Page 133 - RusRPTSept21

57% q/q to 853kt (more than 85% of seamless pipe production in Russia in 2Q21). Welded pipes sales were up 73% q/q to 277kt (around 14% of Russian welded production in 2Q21, we estimate).
Revenues were up 68% q/q to $1.47bn. As the cost of sales grew somewhat slower (+64% q/q), gross profit rose 85% q/q. Despite the 60% q/q growth in sales volumes, the selling expenses of the combined company declined 2% q/q (although they were elevated in 1Q21). However, G&A expenses added 43% q/q after the consolidation of Chelpipe’s results for the full quarter. Still, EBITDA grew 3x q/q, to $199mn.
Financial expenses increased to $83mn (from $50mn in 1Q21). The FX gain of $12mn further supported the bottom line, which was reported at $60mn. FCF was positive, at $266mn, of which $147mn was contributed by a working capital release. Net debt to EBITDA (run-rate) was 4.3x (above the 3.5x at the end of 2020 before the acquisition).
During the call, the company commented that it might draft a new dividend policy. According to management, the majority shareholder could use the dividend to retire its payables to TMK, returning the cash to the company.
All in all, the quarter marked an improvement in profitability vs. 1Q21 (with the gross profit and EBITDA margins rising), although it fell in 1H21 y/y with the consolidation of the less marginal pipe business. We would expect higher cost reductions in the G&A line in future, in order to judge the success of Chelpipe’s acquisition.
9.1.12 Transport sector news
In August, the Russian railway market transported 109mnt of cargo, up 1% YoY and flat to August 2019. The seasonally adjusted figure was flat MoM, but still 2% below the June 2021 level due to flooding in the Russian Far East.
This has been the major issue preventing the market from reaching new highs, we think. The main drivers have been the same since the beginning of the year: coal and fertilizers are supported by favourable pricing, and railway
133 RUSSIA Country Report September 2021 www.intellinews.com