TMK Announces 1Q 2011 IFRS Results

OREANDA-NEWS. June 06, 2011. TMK (“TMK” or “the Company”), one of the world’s leading producers of tubular products for the oil and gas industry, today announces its interim IFRS consolidated financial results for the three months ending March 31, 2011.
1Q 2011 Highlights
Financials:

• Revenue increased by 35% year-on-year to U.S.D 1,669 million driven by an improvement in pricing and product mix as well as growth in sales volumes.

• Gross profit increased to U.S.D 391 million, a year-on-year increase of 34%, as a result of both sales volume growth and a favorable change in prices and product mix. Adjusted EBITDA rose 44% increasing from U.S.D 204 million in the first quarter of 2010 to U.S.D 293 million in the first quarter of 2011. Adjusted EBITDA margin improved from 16% in the first quarter of 2010 to 18% in the first quarter of 2011, while gross profit margin decreased by 1% to 23%.

• Net income amounted to U.S.D 104 million as compared to a net loss of U.S.D 1 million in the first quarter of 2010, as a result of higher gross profit, lower net finance costs and a lower loss from changes in the fair value of the derivative financial instrument. Net income adjusted to the loss on changes in the fair value of the derivative financial instrument (non-IFRS measure) equals U.S.D 121 million as compared to U.S.D 46 million year-on-year. Adjusted net income margin reached 7% as compared to 4% in the first quarter of 2010.

• Net debt increased by 4% as compared to December 31, 2010, and amounted to U.S.D 3,853 million. The increase in debt was substantially due to the appreciation of the Russian rouble against the U.S. dollar which translated into a higher U.S. dollar amount of the rouble-denominated debt. The share of short-term loans and borrowings decreased from 18% as of December 31, 2010 to 13% as of March 31, 2011. TMK’s weighted average nominal interest rate decreased by 16 basis points as compared to December 31, 2010 and stood at 7.7% as of March 31, 2011.

Sales Volumes:

• Total pipe sales increased by 14% to 1,060 thousand tonnes, mostly as a result of the increase in industrial seamless and large-diameter (LD) pipe volumes in the Russian division.

• Seamless pipe sales increased by 9% compared to the first quarter of 2010 and amounted to 590 thousand tonnes. This increase was mainly driven by the recovery in demand for industrial seamless pipe. Sales of industrial seamless pipe increased by 52% and amounted to 154 thousand tonnes.

1 Moscow, June 6, 2011

• Welded pipe sales increased by 22% to 470 thousand tonnes on the back of robust demand for LD pipe in Russia. Sales of LD pipe, supported by the ongoing construction of large-scale Russian pipeline projects, increased by 51% and amounted to 207 thousand tonnes.

• OCTG (oil country tubular goods) sales volumes remained flat year-on-year. A slight increase in OCTG sales volumes in the Russian division was offset by a drop in the Americas division. Sales volumes of line pipe increased by 4% driven by an increase in sales volumes in the American division.

Corporate Developments:

• In March 2011, TMK won an auction for the acquisition of a 25.5% stake in OJSC Volgograd River Port for RUB 113 million (approximately U.S.D 4 million). The transfer of ownership is expected to be finalized in the second quarter of 2011. This acquisition will allow TMK to optimize logistics for the Volzhsky plant and will facilitate shipments of oil and gas pipe to the Caspian region.

• In March 2011, TMK IPSCO commissioned a second thread line for ULTRA connections with a capacity of 240 thousand joints at the Brookfield facility in Ohio, USA. The new line will expand the existing product range and will allow TMK IPSCO to strengthen its position in shale oil and gas drilling in both the U.S. and Canada.

• In May 2011, TMK began construction of a research center in Houston, Texas, USA. This facility will undertake product design and development, experimental and validation testing, as well as advanced metallurgical research.

Summary 1Q 2011 Results