PROPRIETARY & CONFIDENTIAL TMK Investor Presentation June 2015
TMK Global Supplier of Full Range of Pipes for Oil and Gas Industry Capacity, North Russia Europe Total k tonnes America and CIS Steelmak ing 540 450 2,750 3,740 Seamless pipe 350 220 2,595 3,165 Welded pipe 1,040 2,423* 3,463…
Leading Global Supplier of Pipe for Oil and Gas Industry A world leading tube producer by sales volumes in 2014 and in the last 5 years Sales Volumes (thousand tonnes) 4,238 4,288 4,402 4,185 3,962 1,743 1,866 1,842 1,844…
Diversified Business Model Diversified product portfolio and customer base Key Considerations Sales Volumes by Product (FY2014) High degree of diversification enabling earnings Welded LD resilience. 11% Welded Line Seamless…
Low Cost Vertically Integrated Producer Raw materials costs can generally be Key considerations passed through to customers Structural cost advantages over major international competitors: Russia is one of the lowest Cost of Sales…
Russian Market Share Positions OCTG 69% Line pipe 63% Industrial pipe 38% SEAMLESS +8% QoQ +11% QoQ +3% QoQ Seamless OCTG Seamless line pipe for High-margin products for for oil and gas oil and gas industrial needs 1 1 2…
Russian Oil & Gas Market Overview Oil production in Russia Key considerations Targeted scenario of oil production will be reaziled if total share of shelf and Russias Ministry of Energy expects oil tight oil production reaches 25% by…
Russian Oil & Gas Market Overview - Continued Growing share of horizontal drilling TMKs share on the premium market 35% 31% 100% 30% 29% 25% 80% 35% 43% 25% 21% 20% 60% % % 15% 13% 11% 12% 40% 75% 10% 65% 57% 20%…
Gazproms Eastern Program Creates Additional Demand LDP demand in Russia, 2010-2018E Gazproms Eastern program 3,000 Power of Siberia 2,500 Thousand tonnes 2,000 1,500 1,000 500 Source: Gazprom Altai 0 2012 2013 2014…
US Market Overview 13
State of the Industry in the US Drop in rig count followed drop in oil prices Oil Gas Crude Oil WTI Spot 2,400 120 Rig count dropped by about 900 rigs since the beginning of the year and over Crude Oil Price (/Bbl) 2,000 100…
State of the Industry in the US continued Footage drilled by region Total footage drilled 100 450 +10% 2013 80 375 2014 2015E 300 Million Feet Million Feet 60 -39% 225 407 40 370 150 250 20 75 0 0 Williston/…
Impact on US OCTG Demand FY2015 forecast remains unchanged, with OCTG OCTG inventories, at 8.4 months of consumption in consumption expected to drop sharply March 2015, are expected to continue rising in 2Q 2015 4,200 18 7,000…
Price Decline Being Aided by Drop in Raw Material Costs US distributor welded OCTG vs HRC prices US distributor seamless OCTG vs. scrap prices (Monthly Average) (Monthly Average) 2,200 1,000 2,400 800 Seamless OCTG /Metric Tonne…
1Q 2015 Financial Results 18
1Q 2015 vs 4Q 2014 Summary Financial Highlights Sales decreased QoQ mainly due to the lower volumes across Revenue fell QoQ as a result of lower pipe sales and a all pipe segments negative effect of currency translation -19% QoQ -24%…
1Q 2015 vs 1Q 2014 Summary Financial Highlights Sales declined YoY mostly as a result of lower Revenue fell YoY mainly as a result of a negative volumes of OCTG and industrial pipe effect of currency translation -2% YoY -23% YoY 1,200…
1Q 2015 vs 4Q 2014 Sales by Division and Group of Product Sales by Division 1,000 -16% Russian division sales decreased QoQ mainly due to lower 800 industrial and line pipe volumes. Thousand tonnes 600 American division sales…
1Q 2015 vs 1Q 2014 Sales by Division and Group of Product Sales by Division 840 6% 720 Russian division sales increased YoY mostly due to higher LDP volumes, as well as stronger sales of seamless line pipe. Thousand tonnes 600…
1Q 2015 vs 1Q 2014 Revenue by Division Revenue Revenue per Tonne* -24% 1,000 2,000 7% 800 1,600 -28% -9% U.S. / tonne U.S. mln 600 1,200 981 -22% 1,778 400 800 1,665 748 1,297 1,350 1,180 971 200 418 -12% 400…
Strategic Overview 27
Sanctions New Opportunities Counterbalancing Threats Selected sanctions by EU and US: New opportunities for TMK: Technology leadership in Russia. Prohibited to directly or An export license is indirectly provide any required to…
All Strategic Assets Operating Focus of CAPEX program has been seamless pipe and facility modernization in Russia and the US 3.5 +200 -250 kt in 2016 New pipe rolling FQM Mill at 3.0 Seversky Pipe Plant put into operation in…
Revised Capex and M&A Program USmln CAPEX for 2015-2016 was cut by more than 30% and still includes some minor M&As. Maintenance CAPEX is around US100-120 mln annually. 245 250 216 Majority of CAPEX will be spent on finishing…
Debt Maturity Extended Debt maturity profile as of March 31, 2015 As of March 31, 2015, total credit portfolio 800 amounted to US3,013 mln based on management accounts. 700 More than 75% of total bank loans are with the major…
Commitment to Deleverage Target to achieve 2.5x Net Debt / EBITDA by YE2016 4.5 Target to achieve 2.5x Net Debt-to- 4.3 3.9 EBITDA ratio by the end of 2016 3.8 3.7 3.4 3.6 given possible non-organic transactions. 2.5 Possible…
Key Targets and Strategy Update Capex investment largely completed with focus now on deleveraging. Possibility of limited small-sized acquisitions in upstream and downstream aiming CAPEX at EBITDA growth whilst complying with…
Income Statement US mln 2014 2013 2012 2011 2010 Revenue 6,009 6,432 6,688 6,754 5,579 Cost of Sales (4,839) (5,074) (5,209) (5,307) (4,285) Gross Profit 1,169 1,358 1,479 1,446 1,293 Selling and Distribution Expenses (350) (379)…
Cash Flow US mln 2014 2013 2012 2011 2010 Profit / (Loss) before Income Tax (201) 312 400 544 185 Adjustments for: Depreciation and Amortisation 304 326 326 336 301 Net Interest Expense 226 245 275 271 412 Others 479 61 39 (101) 44…
Seamless Core to Profitability U.S. mln QoQ, YoY, 1Q 2015 Gross Profit Breakdown 1Q 2015 (unless stated otherwise) % % Other Volumes- Pipe, kt 630 -10% -2% operations 2% Revenue 697 -21% -29% Welded SEAMLESS 23% Gross Profit…
Appendix Capital Structure and Corporate Governance 40
Capital Structure Capital structure as of February 12, 2015 Key considerations TMKs securities are listed on the London Stock Free Float 24.93% Exchange, the OTCQX International Premier trading platform in the U.S. and on Russias…
TMK Corporate Governance DMITRY PUMPYANSKIY, Chairman of the Board of Directors, non-executive director. Key considerations Born in 1964. Graduated from the Sergey Kirov Urals Polytechnic Institute in 1986. PhD in Technical Sciences,…
Appendix TMK Products 43
Wide Range of Products, Focus on Oil and Gas Seamless Welded Premium Threaded pipes for the oil Threaded pipes for the oil Premium connections are and gas industry including and gas industry including proprietary value-added drill…
Premium Solutions: TMK UP ULTRA-SF ULTRA-FJ ULTRA-FX ULTRA CX ULTRA QX ULTRA DQX Unique range of Premium products 2003 2003 2003 2008 2009 2011 Onshore/offshore Sour gas Thermal Arctic Horizontal and extended reach Drilling with…
Utilisation of TMK Pipe Products in Oil and Gas Industry OCTG Oil Country Tubular Goods (drilling, casing, tubing) used for oil & gas exploration, well fixing and oil & gas production (44% of total sales volumes in 2014); Line pipe…
Thank You TMK Investor Relations 40/2a, Pokrovka Street, Moscow, 105062, Russia +7 (495) 775-7600 IRtmk-group.com 47
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