Chelpipe group's press centre
The presentation will be held in the format of conference call and webcast on Thursday, 18 February 2021, at 12.00 pm London time (3.00 pm Moscow time).
Speakers:
• Salavat Galimov, Acting CFO
• Denis Prikhodko, Commercial Director
To join the call please dial:
From the UK:
+44 203 009 2470 (local)
0800 279 4054 (toll-free)
From Russia:
+7 495 646 9313 (local)
8 800 500 9820 (toll-free)
Conference ID: 85470254#
Webcast link: https://onlinexperiences.com/Launch/QReg/ShowUUID=4D6C20F8-0896-49CF-B7AE-DB4F84482739
Please dial 10-15 minutes prior to the scheduled time of the call.
The call replay will be available at: +44 20 3364 5150 conference ID 85470254# ChelPipe Group will announce its operating and financial IFRS results for FY2020 on February 18, 2021
The Chelyabinsk Pipe Plant (ChelPipe Group) invites you to participate in the presentation of its financial and operating results for the year ended December 31, 2020. The presentation will be held in the format of conference call and webcast on Thursday, 18 February 2021, at 12.00 pm London time (3.00 pm Moscow time).
On the site of Pervouralsk Pipe Plant (PNTZ, part of ChelPipe Group), AQA Genesis, a modern water refining system, has been launched to provide a “green” water supply circuit for pipe production processes and to significantly reduce the plant’s environmental footprint. RUB 520 million was invested in the facility commissioned as part of AQA, a multi-phase programme to upgrade water systems of ChelPipe Group’s assets.
Dmitry Kobylkin, Russian Minister of Natural Resources and Environment, and Vasily Osmakov, Deputy Russian Minister of Industry and Trade attended the ceremony online. The facility launched by Yevgeny Kuyvashev, Governor of the Sverdlovsk Region, Andrey Komarov, Chairman of ChelPipe Group’s Board of Directors, and Danila Shestakov, an activist of the City of Leaders social movement.
AQA Genesis is based on the best available technologies and uses Russian-made latest generation equipment – an automated process monitoring and control system, which records every parameter, related to water quality and consumption. Every hour, AQA Genesis withdraws water from PNTZ’s pipe rolling process, exposes it to multi-stage treatment – sedimentation, reagent treatment, clarification, cooling, removal of sediments and oil products – before returning it to the facility for reuse.
AQA Genesis will recycle 33,000 cubic metres of water per day, reduce the asset’s industrial effluents by 30%, the content of suspended solids in water sevenfold, iron – sixfold, and oil products – more than hundredfold. AQA Genesis provides a recycling water supply solution to minimise river water usage.
Minister of Natural Resources and Environment of the Russian Federation attends official launch of AQA Genesis, ChelPipe Group’s new METAllurgy facility
The Chelyabinsk Pipe Plant (ChelPipe Group), a leading Russian producer of tubular products and a supplier of integrated solutions for the oil and gas industry, has published its operating and financial IFRS results for H1 2020.
Key financial results for H1 2020
· The Company’s revenue amounted to RUB 71,844 million, down by 16.3% year-on-year as a result of decreased shipment volumes, mostly of large-diameter pipes (LDP).
· The net profit increased by 7.2% year-on-year to RUB 4,480 million.
· The EBITDA margin increased by 3.2 p.p. year-on-year to 21.6%. The Group’s EBITDA decreased by 1.7% to RUB 15,541 million.
· Capital investments increased by 18.6% year-on-year to RUB 3,112 million, driven by operational efficiency projects, the Company’s environmental programme, and the oilfield services division’s rental scheme.
· Net debt / LTM EBITDA was 2.3x, as compared to 2.7x in H1 2019.
Financial performance
|
in RUB million, unless otherwise stated |
H1 2020 |
H1 2019 |
Change, % |
|
Revenue |
71,844 |
85,838 |
(16.3)% |
|
Operating profit |
11,250 |
10,853 |
3.7% |
|
EBITDA |
15,541 |
15,811 |
(1.7)% |
|
Net profit |
4,480 |
4,179 |
7.2% |
|
|
|||
|
EBITDA margin |
21.6% |
18.4% |
3.2 p.p. |
|
Operating cash flow |
1,334 |
532 |
150.8% |
|
Net debt |
73,906 |
73,709 |
0.3% |
|
Capital investment |
3,112 |
2,623 |
18.6% |
EBITDA and EBITDA margin
In H1 2020, EBITDA decreased to RUB 15,541 million (down by 1.7%) with EBITDA margin going up by 3.2 p.p. to 21.6%. The margin growth primarily resulted from the efforts taken by the management of ChelPipe Group to implement the operational efficiency programme, reduce operating, administrative and management costs, and from a constant focus on increasing the share of high-margin products in the sales mix.
Capital investments
Capex growth in H1 2020 was mostly driven by an increase in investments in the rental scheme of the Group’s oilfield services division. The investments made a substantial contribution to the development of the division. The Company also ramped up investments in the operational efficiency and environmental programmes.
ChelPipe Group intends to continue a balanced implementation of its investment programme by adopting a flexible approach to capex depending on the market environment. ChelPipe Group’s current focus is on projects to improve productivity of the Iron Ozone 32 electric arc furnace plant to secure supply of own-produced pipe billets as well as on environmental projects.
Financial condition
Despite a decline in revenue, ChelPipe Group maintained a stable financial condition in H1 2020. In May 2020, Fitch Ratings confirmed ChelPipe’s long-term rating of “BB-” with a Stable outlook.
In 2020, the Company continued with the strategy to reduce its debt burden. Net debt in H1 2020 was RUB 73,906 million.
Dividends
In early 2020, the Company approved a new dividend policy which aims for a dividend payout frequency of at least two times a year. The dividend amount will depend on ChelPipe Group’s debt burden, free cash flow and net profit.
In the reporting period, ChelPipe Group paid out dividends for Q3 2019 for a total amount of RUB 1.7 billion and for past years for a total amount of RUB 1.3 billion. The Company also announced dividends of RUB 2.5 billion for 2019.
Operating results
|
kt, unless otherwise stated |
H1 2020 |
H1 2019 |
Change, % |
|
Seamless industrial pipes |
254 |
270 |
(5.9)% |
|
OCTG |
220 |
247 |
(10.9)% |
|
Line pipes (O&G) |
67 |
74 |
(9.5)% |
|
LDPs |
180 |
377 |
(52.3)% |
|
Other welded pipes |
20 |
16 |
25.0% |
|
TOTAL |
741 |
984 |
(24.7)% |
In H1 2020, total pipe shipments decreased by 24.7% to 741 kt. The key driver behind the decrease was a general decline in demand for LDPs from energy companies and completion of large infrastructure projects in CIS and non-CIS countries.
The decrease in seamless industrial pipe shipments is insignificant and was caused by a decreased activity in construction industry and operations of regional small and mid-sized enterprises, as well as by the induction of the quarantine regulations at the major enterprises due to the threat of COVID 19 coronavirus infection spread.
In H1 2020, demand for OCTG was under pressure as oil majors were revising their upstream investments due to a decrease in the global demand for oil products. ChelPipe Group’s OCTG shipments went down by 10.9% in H1 2020.
Outlook 2020
· ChelPipe Group plans to focus on achieving the key goals outlined in its strategy to 2024: developing a high-margin product line, improving operational efficiency, improving customer experience and enhancing the offering while increasing the Group’s presence in adjacent markets and expanding its target geography.
· ChelPipe Group expects that the spread of COVID-19 will continue to adversely affect the macroeconomic situation in 2020. However, the Group’s anti-crisis measures and its operational efficiency programme as well as forecasted rebounding demand in H2 2020 in a number of segments will allow ChelPipe to maintain its stable financial condition.
Key events after the reporting date
- In July 2020, ChelPipe Group successfully issued a five-year exchange-traded bonds with a coupon of 6.60% p.a. for a total amount of RUB 10 billion. The proceeds were used to improve the Group’s debt portfolio structure.
- ChelPipe Group announced its plans to set up an industrial and financial group with Zagorsk Pipe Plant to secure supply of pipe and related products to energy companies. To work on further steps, financial and economic, legal, technological, and commercial task forces including representatives of both parties have been set up.
Pipe Division
Shipment by product types:
|
kt,
unless otherwise stated |
Q 1 2020 | Q 1 2019 | Chg., % |
| Seamless industrial pipes | 118 | 124 | (5)% |
| OCTG | 109 | 130 | (16)% |
| Line pipes (O&G) | 39 | 38 | 3% |
| LDP (large diameter pipes) | 106 | 152 | (30)% |
| Other welded pipes | 10 | 5 | 100% |
| TOTAL | 382 | 449 | (15)% |
ChelPipe Group has decreased OCTG shipment for 16% - to 109 kt because some orders were postponed to late 2020. ChelPipe Group OCTG market share in Russia is 16% - the Group has maintained its status as one of the leaders in this segment.
Total seamless industrial pipes shipment for Q1 2020 decreased insignificantly and accounts for 118 kt. This reduction was also caused by some postponed tenders and orders. Despite this the ChelPipe Group remains the Russian market leader in the seamless industrial pipe segment.
Total volume of shipments of large diameter pipes (LDP) produced by the ChelPipe Group decreased by 30% compared to the same period last year and amounted to 106 kt. Also, shipments to the domestic market decreased by 17% or 16 kt. Volume of shipments to the market of the CIS countries increased by almost 2.5 times - by 11 kt due to deliveries to Uzbekistan. Deliveries to non-CIS countries decreased by 84% or 41 kt. As a result of 1st quarter of 2020, ChelPipe Group has become the largest supplier of large diameter pipes among Russian manufacturers with a market share of 22%.
ChelPipe Group shipments of line pipes in the 1st quarter of 2020 amounted to 39 kt, which is almost the same level as in the same period in 2019.
Trunk Pipeline Equipment Division
During the 1st quarter of 2020, total volume of shipments of Trunk Pipeline Equipment Subdivision of the ChelPipe Group increased by 20% compared to the 1st quarter of 2019 and amounted to 3.9 kt. Pipeline fittings (hot and cold bends, short-radius bends, pipe spools and stamp-welded parts) manufactured by JSC "Pipeline Bends" and ETERNO, LLC (companies of the ChelPipe Group) were delivered to customers as part of repair and maintenance programs and for field infrastructure development, including to the non-CIS countries. In addition, ChelPipe Group sold high-tech products of the ETERNO INGENIUM line for the Akkuyu nuclear power plant under construction in Turkey.
In the new economic environment, in order to maintain stability, ChelPipe Group will focus on the development of export sales, the need for which will increase in the context of devaluation of the ruble, and will also focus on developing its customer service package in high value-added segments.
PJSC «ChelPipe» is announcing operating results for the 1st quarter of 2020
HSE is of utmost priority for ChelPipe, and the Group has developed an anti-crisis plan to prevent infectious diseases at its offices and production sites. The measures include restriction of business and personal travel in Russia and abroad for ChelPipe Group employees and switching from business meetings in person to remote negotiations using advanced technical solutions. Production shifts and handover procedures are scheduled to minimise personal contact.
Some of the Company employees now work remotely, and the students of the corporate Future of METAllurgy education programme proceed with online learning using advanced classroom technology. ChelPipe Group has suspended its corporate mass events scheduled for the first ten days of April until the epidemiological situation improves, with the event calendar to be updated subject to circumstances. The Company’s production sites are equipped with hand sanitiser which is within easy reach; employees have their temperature measured on a daily basis; offices and production shops are additionally sanitised with disinfectants.
Moreover, we have intensified our internal communications on the measures being taken to prevent viral infections, as recommended by Rospotrebnadzor (Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing). Awareness posters are displayed at all the Company’s facilities, and there is ongoing communication via email and text messages, the intranet, corporate newspaper and radio. ChelPipe Group is taking comprehensive measures to prevent infectious diseases and COVID-19
- Andrey Komarov, Chairman of the Board of Directors of ChelPipe Group;
- Alexander Fedorov, Chairman of the Board of Directors of Pervouralsk Pipe Plant;
- Boris Kovalenkov, CEO of ChelPipe Group;
- Dina Mikryukova, Director for Economic and Strategy Control of ChelPipe Group;
- Vadim Makhov, Professor of Business Practice at Moscow School of Management SKOLKOVO (independent director);
- Regina von Flemming, member of the Board of Directors of MTS PJSC (independent director);
- Douglas Gardner, member of the Board of Directors and Chairman of the Audit Committee of Kaspi.kz and Managing Director of CAIGAN Capital (independent director).
The three independent directors will oversee three of the four Committees of the Board of Directors: Douglas Gardner will chair the Audit Committee, Regina von Flemming will chair the Nomination and Remuneration Committee, and Vadim Makhov will chair the Strategic Planning Committee.
In addition, Michael Ruckman, President and Managing Director of Senteo Inc. and an international authority on customer experience management and client-centric business transformations, has joined the Strategic Planning Committee.
During the meeting, the Board also reviewed ChelPipe Group’s financial results for 2019, and approved the budget for 2020 and the Company’s new organisational structure. The new structure has been developed by management in line with the vision for ChelPipe Group’s strategic development, and is designed to support the implementation of key initiatives set out in the Company’s five-year strategy. Andrey Komarov re-elected as Chairman of ChelPipe Group
FY 2019 financial highlights
- Revenue increased by 7.5% and reached a record amount of RUB 192,278 million thanks to steady revenue growth from sales of steel pipes at international markets;
- Gross profit increased by 22.4% to RUB 54,191 million due to the expansion of the Company’s product line, excellent results in the LDP (large-diameter pipe) segment and growing profitability in Seamless Industrial and Seamless OCTG;
- Adjusted EBITDA[1] increased by 12.8% to RUB 31,828 million. Adjusted EBITDA (EBITDA) margin increased by 0.8 p.p. comparing to 2018 and reached 16.6%;
- Free cash flow[2] increased by 10.6% to RUB 11,123 million as result of increase of EBITDA, which has largely been converted into cash flow.
- Capital expenditures amounted to RUB 7,558 million with an increase of 37.6% from the previous as a result of Company’s focus on projects aimed at transformation of the Group into a client-centric company, digitalisation, and carrying out projects to improve operational efficiency and sustainability initiatives.
- Net debt[3] / EBITDA ratio was 2.1x at the end of 2019 comparing to 2.4x at the end of 2018.
2020 outlook
- ChelPipe Group plans to focus on achieving the key goals outlined in its 2024 strategy: improving operational efficiency, customer experience and developing offers to its clients by gradually increasing its presence in adjacent markets and expanding the geography of shipments.
- The Company intends to continue increasing its share of high value-added (HVA) products in order to increase marginal profit.
- ChelPipe Group has established a minimum target for dividend payouts in 2020 and 2021 of at least RUB 7.5 billion each year in accordance with the Company’s approved dividend policy. Dividends declaration and payment will be carried out in accordance with resolutions of corporate governance bodies, including decision of General Shareholders Meeting.
[1] Adjusted EBITDA is determined as profit/loss adjusted by finance income and costs, income tax, depreciation and amortization, foreign exchange gain/loss, change in fair value of derivatives, gain/loss on disposal of subsidiaries, gain/loss on disposal of property plant and equipment and intangible assets, impairment of loans and interest receivable, impairment of assets (property plant and equipment, intangible assets, advances for capital construction and intangible assets), impairment of goodwill, social and charity expenses not related to operating activities.
[2] Free cash flow is a net cash generated from operating activities less the cash paid for acquisition of property, plant and equipment and intangible assets.
[3] Net debt is a total amount of non-current and current borrowings recognized in the consolidated statement of financial position less cash and cash equivalents.
ChelPipe Group Announces Its 2019 Financial Results
FY 2019 highlights
- In FY 2019, ChelPipe Group shipped a total of 2,070 kt of pipes to customers (up 8% y-o-y).
- A key growth driver was an increase in export shipments to 736 kt, or 36% of all shipments.
- Shipments to the Russian market totalled 1,334 kt.
- Large-diameter pipe (LDP) shipments reached 916 kt (up 33%), strengthening ChelPipe Group’s position as the largest LDP manufacturer in the Russian market.
- Oil country tubular goods (OCTG) shipments increased by 3% to 469 kt.
- Shipments of pipes with ChelPipe Prime threaded connections rose by 23%, driven by stronger demand from Russian customers.
- Shipments of trunk pipeline division products increased by 17% to 21.3 kt.
- Sales of tubular products through the online store increased by 160%.
ChelPipe Group announces operating results for FY 2019
Payouts under the dividend policy will vary depending on the company’s debt burden. This approach is designed as a balancing mechanism to support financial stability while also taking into account Chelpipe Group’s needs for capital expenditures associated with strategic investment projects:
• The company plans to pay dividends equal to at least 100% of IFRS Net Profit or free cash flow (whichever is the higher) if the net debt/EBITDA ratio is less than 1.5x;
• The company plans to pay dividends equal to at least 70% of IFRS Net Profit or at
least 100% of free cash flow (whichever is the higher) if the net debt /EBITDA ratio is
equal to or higher than 1.5x but lower than 2.5x;
• The company plans to pay dividends equal to at least 50% of IFRS Net Profit or at
least 75% of free cash flow (whichever is the higher) if the net debt /EBITDA ratio is
equal to or higher than 2.5x but lower than 3.5x;
• If the net debt/EBITDA ratio is 3.5x or above, dividend payments will be at the discretion
of the Board of Directors;
• All dividend payments are subject to approval by the general meeting of shareholders. Chelpipe Group approves new dividend policy
The new strategy seeks to ensure consistent and strong business growth by transforming Chelpipe Group to a customer-centric enterprise. The strategy focuses on developing the Company’s offering in high value-added segments, gradual expansion in adjacent segments, entry into new regions, and operating efficiency improvements. The key objectives and expected effects include:
• Focus on developing high-potential segments with moderate levels of competition and on increasing the share of niche products with high added value;
• Operating efficiency improvements to deliver a target annual reduction of at least 2.5% of aggregate costs not associated with raw materials;
• Maintaining a consistently high EBITDA margin;
• Sales channel and product portfolio diversification with a targeted export revenue share above 25%;
• Ongoing deleveraging to achieve a target net debt / EBITDA ratio of below 1.5x;
• Better structure and quality of corporate governance, higher transparency, and a more appealing investment case.
Chelpipe Group’s corporate philosophy will serve as the foundation fr om which to achieve these strategic goals. This philosophy is based on the principles of sustainable development and balancing the interests of all stakeholders, including clients, investors, shareholders, employees and society.
Value proposition enhancement
The Company will focus its efforts on high-potential segments, high value-added niche products, quality of service, and integrated engineering solutions rather than pursuing production growth in any market environment. This approach is expected to contribute to the Group's efforts to expand its proposition in target markets and maintain its share of export sales in revenue mix at above 25%.
Corporate philosophy
Chelpipe Group’s key focus areas are strengthening its corporate culture, organisational structure and process management, as well as developing its production system, improving customer experience and digital transformation. Sustainability is at the core of Chelpipe Group’s strategy and the Company remains committed to upholding stringent health and safety standards, meaningful employee development, environmental well-being, as well as social and economic development for the regions wh ere it operates. The Company will continue planning and working towards these goals in line with best practices.
Corporate governance
Improving the structure and quality of corporate governance is another focus area for Chelpipe Group as it seeks increase transparency and strengthen its investment case. To this end, the Board of Directors has nominated two new and highly reputable independent directors with a wealth of relevant expertise – Regina von Flemming, an independent director and member of the Board of Directors of MTS PJSC, and Doug Gardner, member of the Board of Directors, Chairman of the Audit Committee at Kaspi.kz, member of the Consultation Council and the Audit and Finance Committee at Kaspi Bank, Managing Director at CAIGAN Capital. If elected at the general meeting of shareholders on 27 february 2020, the number of independent members on the Board of Directors will increase to three, including Vadim Makhov, Professor of Business Practice at the Moscow School of Management Skolkovo.
Chelpipe Group's Board of Directors approves development strategy through 2024 and nominates two new independent directors
ChelPipe Group has shipped 300 tonnes of long cold-finished boiler pipes and tubes with special properties to Krasny Kotelshchik (part of NordEnergoGroup), which plans to use them in steam boilers and pipelines for the Udarnaya Thermal Power Plant (TPP) in Taman (Krasnodar Territory).
Pipe Division
Shipment by product types
| ths. tons unless otherwise stated | 9M 2019 | 9M 2018 | Chg., % | Q3 2019 | Q2 2019 | Chg., % |
| Seamless industrial pipes | 398 | 412 | (3,4%) | 128 | 146 | (12,3%) |
| OCTG | 358 | 326 | 9.8% | 111 | 117 | (5,1%) |
| Line pipes (O&G) | 101 | 153 | (34.0%) | 27 | 37 | (27,0%) |
| LDP (large diameter pipes) | 699 | 603 | 15,8% | 322 | 237 | 35,6% |
| Other welded pipes | 25 | 27 | (7,4%) | 10 | 10 | - |
| TOTAL | 1 581 | 1 521 | 3,9% | 598 | 547 | 9,3% |
• In nine months of 2019, the demand for large diameter pipes increased by 56 ths. tons (+2%) compared to the same period last year, including: domestic market +104 ths. tons (+6% y-o-y), CIS countries +213 ths. tons (3.5 times y-o-y). Shipments to international projects for the non-CIS countries decreased by 246 ths. tons (-39% y-o-y) due to the completion of two major projects: Nord Stream 2 and Turkish Stream. In nine months of 2019, ChelPipe Group has become the largest supplier of large diameter pipes among Russian manufacturers with a market share of 29%. In nine months of 2019, LDP shipments of ChelPipe Group increased by 15.8% y-o-y and amounted to 699 ths. tons Growth is mainly attributed to higher delivery volumes to the CIS countries - ChelPipe Group supplied large diameter pipes for Saryarka (natural gas pipeline for gasification of Nur-Sultan, the Republic of Kazakhstan) and TAPI (natural gas pipeline Turkmenistan–Afghanistan–Pakistan–India). The Company became the only LDP supplier for the construction of gas pipeline in Turkmenistan under TAPI project.
• Total consumption of OCTG in the domestic market in the first nine months of 2019 increased by 6% y-o-y and amounted to 1.8 mln tons. The increase was due to higher demand for tubing. ChelPipe Group shipments increased by 9.8% y-o-y and amounted to 358 ths. tons. In the reporting period the Company's share in the OCTG market stood at 19%.
• In the seamless industrial pipe segment ChelPipe Group is the largest supplier in the domestic market. Total shipments in nine months of 2019 amounted to 398 ths. tons, a decrease of 3.4% y-o-y. The dynamics is caused by expectations of consumers on decrease in pipe prices in the third quarter of 2019 following a decrease in prices for pipe billets.
• In nine months of 2019, ChelPipe Group shipments of line pipes amounted to 101 ths. tons, a decrease of 34% y-o-y. Negative dynamics was due to decreasing market demand for line pipes as a result of their replacement by cheaper welded pipes.
Trunk Pipeline Division
• Major projects for which ChelPipe Group delivered pipeline fittings in the reporting period: natural gas pipeline Power of Siberia; Chayandinskoye oil, gas and condensate field; construction of the Gryazovets – Slavyanskaya compressor station, natural gas pipeline Saryarka. The total volume of product shipments (hot and cold bends, short-radius bends, stamp-welded fittings, etc.) from JSC "Pipeline Bends" and "ETERNO", LLC (part of ChelPipe Group) was 11.1 ths. tons, 8.5% less than in nine months of 2018 due to the reduction of market capacity. ChelPipe announces its operational results for the first nine months of 2019
Public Joint Stock Company "Chelyabinsk Pipe Plant" (PJSC "ChelPipe"), a leading manufacturer of pipe products and provider of integrated solutions for the fuel and energy industry companies, announces its operating results for the first nine months of 2019.
Public Joint-Stock Company Chelyabinsk Pipe Plant (Chelpipe PJSC), a leading Russian manufacturer of tubular products and provider of integrated solutions for companies of the fuel and energy industry, announces the successful placement of inaugural USD 300 million 4.5% Guaranteed Notes due 2024.
Good credit history of the company and favourable market conditions attracted a great number of investors within the framework of the five-day road show in Moscow, Zurich, Frankfurt, New York and London. Consequently, in the original price range of 4.75-5%, the order book exceeded 1 bn US dollars, which made it possible to cut the rate twice and close the deal at 4.5%.
The final order book lists around 100 names including investors from the United Kingdom (30%), Russia (28%), Сontinental Europe (23%), Asia (14%) and the United States (5%). Around 52% of the bonds issued were acquired by asset management companies, funds and insurance companies, and 48% by banks and private banking.
Citi, Gazprombank, J.P. Morgan and Société Générale acted as the Joint Bookrunners and Global Coordinators, Renaissance acted as Joint Bookrunner and Sovcombank as Co-manager. The USD 300 million 4.5% Guaranteed Notes due in September 2024 were issued by Chelpipe Finance DAC, an Irish company founded for the sole purpose of issuing debt instruments and financing loans to ChelPipe Group.
ChelPipe is planning to spend the revenue from bond issue to pay back ruble loans to optimize the debenture portfolio.
ChelPipe Group successfully issued debut Eurobonds worth $300 M
Financial results as of H1 2019
(in millions of Russian rubles, unless otherwise stated)
| January - June 2019 | January - June 2018 | Change, % | |
| Shipment volume, thousand tonnes | 984 | 1 096 | (10.2%) |
| Revenue | 85,838 | 94,941 | (9.6%) |
| Operating profit | 10,853 | 12,200 | (11.0%) |
| Net profit | 4 179 | 5 621 | (25.7%) |
| EBITDA (adjusted )* | 15,811 | 16,238 | (2.6%) |
| EBITDA margin | 18.4% | 17.1% | 1.3 p.p. |
| Operating cash flow | 532 | 1 306 | (59.3%) |
| Net debt | 73,709 | 73,116 | 0.8% |
| Capital investments | 2 623 | 2 371 | 10.6% |
| Amount of assets | 150,350 | 140,763 | 6.8% |
* Adjusted EBITDA (hereinafter, EBITDA) represents the amount of profit/loss for the period adjusted for financial expenses and financial income, profits taxes, depreciation, foreign currency exchange gains or losses, changes in the fair value of derivatives, gains/losses on divestment in subsidiaries, gains/losses on disposal of fixed assets and intangible assets, changes in reserves for issued loans and accrued interest, changes in reserves for the depreciation of fixed assets and intangible assets, impairment of advances for major construction and intangible assets, goodwill impairment, social expenses and charitable contributions not related to operating activities.
Shipment:
• Shipment volumes of pipes amounted to 984 thousand tonnes in H1 2019.
•The share of ChelPipe Group in the total shipments of the Russian pipe producers amounted to 16.5%.
Financial results:
• As a result of adjusting the terms of shipments for a number of projects for the H2 of 2019, the company's revenue decreased by 9.6% compared to the same period last year and amounted to 85,838 million rubles.
• Gross profit remained at the level of H1 2018 and amounted to 23,288 million rubles, EBITDA amounted to 15,811 million rubles (-2.6%). At the same time, the efficiency of business was increased, which allowed to raise the EBITDA margin by 1.3 percentage points.
•The decrease in net profit by 1.4 billion rubles to 4 179 million rubles was affected by a reduction of operating profit (due to the adjustment of the schedule of shipments of LDP for current projects) and a one-time impairment of assets.
Debt obligations:
• Net debt of H1 2019 amounted to 73,709 million rubles.
• As of June 30, 2019, the ratio of net debt to EBITDA LTM was 2.7x.
• In February 2019, Expert RA agency confirmed the credit rating of ruA+ for Chelyabinsk Pipe Plant. The forecast rating is stable.
Key events of H1 2019:
• ChelPipe Group began shipping tubular products for the Sary-Arka gas pipeline in Kazakhstan. VTB Bank provided ChelPipe Group with bank guarantees for the implementation of this project.
• ChelPipe Group signed a contract for the shipment of more than 150 thousand tonnes of large-diameter pipes (LDP) with the Turkmengas state concern for the construction of the linear section of the TAPI gas pipeline (Turkmenistan – Afghanistan – Pakistan – India). Financing of the project, opening and acceptance of the letter of credit was provided by three financial organizations: ChelPipe Group's partner, Sberbank, Islamic Development Bank and the State Bank for Foreign Economic Affairs of Turkmenistan.
• An experimental workshop to design ChelPipe Prime threaded connections has been officially opened at the Pervouralsk Pipe Plant Finishing Center. These high-technology products will help to meet the ever-increasing needs of consumers conditioned by the growth of the complexity of oil extraction and oil & gas field development.
• Rimera Group Oilfield Services Division presented a new product line of high-technology equipment for multi-stage hydraulic fracturing FRACTURA, which will improve oil recovery from fields with hard-to-recover reserves. FRACTURA is entering the late stage of development.
Key events after the reporting date:
• As part of the reorganization of the Rimera-Service network (part of the ChelPipe Group oilfield services division), ChelPipe Group allocates pipe service as a separate business line. New business line, the Pipe Service of the Chelyabinsk Pipe Plant, will allow the company to become a universal supplier offering services in both production and maintenance of tubing.
• The Rimera Group of Companies (the ChelPipe Group oilfield services division) has opened a subsidiary in Dubai, United Arab Emirates — RIMERA OVERSEAS DMCC. Its major task will be to promote the comprehensive oilfield services provided by the Rimera Group on the international market: production and supply of equipment for oil production, servicing oil production equipment and a full product range of tubing.
Forecast for 2019:
• ChelPipe Group does not expect significant changes in the steel pipe market in H2 2019: The company expects to keep supplies at the same level as last year.
• The programs implemented by the management of the ChelPipe Group to improve the efficiency of operating activities, as well as customer-oriented transformation measures, will allow the company to maintain a stable financial position in 2019.
ChelPipe Group Announces its Consolidated Financial Results for H1 2019
ChelPipe group has made a contract for shipment of more than 150 thousand tons of LDP (large diameter pipes) for construction of a linear portion of TAPI (Turkmenistan – Afghanistan – Pakistan – India) gas pipeline. According to the terms and conditions of the contract, about 200 km of TAPI gas pipeline will be laid in the territory of Turkmenistan from Chelpipe pipes. First supply of X70 1420 mm pipes with external anticorrosion coating is to take place in the second quarter of 2019.
ChelPipe Group to ship more than 150 thousand tons of pipes for TAPI gas pipeline in Turkmenistan
ChelPipe group has made a contract for shipment of more than 150 thousand tons of LDP (large diameter pipes) for construction of a linear portion of TAPI (Turkmenistan – Afghanistan – Pakistan – India) gas pipeline.
At the initiative of the public movement known as the City of the First in Pervouralsk, an event devoted to separate collection of recycled materials was held for the first time under the name Recycling. A waste collection point was set up in the central city square, where townspeople could deposit waste paper, plastic, metal, and used batteries. In just a few hours, more than a hundred city residents took part in the initiative, and volunteers brought a total of one ton of waste paper, about 300 kilograms of batteries, and more than 100 kilograms of plastic and aluminum.
Public Movement City of the First holds charity event for recycling
ChelPipe Group has launched a new company website (www.chelpipe.ru), which brings together the company's key online resources and is designed to make customer communications even more effective.
The goal of this website is to create for customers a shared vision of the company's strategy and values, principles of corporate governance and sustainable development, including the perception of ChelPipe Group as a high- tech manufacturer being at the forefront of global industrial corporations in terms of efficiency and customer-oriented service.
The new resource is meant to be used not only for the purposes of communications but also for a number of business tasks. Customers are able to make an online order in the catalogue for any products manufactured by the Group – from pipes to drilling equipment and spare parts – as well as requested maintenance services, such as repairing the oilfield equipment or scrap removal.
Created according to e-commerce standards, this website provides the customer with the same experience as a regular online store, with minimum effort needed to find and to select products. Thanks to the user-friendly menu, it takes just one click to go from the main page to the desired section of the product catalogue. There, with the help of detailed filters, the customer can select a product, its quantity, and add it to the basket to be purchased later.
ChelPipe Group launches a new company website
ChelPipe Group has launched a new company website (www.chelpipe.ru), which brings together the company's key online resources and is designed to make customer communications even more effective.
Students of the Future of White Metallurgy educational program created by ChelPipe Group won 10 medals at the Young Professionals, 7th Open Regional Championship (WorldSkills Russia), coming in ninth place overall out of the 79 educational institutions in the region that participated in the competition. The future white metallurgists performed in eight skill categories: Reverse Engineering, Industrial Robotics, Prototyping, CAD Engineering Design, Turning Work on CNC Machines, Industrial Automation, Industrial Mechanics and Installation, and Electrical Installation.
In the Industrial Robotics skill, gold medals were awarded to Lev Popov and the team of Timur Sadreev and Ilya Belokozovich in the Juniors category (14 to 16 years of age). For the Reverse Engineering skill, Nikita Kuznetsov was the winner, Andrei Tarasov won the silver medal, and Alexander Gimazetdinov and Ruslan Sultangaliev won bronze. In the Industrial Mechanics and Installation category, Andrei Efimov received the gold medal, and Nikolai Perminov received the silver medal. In addition, Ivan Semeyshchev won the gold medal in the Industrial Automation skill, and Vadim Gallyamov won the silver medal for Prototyping.
The winners of the regional championship will continue preparations for the next stage of the competition, the National Championship of Young Professionals (WorldSkills Russia), which will be held on May 20–24, 2019, in Kazan.
Future white metallurgists win 10 awards at the Young Professionals, 7th Open Regional Championship (WorldSkills Russia)
Students of the Future of White Metallurgy educational program created by ChelPipe Group won 10 medals at the Young Professionals, 7th Open Regional Championship (WorldSkills Russia), coming in ninth place overall out of the 79 educational institutions in the region that participated in the competition.
At the Russian Investment Forum in Sochi focused on the national projects, shareholder of ChelPipe Group Andrei Komarov took part in a plenary session entitled Factors of Success: Ideas, Personnel, and Competences. It was chaired by Russian Prime Minister Dmitry Medvedev.
Public officials, along with the expert and business communities, discussed plans for the implementation of key strategic development projects in Russia, in particular the national Education project. Among the participants were the Governor of the Perm region Maxim Reshetnikov, ASI Director General Svetlana Chupsheva, and President of the Skolkovo Moscow School of Management Marat Atnashev. The prime minister noted the importance of implementing practice-oriented educational programs and urged the real economy to be more actively involved in the development of the education system.
Andrei Komarov spoke about the work carried out by ChelPipe Group in this area in recent years, which has made it possible to achieve high results in training personnel and to build a system of continuing professional education in a single-industry city. He thanked the Government of the Russian Federation for supporting changes to the Tax Code, which made it possible to include the costs of employee training in the dual learning model in the category of production costs not subject to income tax.
Shareholder of ChelPipe Group Andrei Komarov gives a speech at the plenary session of the Russian Investment Forum
At the Russian Investment Forum in Sochi focused on the national projects, shareholder of ChelPipe Group Andrei Komarov took part in a plenary session entitled Factors of Success: Ideas, Personnel, and Competences. It was chaired by Russian Prime Minister Dmitry Medvedev.
