Page 74 - UKRRptDec20

positive, because this segment remains highly profitable. Namely, in 6M20 Interpipe made $1,062 of EBITDA in this segment (before reallocation of steel segment EBITDA) per ton of railway products sold. This value might drop to about $700/t in 3Q20 because of the drop in product prices, but we expect this segment will remain the main source of Interpipe’s profitability in 2H20 and early 2021. Additionally, we estimate that the company makes about $100-125 of EBITDA in its steel segment per each ton of wheels sold.
EBITDA at ​Interpipe NTRP, a subsidiary of Ukraine’s largest pipe and railway ​wheel producer Interpipe, improved 27.1% qoq to $22.3mn in 3Q20, according to the plant’s standalone financial report published on October 30. The plant’s revenue lost 18.0% qoq to $70.9mn in 3Q20.
​Fitch Ratings announced on November 11 it has assigned a B issuer default rating (IDRs) with a Stable outlook to Ukraine’s largest pipe and railway wheel producer​ ​Interpipe​.
Both the rating and the outlook are the same as Fitch’s assessment for Ukraine’s sovereign credit. Currently, Interpipe has no ratings from other credit agencies.
Fitch’s rating of Interpipe reflects the company’s smaller scale than that of its steel peers, but also a high share of value-added products, vertical integration, geographically diversified operations and its leading domestic and regional position in seamless pipes and wheels, the agency said in its November 11 release. The rating also reflects strongly improved credit metrics following a restructuring in 4Q19, Fitch said.
Another consideration for the rating was a limited record of post-restructuring financial policy and governance practices –, which results in uncertainty over post-2020 dividend distributions and thus leverage profile – once Interpipe's current restrictive covenants are lifted, according to Fitch.
Interpipe’s EBITDA will amount to around $245mn in 2020 (down from $259mn in 2019), $180mn in 2021, and $150mn in 2022-2023, the agency said.
The EBITDA of Interpipe’s railway product segment will drop from the record-high $200mn in 2019 to $110mn in 2021 and $70mn from 2022, Fitch estimated, saying that the segment’s volumes will drop marginally in 2020 from 200 kt in 2019 and then recover slowly toward 200 kt in 2023. The agency expects the 34.22% Russian anti-dumping duty on Interpipe’s railway products to expire in January 2021 and the segment’s performance to be supported by Interpipe’s expansion in European markets and into wheelset assembly, according to the report.
Interpipe’s pipe volumes will drop to 460-470 kt in 2020 from around 600 kt in 2019 before rising slowly to 600 kt by 2023, with the recovery being slow due to coronavirus impact on oil markets, Fitch said.
Interpipe will prepay in full the $81mn of its notes outstanding by mid-2021 and will commence dividend payments that year, which will drive its gross debt gradually to $300-350mn by 2023, according to the report. Assuming the notes are fully prepaid by end-2021, annual cash
74​ UKRAINE Country Report​ December 2020 ​ ​www.intellinews.com