DGAP-Regulatory: TMK Announces 1H 2014 Operational Results

DGAP-Regulatory: TMK Announces 1H 2014 Operational Results

OAO TMK  / Miscellaneous

22.07.2014 12:16

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July 22, 2014       PRESS RELEASE

TMK Announces 1H 2014 Operational Results

The following contains forward looking statements concerning future events.
These forward looking statements are based on current information and
assumptions of TMK management concerning known and unknown risks and
uncertainties.

TMK, one of the world's leading producers of tubular products for the oil
and gas industry, announces its operational results for the first half of
2014.

2Q 2014 and 1H 2014 Highlights

  - In the first half of 2014, TMK shipped a total of 2,056 thousand tonnes
    of steel pipe, down 3.9% and up 1.2% year-on-year and
    quarter-on-quarter, respectively.

  - Seamless pipe shipments fell by 1.3% year-on-year to 1,227 thousand
    tonnes and by 3.9% quarter-on-quarter to 601 thousand tonnes.

  - Welded pipe shipments dropped by 7.6% year-on-year to 829 thousand
    tonnes due to lower demand for welded line pipe and large diameter pipe
    (LDP). In the second quarter, welded pipe shipments were up 9.3%
    quarter-on-quarter.

  - Total shipments of OCTG pipe, TMK's core product, reached 971 thousand
    tonnes, up 8.1% year-on-year, but down 2.1% quarter-on-quarter.

  - Shipments of premium connections amounted to 404 thousand joints, up
    9.2% and 9.5% year-on-year and quarter-on-quarter, respectively.

 2Q 2014 and 1H 2014 Summary Results

(thousand tonnes)


Product          2Q 2014  1Q 2014   Q-o-Q, %  1H 2014  1H 2013  Y-o-Y, %

Seamless pipe
                     601       626     -3.9%    1,227    1,244     -1.3%
Welded pipe
                     433       396      9.3%      829      897     -7.6%
Total
                   1,034     1,022      1.2%    2,056    2,140    - 3.9%
including OCTG
                     480       491     -2.1%      971      898      8.1%





2Q 2014 and 1H 2014 Market Overview and Performance by Division

Russian Division

In the first quarter, TMK's Russian Division shipped 1,381 thousand
tonnes(1) of tubular products, down 8.4% year-on-year, but up 2.5%
quarter-on-quarter (699 thousand tonnes in 2Q).

Seamless pipe shipments were down 5.7% year-on-year to 888 thousand tonnes,
and 4.3% quarter-on-quarter to 434 thousand tonnes.

Shipments of seamless OCTG pipe rose by 3.9% year-on-year to 537 thousand
tonnes, while dropping by 2.4% quarter-on-quarter to 265 thousand tonnes
due to reduced oil and gas drilling across Russia.

Shipments of seamless line pipe fell by 18.4% year-on-year to 213 thousand
tonnes and by 2.4% quarter-on-quarter. The decrease was due to postponing
of several trunk pipeline construction and related infrastructure projects.

As a result of lower demand from engineering companies, shipments of
seamless industrial pipe went down by 16.1% year-on-year to 138 thousand
tonnes and 15.2% quarter-on-quarter to 58 thousand tonnes.

The decline in welded pipe shipments by 12.8% to 493 thousand tonnes in the
first half of 2014 is attributable to lower demand for welded line pipe and
large diameter pipe (LDP) in the first quarter. LDP shipments were up 25%
quarter-on-quarter to 96 thousand tonnes due to the launch of several
pipeline projects (Bovanenkovo-Ukhta, Southern Corridor, others.). In the
second quarter of 2014, welded line and industrial pipe shipments amounted
to 77 and 91 thousand tonnes, up 9.7% and 21.3% quarter-on-quarter,
respectively.

(1) This includes shipments from TMK's Russian facilities, TMK-Kaztrubprom
and TMK GIPI to the Russian, CIS and non-CIS markets (excluding the North
American market).

American Division

In the reporting period, TMK's American division, TMK IPSCO, increased its
shipments by 6.8% year-on-year, reaching a total of 592 thousand tonnes of
tubular products(2). Seamless and welded pipe shipments were 256 and 336
thousand tonnes, up 15.1% and 1.3% year-on-year, respectively. Compared to
the second half of 2013, shipments during the first half of 2014 were down
3.7%, mainly due to a decrease of 13.4% in domestic welded shipments, the
result of planned cut-backs in production in response to unfavourable
market conditions caused by a surge in low-priced imports.

In the second quarter of 2014, the division shipped 294 thousand tonnes of
tubular products, down 1.5% quarter-on-quarter, with seamless pipe
accounting for 126 thousand tonnes (down 3.6% quarter-on-quarter). Welded
pipe shipments amounted to 168 thousand tonnes, virtually unchanged
quarter-on-quarter.

While US shipments of welded OCTG were down year-on-year, this drop was
offset by an increase in shipments to Canada. Quarter-on-quarter, welded
OCTG shipments were down 3%.

Shipments of seamless OCTG pipe rose by 16.3% to 197 thousand tonnes in the
first half of 2014, while remaining flat quarter-on-quarter at 99 thousand
tonnes.

As several infrastructure projects were completed, the division saw reduced
demand for seamless line pipe, which resulted in a 39.7% year-on-year drop
to 18 thousand tonnes. Continuing this trend, the second quarter saw eight
thousand tonnes of this product shipped, down 19.0% quarter-on-quarter.

Shipments of seamless industrial pipe, in contrast, increased by 71.5% to
41 thousand tonnes in the first half of 2014, while dropping by 14.9%
quarter-on-quarter to 19 thousand tonnes in the second quarter.

(2) This includes products manufactured by TMK's Russian and Romanian
facilities and sold in the North American market.

European Division

The European pipe market continues its slow recovery after a lasting
stagnation. Demand for industrial pipe, the division's core product, is
marked by small orders.

The division shipped 41 thousand tonnes of this product in the second
quarter, which is flat quarter-on-quarter, and a total of 82 thousand
tonnes in the first half of 2014, up 5.5% year-on-year.

Premium Segment

The demand for TMK UP premium connections remains high, sustained by
expansion of directional and horizontal drilling in America and Russia.

In May 2014, TMK signed a long-term contract with Yamal LNG to deliver
premium tubular products throughout 2014-2020, with Yamal LNG's overall
demand for premium tubular products during this period estimated at 48
thousand tonnes.

Over the reporting period, TMK signed a memorandum of understanding with
Sakhalin Energy, Sakhalin-II operator, under which a roadmap is to be
drafted for Sakhalin Energy to view TMK as a prospective supplier of
premium tubular products.

TMK shipped a total of 404 thousand joints of premium connections in the
first half of 2014, up 9.2% year-on-year, while also boosting the
quarter-on-quarter figure by 9.5%.

2H 2014 Outlook

The Russian tubular market is likely to grow in the second half of 2014
driven mainly by the increase in horizontal drilling and development of
unconventional oil and gas fields. Owing to that, TMK expects a steady
demand for oil and gas pipe, particularly seamless OCTG.

The launch of major pipeline projects across Russia will enable the Company
to increase shipments and improve product mix in the welded pipe segment,
especially LDP. TMK awaits the expansion of demand for seamless line pipe,
as the infrastructure projects related to trunk pipeline construction will
be carried out. The launch of Gazprom's Eastern Gas Program may also spur
the market growth.

In the US, the recent positive decision to impose anti-dumping and
countervailing duties on manufacturers from nine countries made by the US
Department of Commerce is yet to be confirmed by the International Trade
Commission's (ITC). The decision is expected on August 14th. A positive
decision by the ITC will help make competition in the US market more fair,
by levelling conditions for all manufacturers. This includes TMK's American
Division, whose performance may see certain improvement starting in 2015,
as inventories of low-priced OCTG imports begin to deplete, and prices
gradually begin to recover in the wake of increased drilling activity. As
in 2013, TMK's American division expects second half 2014 shipments to be
stronger than those in the first half of the year.

As for the second half 2014 shipments TMK estimates them to be more or less
flat comparing to the first half of the year, while improving product mix
makes the Company believe that 2H 2014 financials will be stronger than in
1H 2014.

***
For further information regarding TMK, please, visit www.tmk-group.ru as
well as download the YourTube iPad application from the App Store
https://itunes.apple.com/ru/app/yourtube/id516074932?mt=8&ls=1

***

ТМК (www.tmk-group.ru) 

TMK (LSE: TMKS) is a leading global manufacturer and supplier of steel pipe
for the oil and gas industry, operating 28 production sites in Russia, the
U.S., Canada, Romania, Oman, the UAE, and Kazakhstan, and two R&D centres
in Russia and the U.S. In 2013, TMK's pipe shipments totaled 4.3 million
tonnes. The largest share of TMK's sales belongs to high margin oil country
tubular goods (OCTG), shipped to customers in over 80 countries. TMK
delivers its products along with an extensive package of services in heat
treating, protective coating, premium connections threading, warehousing
and pipe repairing.
TMK's securities are listed on the London Stock Exchange, the OTCQX
International Premier trading platform in the U.S. and on the Moscow
Exchange MICEX-RTS.

TMK's production assets structure:


Russian Division:            American Division:
Volzhsky Pipe Plant;         12 plants of TMK IPSCO;
Seversky Tube Works;         OFS International LLC.
Taganrog Metallurgical       European Division:
Works;                       TMK-ARTROM;
Sinarsky Pipe Plant;         TMK-RESITA.
TMK-CPW;                     Middle East Division:
TMK-Kaztrubprom;             TMK GIPI (Oman);
TMK-INOX;                    Threading & Mechanical Key Premium LLC (Abu-
TMK-Premium Service;         Dhabi);
TMK Oilfield Services.





TMK Corporate Communications
Ilya Zhitomirsky
Tel.: +7 495 775 7600
E-mail: pr@tmk-group.com



22.07.2014 EquityStory.RS, LLC's Distribution Services include Regulatory
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Language:           English
Company:            OAO TMK
                    40/2a Pokrovka
                    105062 Moscow
                    Russia
Phone:              +7 495 775-7600
Fax:                +7 495 775-7601
E-mail:             tmk@tmk-group.com
Internet:           tmk-group.com
ISIN:               US87260R2013
Category Code:      MSC
TIDM:               TMKS
Sequence Number:    2132
Time of Receipt:    Jul 22, 2014 12:15:23
 
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