016* *1Q *Change, %* *1H *1H *Change,
2016* 2016* 2015* %*
Sales
(thousand *47* 43 9% 90 100 (10)%
tonnes)
Revenue *47* 41 13% 88 114 (22)%
Gross *9* 8 5% 17 29 (42)%
profit
_Gross
profit *19%* _20%_ _19%_ _26%_
margin, %_
Adjusted *4* 6 (30)% 10 20 (50)%
EBITDA
_Adjusted
EBITDA *9%* _15%_ _12%_ _18%_
margin, %
_
_2Q 2016 vs. 1Q 2016_
- In 2Q 2016, revenue at the European division increased as a result of
higher seamless pipe sales compared to the prior quarter, while gross profit
remained largely unchanged.
_1H 2016 vs. 1H 2015_
- Year-on-year performance at the European division was generally affected
by lower seamless pipe sales and weaker pricing.
*2Q and 1H 2016 IFRS Results Conference Call:*
TMK's management will hold a conference call to present 2Q and 1H 2016
financial results today, August 19, 2016, at 09:00 New York / 14:00 London /
16:00 Moscow.
To join the conference call please dial:
UK Local: +44 2030 432440
UK Toll Free: 0808 238 1774
Russia: +7 495 221 6523
Russia Toll Free: 810 800 204 14011
U.S. Local: +1 877 887 4163
Conference ID: 23094931#
_(We recommend that participants start dialing-in 5-10 minutes in advance to
ensure a timely start for the conference call)_
*****
*For further information regarding TMK please visit *www.tmk-group.com [2]
*or download the YourTube iPad application from the App Store
*https://itunes.apple.com/ru/app/yourtube/id516074932?mt=8&ls=1 [3]
*or contact:*
*TMK IR Department:*
Marina Badudina
Tel: +7 (495) 775-7600
IR@tmk-group.com
*TMK PR Department:*
Alexander Goryunov
Tel: +7 (495) 775-7600
PR@tmk-group.com
*International Media Relations:*
Andrew Hayes / Emily Dillon
Tel: +44 (0) 20 7796 4133
Edillon@hudsonsandler.com
*****
*TMK (www.tmk-group.com) *
TMK (LSE: TMKS) is a leading global manufacturer and supplier of steel pipes
for oil and gas industry, operating 30 production sites in the United
States, Russia, Canada, Romania, Oman, UAE and Kazakhstan with two R&D
centers in Russia and the USA. In 2015, TMK's pipe shipments totalled 3.87
million tonnes. The largest share of TMK's sales belongs to high margin oil
country tubular goods (OCTG), shipped to customers in over 80 countries. TMK
delivers its products along with an extensive package of services in heat
treating, protective coating, premium connections threading, warehousing and
pipe repairing.
TMK's securities are listed on the London Stock Exchange, the OTCQX
International Premier trading platform in the U.S. and on the Moscow
Exchange MICEX-RTS.
_TMK's assets structure by division:_
Russian division: American division:
Volzhsky Pipe Plant; 12 plants of TMK IPSCO;
Seversky Tube Works; OFS International LLC;
Taganrog Metallurgical Works; TMK Completions.
Sinarsky Pipe Plant; European division:
TMK-CPW; TMK-ARTROM;
TMK-Kaztrubprom; TMK-RESITA.
TMK-INOX; Middle East Division:
TMK-Premium Service; TMK GIPI (Oman).
TMK Oilfield Services;
TMK CHERMET.
The EquityStory.RS, LLC Distribution Services include Regulatory
Announcements, Financial/Corporate News and Press Releases.
Archive at www.dgap.de/ukreg
Language: English
Company: PAO TMK
40/2a Pokrovka
105062 Moscow
Russia
Phone: +7 495 775-7600
Fax: +7 495 775-7601
E-mail: tmk@tmk-group.com
Internet: tmk-group.com
ISIN: US87260R2013, RU000A0B6NK6
Category Code: MSCU
TIDM: TMKS
Sequence Number: 3327
Time of Receipt: 19-Aug-2016 / 09:59 CET/CEST
End of Announcement EquityStory.RS, LLC News Service
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