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anti-dumping duty on imports of Ukrainian railcar wheels into the Eurasian Economic Union (EAEU) starting June 2, the kommersant.ru news site reported the same day, citing anonymous sources. The EEC is the executive body of the EAEU led by Russia and uniting five former Soviet countries, including Belarus, Kazakhstan, Armenia and Kyrgyzstan. Recall, the EEC hiked this duty in January 2018 to 34.22% from 4.75% and temporarily suspended it in July 2019 until June 1, 2020. Interpipe sells around 45% of its railway products to the CIS region, mainly to Russia and Belarus.
EBITDA at Ukraine’s largest pipe and railway wheel producer Interpipe surged 47% q/q and 26% y/y to $86.0mn in 1Q20, according to the company’s financial statement and accompanying presentation published on June 19. Net profit amounted to $133mn in 1Q20, compared with a $1mn loss for 1Q19.
Interpipe’s revenue dropped 3% qoq to $251.0mn in 1Q20, driven by an 8% drop in its pipe segment revenue to $112.5mn. Revenue from its railway product segment slid 1% qoq to $127.8mn.
EBITDA (before reallocation from its steel segment) of Interpipe’s railway product segment jumped 2.8x y/y and climbed 2% qoq to $69.6mn in 1Q20. EBITDA of its pipe segment was negative $4.7mn in 1Q20, compared with $30.7mn in 1Q19 and negative $12.7mn in 4Q19. EBITDA of Interpipe’s steel segment jumped 69% y/y and 7.5x qoq to $20.7mn.
The company’s net operating cash flow plunged 78% y/y and 86% qoq to $7mn in 1Q20. Cash outflow due to the release of advances received in 4Q19 amounted to approximately $68mn in 1Q20.
Interpipe’s CapEx increased 25% y/y but dropped 41% qoq to $11mn in 1Q20. Free cash flow was negative $4mn in 1Q20, compared with $31mn in 4Q19 and $23mn in 1Q19.
At end-March, Interpipe’s gross debt amounted to $221mn (gross debt/L12M EBITDA 0.8x) and its net debt amounted to $88mn (net debt/EBITDA 0.3x).
Interpipe had $133mn in cash at the end of March, 48% less for the quarter driven by the repayment of $121mn of debt.
During a June 19 conference call with investors, Interpipe management disclosed that the amount of advances received in 4Q19 remaining to be released is $25mn. The company’s cash as of the date of the call was $190mn, including $30mn of restricted cash. Cash generation from operating activities is expected to be $30mn.
The company’s management also said on the conference call that the company will be dismissing 1,500 employees (15% of its workforce) at the beginning of July, and that the yearly savings from the workforce reduction will be $15mn.
The recent drop in railway product prices and the reintroduction of the 34.22% duty on Interpipe’s wheels by Russia starting from June 2 will combine to reduce Interpipe’s revenue from the sales of its railway products to the CIS region by approximately 50%, the management said on the call.
79 UKRAINE Country Report July 2020 www.intellinews.com
