Interpipe pipe sales to Russia plunge 6.7x in 1H15

Pipes sold to Russia by Ukraine’s largest pipe producer Interpipe (INPIP) plummeted in the first half of 2015, the company’s economic and finance director said in an interview published in a Biznes local magazine on July 13. Average monthly pipe sales to Russia was 3 kt in 1H15, a plunge of 85 percent from 20 kt throughout 2014. Among the reasons were import duties imposed by the Russian government on the company’s products since 2H13, the sharp devaluation of the Russian ruble and the ongoing warfare between the countries, which devastated trade relations. Interpipe has been just selling off its stockpiles in Russia and isn’t planning to replenish inventories due to the current market conditions, the director said.

Roman Topolyuk: The company’s management already guided at the year’s start that it would quit the Russian market in 2015 and Interpipe has almost delivered on this promise: Russia’s share of pipe sales decreased to 9% in 1H15 from 28% a year ago and is on track for further decline. The company hasn’t managed to compensate for the decline in trade with additional supplies to the U.S. pipe market, which has experienced a significant drop in demand due to plunging oil prices.

The loss of the Russian market has negatively impacted Interpipe’s performance as we project its pipe production will drop 39% yoy to 600 kt in 2015. Such an operating result has dented its earnings power, which might generate EBITDA of a thin margin above the interest costs, we estimate, and which was the reason the company stopped incurring interest payments on its debt in February. Without any prospects of a turnaround on the market currently, the company would need to negotiate debt relief with its creditors, and that might include a debt-to-equity swap, according to Debtwire.