News

TMK Ipsco revenue off despite rise in sales.

Issued at 2014-01-02



TMK Ipsco, the North American subsidiary of Russian pipe and tube maker OAO TMK, logged a decline in nine-month earnings despite improved sales volumes as prices fell.
The Houston-based company’s Americas division recorded revenue of $1.21 billion for the first nine months ended Sept. 30, down 6.9 percent from nearly $1.3 billion in the same period last year even as sales volumes rose 7.8 percent to 746,000 tonnes from 692,000 tonnes.

Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) for the division fell 51.3 percent to $95 million from $195 million in the same comparison.

"If we look at the third-quarter highlights ... our performance in the American division is a success story of increased shipments ... in a soft price environment, which we are addressing by refining and optimizing our mix," TMK Ipsco chairman Piotr Galitzine said during the company’s third-quarter earnings call.

However, prices began to stabilize during the quarter after continued recent declines.

"After seeing prices drifting down the last 15 to 18 months on different products, we are now seeing price stabilization in the third quarter as industry observers ... all point to the fact that oil country tubular goods (OCTG) for both seamless and welded are finally at least flat and are showing signs of coming up in the near future," Galitzine said.

TMK Ipsco’s profit margins have also been crimped by higher raw material costs.

"Gross profit declined by 40 percent year on year (during the third quarter) and this is not offset by lower raw material prices, as the steel companies have successfully pushed through a number of price increases. We are as well fighting to counter this tendency by improving our product mix," Galitzine said.

Meanwhile, OCTG inventories in the domestic market are starting to rise to concerning levels, he said.
"We’re beginning to see some growth in inventories. We are now at 5.7, almost six months of inventories, which is toward the upper end of the bracket that we feel comfortable with in the American division," Galitzine said.
For the fourth quarter, increased drilling in Canada due to the imminent winter freeze is providing a "natural hedge" against the typical year-end inventory paring in the United States, he said. The company expects strong shipments in the Americas divisions as a result.

"As our clients south of the border want to hold less pipe coming into the year-end due to ad valorem taxes, our Canadian clients are demanding as much pipe as they can get," Galitzine said.

TMK Ipsco remains bullish on the North American gas industry, as industrial and consumer use is expected to increase due to new applications and liquefied natural gas (LNG) exports.

"At the end of 2015, the first LNG freighter leaves the United States for the European Union," Galitzine said.


Source: Steelmaker



Related News