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.
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