Investor Presentaiton slide image

Investor Presentaiton

Management's Discussion and Analysis Nine months ended September 30, 2011 Following the continuing economic recovery and growing sales volumes, our operational performance and finance position continued to improve. The following table sets forth information regarding certain key financial measures as of and for the dates/periods indicated: September 30, 2011 June 30, 2011 December 31, 2010 June 30, 2010 December 31, 2009 in millions of U.S. dollars Adjusted EBITDA (LTM) 1,119 1,153 942 597 328 Net debt 2 3,612 3,843 3,711 3,555 3,504 Net debt-to-EBITDA 3 3.2 3.3 3.9 6.0 10.7 ratio well as some deterioration in profitability of welded pipe segment in the U.S. related to expensing of high cost inventory purchased in the second quarter 2011. The reasons mentioned above resulted in the Adjusted EBITDA for the preceding twelve months declined to U.S.$1,119 million at September 30, 2011 from U.S.$1,153 million at June 30, 2011. Sales volume The following table shows pipe sales volumes by reporting segment for the periods presented below: As of September 30, 2011, Adjusted EBITDA for the preceding twelve months was U.S.$1,119 million, a 19% increase over the Adjusted EBITDA for 2010. The Russian rouble depreciation against the U.S. dollar in the third quarter of 2011 caused a decrease in the U.S. dollar equivalent of TMK's debt which improved the net debt-to-EBITDA ratio to 3.2 as of September 30, 2011 from 3.3 as of June 30, 2011. Following the improvement in our operational performance and a stronger financial position, we distributed a final dividend in respect of 2010 based on the decision of our shareholders at the annual shareholders meeting in June 2011. No dividends have been paid since 2008 when we distributed interim dividends for that year. The third quarter 2011 performance was negatively affected by lower volumes and less favourable product mix, incurred expenses relating to maintenance of equipment at Seversky, Volzhsky and Sinarsky plants, as Calculated on a rolling twelve-month basis. See "Selected financial data" for calculation. 2 Net debt calculation - See "Selected financial data". 3 Net-Debt-to-EBITDA ratio is defined as the quotient of Net Debt at the end of the given reporting date divided by the Adjusted EBITDA for the 12 months immediately preceding the given reporting date. Russia America Europe TOTAL PIPES Nine-month period ended 30 September 2011 2010 Change Change in thousand tonnes in thousand tonnes in % 2,384 2,122 262 12% 647 605 42 7% 137 125 12 10% 3,168 2,852 316 11% Russia. In the first nine months of 2011, sales volumes of seamless and welded pipe increased 13% and 11%, respectively. Sales of all types of seamless pipe increased but seamless line pipe sales demonstrated the most significant growth, reflecting the increase of demand from oil and gas companies. OCTG sales growth was achieved in spite of the drop in export sales caused by the political instability in North Africa and the Middle East. Growing sales volumes of welded pipe were mostly attributed to continuing supplies of large diameter welded pipe for the construction of major pipelines such as: Ukhta-Torzhok, Bovanenkovo-Ukhta, Pochinki- Gryazovets and other. Sales volumes of large-diameter welded pipe grew 13% in the first nine months of 2011. 6
View entire presentation