Chelpipe group's press centre
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
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
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).
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.
The ChelPipe Warehouse Complex has supplied 174 tons of large-diameter pipes (LDP) for the construction of a bridge across the Ob River. The products will be used for crossing utility lines from the construction site of the bridge across the river at Ippodromskaya Street in Novosibirsk. The pipes were produced at the Chelyabinsk Pipe Plant.
The batch consisted of EW longitudinal pipes with a diameter of 530–1,220 mm and a wall thickness of 10–12 mm made of QT steel 17G1S. The entire scope of products was delivered to the client in two months.
ChelPipe Warehouse Complex supplies tubular products for construction of fourth bridge across the Ob River in Novosibirsk
The ChelPipe Warehouse Complex has supplied 174 tons of large-diameter pipes (LDP) for the construction of a bridge across the Ob River. The products will be used for crossing utility lines from the construction site of the bridge across the river at Ippodromskaya Street in Novosibirsk. The pipes were produced at the Chelyabinsk Pipe Plant.
Public Joint Stock Company Chelyabinsk Pipe plant (ChelPipe), a leading Russian manufacturer of pipe products and provider of integrated solutions for companies of the fuel and energy complex, announces that Fitch Ratings («Fitch») has revised its outlook on ChelPipe from Negative to Stable. Fitch also affirmed the Company’s «BB-» long-term issuer default rating.
According to Fitch statement, ChelPipe’s upgrade to a Stable outlook reflects the Company’s deleveraging as well as steady demand for pipe products during the next several years.
Fitch analysts maintained their view of the Company as one of the leading manufacturers of tubular goods with high share of value-added products and long-term relations with its key customers.
Fitch upgrades ChelPipe outlook to Stable, affirms rating at «BB-»
Public Joint Stock Company Chelyabinsk Pipe plant (ChelPipe), a leading Russian manufacturer of pipe products and provider of integrated solutions for companies of the fuel and energy complex, announces that Fitch Ratings («Fitch») has revised its outlook on ChelPipe from Negative to Stable. Fitch also affirmed the Company’s «BB-» long-term issuer default rating.
