OAO TMK, one of the world's leading producers of tubular products for the oil and gas industry, announced its interim consolidated IFRS financial results for the nine months ending September 30, 2012.
3Q 2012 Highlights
In line with management's expectations, the Company experienced slowing sales in the third quarter of 2012 resulting in decreased total pipe sales of 5% quarter- on-quarter to 1,050 thousand tonnes. The decline was mainly due to lower Russian seamless pipe sales caused by major repairs at several Russian plants and a reduction in U.S. welded pipe sales as a result of softening market conditions. Due to the decline of seamless pipe sales traditionally experienced in Russia during the third quarter, the Company preplanned major repairs at the Russian plants.
Third quarter revenue was $1,617 million, a decrease of 9% over the second quarter of 2012. The decline reflects lower seamless volumes, unfavorable changes in pricing and sales mix as well as the impact of currency translation3.
Adjusted EBITDA decreased by 16% quarter-on-quarter to $243 million being negatively affected by lower sales and weaker product mix globally as well as lower margins in the American and European divisions. Consolidated adjusted EBITDA margin was 15%.
Net income was $69 million for the third quarter as compared to $76 million in the second quarter of 2012. Net income adjusted for the gain/(loss) on changes in fair value of the derivative instrument4, amounted to $67million; adjusted net income margin was 4% for the third quarter of 2012.
In the third quarter, net debt increased by $117 million and amounted to $3,686 million as of September 30, 2012 due to appreciation of the Russian rouble against the U.S. dollar compared to June 30, 2012. Net Debt-to-EBITDA ratio5 remained flat at 3.6x. The share of short-term loans and borrowings was 24% as of September 30, 2012; loans with a fixed interest rate represented 84% of total debt. TMK's weighted average nominal interest rate increased from 6.87% as of June 30, 2012 to 7.00% as of September 30, 2012.
9M 2012 Highlights
Total pipe sales remained almost flat compared to the first nine months of 2011 and amounted to 3,156 thousand tonnes.
Seamless pipe sales increased by 6% compared to the first nine months of 2011 and amounted to 1,876 thousand tonnes. Seamless OCTG pipe volumes increased by 16% year-on-year mainly on the back of growing drilling activity in Russia.
Welded pipe sales decreased by 9% year-on-year and amounted to 1,280 thousand tonnes. Welded OCTG and line pipe sales increased by 9% and 23% respectively while LD pipe sales declined as a result of Russian customers delaying new pipeline projects.
Revenue decreased by 2% year-on-year to $5,056 million mainly due to the negative impact of currency translation. Sales of seamless pipe, the core business of the Company, generated 62% of total revenue.
Adjusted EBITDA decreased by 2% year-on-year to $810 million while gross profit increased by 3%. Higher volumes and better pricing of seamless pipe were offset by the negative effect of currency translation and higher operating expenses. Adjusted EBITDA margin amounted to 16% year-to-date.
Net income was $250 million for the first nine months of 2012 as compared to $279 million for the first nine months of 2011. Net income adjusted for the gain/(loss) on changes in fair value of the derivative instrument, amounted to $251 million; adjusted net income margin equaled 5% for the first nine months of 2012.
