Chelpipe group's press centre
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
- 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
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
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.
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.
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.
