Investor Presentaiton
Management's Discussion and Analysis
Nine months ended September 30, 2011
America. Sales volumes in the American division increased reflecting
growth in pipe consumption in the U.S. market. Sales volumes growth was
substantially affected by the imposition of countervailing duties by the U.S.
government on the imported of low-cost Chinese tubular products, as well
as the high drilling activity in the existing and new shale plays. As a result,
welded line pipe sales grew 46% and seamless OCTG - 9%. Sales of
welded industrial pipe grew 6% in the first nine months of 2011 as
compared to the first nine months of 2010.
Europe. The division produces only seamless pipe and steel billets. Sales
of seamless industrial pipe, a core product in the division, increased 22%
reflecting high market demand, mainly from the engineering industry.
In the first nine months of 2011, we saw a significant increase in sales of
both seamless and welded pipe. The table below presents sales volumes by
group of products for the periods presented below:
Nine-month period ended
Change
in %
30 September
2011
2010
Change
in thousand tonnes
in thousand tonnes
Seamless pipe
1,763
1,562
201
Welded pipe
1,405
1,290
115
9%
TOTAL PIPES
3,168
2,852
316
11%
13%
Revenue
The table below presents revenue by reporting segment for the periods
presented below:
Russia
America
Europe
TOTAL REVENUE
Nine-month period ended
30 September
2011
2010
Change
Change
in millions of U.S. dollars
in millions of U.S. dollars
in %
3,703
2,776
927
33%
1,150
980
170
17%
298
175
123
70%
5,151
3,931
1,220
31%
Russia. Revenue generated by the Russian division increased 33%, or
U.S.$927 million, year-on-year reflecting higher selling prices and sales
volumes of tubular products.
Changes in selling prices and the product mix accounted for a
U.S.$308 million and U.S.$96 million increase in seamless and welded
pipe revenue, respectively. An increase in sales volumes of seamless and
welded pipe resulted in the revenue increase of U.S.$199 million and
U.S.$131 million, respectively.
Revenue from other operations grew U.S.$11 million mainly due to an
increase in revenue from pipe-related services, e.g. protective coating, repair
and field services.
The favorable effect of translation from the functional to the presentation
currency accounted for U.S.$182 million.
1 For the purposes of this management discussion and analysis, the translation effect on revenue/costs and
income/expense illustrates an influence of different rates used for translation of such revenue/costs or
incomes/expenses from functional to presentation currency in different reporting periods.
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