Investor Presentaiton
Management's Discussion and Analysis
Nine months ended September 30, 2011
America. In the first nine months of 2011, the American division achieved a
17% or U.S.$170 million growth in revenue compared to the relevant period
of 2010.
Increased selling prices for tubular products as well as changes in the
product mix contributed U.S.$97 million and U.S.$41 million to the growth
of seamless and welded pipe revenue, respectively.
The revenue growth of seamless and welded pipe attributable to changes in
sales volumes accounted for U.S.$26 million and U.S.$37 million,
respectively. The growth was mostly derived from increased sales volumes
of seamless OCTG, as well as welded line and seamless line pipe.
Revenue from other operations, mainly revenue from premium threading
services, declined U.S.$31 million as threading capacities were intensively
used for pipes manufactured by TMK production subsidiaries, including
plants located in Russia and Romania. As a result, sales of own-produced
pipe with ULTRA premium connection increased, and revenue from pipe
threading services to external customers declined.
Europe. A 70% year-on-year revenue growth was driven primarily by an
increase in selling prices for tubular products in response to the market
recovery and growing costs of raw materials towards the end of 2010.
Changes in selling prices and the product mix contributed U.S.$45 million
to the total revenue growth.
Revenue growth attributable to higher sales volumes amounted to U.S.$14
million, mainly driven by increased sales of seamless industrial pipe.
An increase in revenue from other operations totaling to U.S.$46 million
primarily reflected the substantial growth in sales of steel billets.
The favorable effect of translation from the functional to the presentation
currency accounted for a U.S.$18 million increase.
In the first nine months of 2011, total revenue growth was mainly
attributable to increased sales of seamless pipe, as well as large-diameter
welded pipe. The table below presents pipe sales volumes by group of
product for the periods presented below:
Seamless pipe
Welded pipe
Nine-month period ended
30 September
2011
2010
Change
Change
in millions of U.S. dollars
2,942
2,131
in millions of U.S. dollars
811
in %
38%
1,974
1,601
373
23%
REVENUE - PIPES
4,916
3,732
1,184
32%
235
199
36
18%
TOTAL REVENUE
5,151
3,931
1,220
31%
Other operations
Cost of sales
In the first nine months of 2011, the cost of sales increased 34% to
U.S.$4,036 million as compared to U.S.$3,018 million in the first nine
months of 2010. The table below presents the cost of sales by reporting
segment for the periods presented below:
Russia
Nine-month period ended
30 September
2011
2010
Change
Change
in millions of U.S. dollars
in millions of U.S. dollars
in %
2,902
2,120
782
37%
America
917
764
153
20%
Europe
217
134
83
62%
TOTAL COST OF SALES
4,036
3,018
1,018
34%
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