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Eastern Europe
December 1, 2017 www.intellinews.com I Page 17
Russian pipemaker TMK to IPO US assets
bne IntelliNews
Russia's largest steel pipemaker TMK Group will IPO its US-based subsidiary TMK IPSCO with the draft registration statement submitted to the US Securities and Exchange Commission, the com- pany said in November 29.
TMK will use the funds raised to refinance debt, while the amount and the price range of the is- sue have not yet been disclosed. For TMK, which focuses on producing large-diameter pipes for the oil and gas industry, the US market is the second largest after Russia.
In October TMK told the holders of its $500mn bonds maturing in 2020 to free the North Ameri- can assets from any guarantees for this debt. That would give the company sufficient flexibility to maximize the price of TMK Ipsco, TMK told the bond holders.
"Ipsco’s current contribution to our estimate of TMK’s NPV stands at some $0.7bn," VTB Capital commented on November 30, while suggesting that "given the higher trading multiples of the US market, the company might be priced higher."
Back in 2008-09, TMK acquired the IPSCO assets for around $1.7bn and VTB sees the potential sale of the stake in IPSCO to be beneficial for TMK, if ran at "a decent valuation."
In January-June 2017, the Russian market was responsible for 85.14% of TMK's Ebitda, which
corresponded to $235mn, while for the US sub- sidiary, the figures were $30mn and 10.9%, re- spectively.
Meanwhile, the company's net debt in January- June 2017 amounted to $2.6bn, while the total value of TMK Ipsco is estimated to be about $1bn. TMK Ipsco includes 10 plants in the US and two in Canada.
Looking forward, the analysts expect TMK's finan- cials to improve in July-September on the back of its strong operating performance. The company's Ebitda margin is likely to reach 14.1%, VTB Capital said in a research note, adding that the US results are likely to be strong, but Russia is also going to remain in focus.
"We would not expect any significant reaction in the name unless the company manages to im- prove materially on its margin beating expecta- tions," VTB Capital said.
In July-September, TMK increased its total pipe shipments in Russia 6% q/q (16% y/y), which was predominantly driven by the 26% q/q (34% y/y) rise in welded pipe production.
This came as a result of the higher LDP demand from Gazprom (+48% q/q, -31% y/y) and seasonal uptick in industrial pipe consumption. US sales were also up 7% q/q, on the back of a 6% YoY in- crease in the average drilling rig count.