PROPRIETARY & CONFIDENTIAL TMK Investor Presentation March 2015
TMK Global Supplier of Full Range of Pipes for Oil and Gas Industry ChermetServis-Snabzhenie Capacity North Russia Europe Total (tons) America and CIS Steelmaking 540,000 450,000 2,750,000 3,740,000 Seamless Pipes 350,000…
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 Seamless OCTG 61% Seamless line pipe 65% Seamless industrial pipe 30% Seamless OCTG Seamless line pipe for High-margin products for for oil and gas oil and gas industrial needs 1 1 2 Large…
Russian Oil & Gas Market Overview Growing oil drilling market in Russia 25,000 7,000 6,000 20,000 Thousand meters 5,000 15,000 4,000 Units 10,000 3,000 2,000 5,000 1,000 0 0 2004 2005 2006 2007 2008 2009…
Gazproms Eastern Program Creates Additional Demands Promising deposits will drive significant development in the oil and gas sector. Source: Gazprom Demand for LDP from Power of Siberia project could amount to 2.7 mln tonnes…
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 Rig count dropped by around 570 rigs 2,500 120 since the beginning of the year and over 650 rigs since Nov 2014. Crude Oil…
Sustainability of Oil Drilling IRRs for select oil plays at US100, US80 and US60 Global cash cost of oil production Region 100 80 60 Eagle Ford 79% 53% 29% Permian Delaware 71% 48% 27% Niobrara 69% 46% 26% Mississippian 62% 43%…
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 Haynesville…
Impact on US OCTG Demand OCTG inventories were at reasonable levels in OCTG consumption is expected is drop sharply Dec 2014, but are expected to rise in 1H 2015 7,000 4,200 18 OCTG Consumption, '000 Tonnes Absolute Inventory,…
Margin Squeeze Ended with Trade Case Decision 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 Welded OCTG…
Competitive Pressures Import share of trade-case-subject countries as a percentage of apparent OCTG consumption 24% Though market share of trade-case- Average Average subject countries of US OCTG % of US OCTG Consumption Country…
4Q 2014 and FY 2014 Financial Results 20
4Q Summary Financial Highlights Sales increased QoQ as a result of higher LDP volumes along with stronger sales of seamless pipe in the Revenue decreased QoQ mainly due to a negative effect Russian division of currency translation +16%…
FY 2014 Summary Financial Highlights Sales increased YoY as a result of stronger sales of Revenue fell YoY mainly due to a negative effect of seamless OCTG and line pipe currency translation +3% YoY -7% YoY 4,500 6,600 3,600 5,500…
4Q 2014 Sales by Division and Group of Product Sales by division 18% 920 Russian division sales increased QoQ as a result of stronger 805 seamless OCTG and line pipe sales, as well as higher LD 690 pipe volumes. Thousand tonnes…
4Q 2014 Revenue by Division Revenue Revenue per tonne* 1,200 1,800 0% -6% 1,000 1,500 -21% -8% 800 1,200 U.S. / tonne U.S. mln 600 12% 900 1,775 1,775 1,014 948 1,312 1,346 400 600 1,240 1,040 441 492 -17% 300…
4Q 2014 Adjusted EBITDA by Division Adjusted EBITDA Adjusted EBITDA margin 180 7% 20% 17% 150 15% 15% 13% 120 12% U.S. mln 11% % 9% 90 10% 162 151 41% 60 5% 30 -33% 42 59 9 6 0 0% Russia America Europe…
FY 2014 Sales by Division and Group of Product Sales by division 4% 3,200 Russian division sales increased YoY mostly due to higher 2,800 seamless OCTG and line pipe volumes, as well as stronger 2,400 LDP sales. Thousand…
FY 2014 Revenue by Division Revenue Revenue per tonne* -11% 7% 4,800 1,800 -15% 4,000 14% 1,350 3,200 U.S. / tonne U.S. mln 2,400 900 1,733 4 483 6% 1,621 3 973 1,453 1,600 1,242 1,286 1,127 450 -5% 800 1 665 1…
FY 2014 Adjusted EBITDA by Division Adjusted EBITDA Adjusted EBITDA margin -21% 800 20% 17% 15% 16% 600 12% U.S. mln 12% 11% % 400 776 9% 9% 614 8% 10% 200 3% 4% 145 159 31 32 0 0% Russia America Europe Russia…
Strategic Overview 29
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. 353 Majority of CAPEX will be spent on finishing 240 250…
Efficiency is Key Cash conversion cycle to be stabilized Improvement of working capital position 120 Stabilization of cash conversion cycle through: 100 Improvements in inventory management; 86 83 80 80 72 76 New contract terms with…
Debt Maturity Extended As of Dec 31, 2014, total credit portfolio amounted Debt maturity profile as of December 31, 2014 to US3,148 mln based on management accounts. 800 As of Dec 31, 2014, cash and cash equivalents amounted to…
Commitment to Deleverage Target to achieve 2.5x Net Debt / EBITDA by YE2016 4.5 4.3 3.9 3.8 Target to achieve 2.5x Net Debt-to- 3.6 3.7 3.4 EBITDA ratio by the end of 2016. 2.5 Possible IPO of TMK IPSCO and limited sale of TMK…
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 QoQ, YoY, FY 2014 gross profit breakdown U.S. mln 4Q 2014 FY 2014 (unless stated otherwise) % % Other 702 2,560 operations Volumes- Pipes, kt 20% 6% 2% Revenue 883 -4% 3,748 -5% Welded 20%…
Appendix Capital Structure and Corporate Governance 43
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…
Appendix TMK Products 46
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 50
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