Interpipe EBITDA drops 53% yoy in 1Q21

EBITDA at Ukraine’s largest pipe and railway wheel
producer Interpipe (INTHOL) plunged 53% yoy to USD 40.4 mln in 1Q21, according
to the company’s financial statements published on June 3.

 

Interpipe’s revenue dropped 20% yoy to USD 201.0 mln
in 1Q21, driven by a 53% plunge in its railway product segment revenue to USD
59.6 mln. Revenue from its pipe segment increased 10% yoy to USD 123.3 mln.

 

EBITDA (before reallocation from its steel segment) of
Interpipe’s railway product segment plunged 84% yoy to USD 11.5 mln in 1Q21.
EBITDA loss of its pipe segment widened 49% yoy to negative USD 6.9 mln in
1Q21. EBITDA of Interpipe’s steel segment soared 70% yoy to USD 35.1 mln in
1Q21.

 

The company’s net operating cash flow skyrocketed 3.1x
yoy to USD 20.8 mln in 1Q21, while its CapEx jumped 58% yoy to USD 17.3 mln.
Free cash flow was positive USD 4.2 mln in 1Q21, compared with negative USD 3.6
mln a year ago.

 

At end-1Q21, Interpipe’s gross debt amounted to USD
110 mln and its net debt amounted to USD 53 mln (net debt/L12M EBITDA 0.2x).

 

Interpipe declared and paid USD 40 mln in dividends in
March, USD 150 mln in May, and plans to pay a further USD 40 mln in dividends
later in 2021, according to the company management statements made on a call
with investors on the same day. Interpipe had about USD 200 mln of cash in the
beginning of June, and plans to spend about USD 84-86 mln in total on CapEx in
2021, including about USD 23 mln on maintenance and USD 60 mln on development.
Interpipe plans to spend about USD 207 mln in total on development CapEx during
the next five years, its management said, adding that maintenance CapEx is seen
at USD 25-27 mln per year. The company’s policy is to maintain at least USD 80
mln in cash on its balance.

 

The release of provisions contributed positive USD 11
mln to Interpipe’s total EBITDA in 1Q21, including USD 15 mln to pipe segment
EBITDA, according to its management statements on the call.

 

As of now, Interpipe does not does not foresee the
recent political tensions around Belarus as resulting in any additional
barriers to its railway product exports to that country, the management said,
adding that railway product total sales volume has returned to the levels of 15
kt per month typical before the imposition of the Russian embargo in early
February. Interpipe expects railway product sales volume to return to pre-covid
level in 2H21, whereas the similar rebound for pipe sales volume might take
longer.

 

The fast and steep increase in prices of input
materials, including steel scrap and energy sources during 1Q21 was an
important factor for the decrease in Interpipe’s profitability. In 2Q21, the
company has been quite successful in passing the input price inflation on to
its customers by being more aggressive in pricing new orders, according to the
presentation released on June 3. Despite the Russian embargo on railway product
imports from Ukraine, exports to other Customs Union countries such as Belarus
and Kazakhstan have remained duty-free since the beginning of February,
Interpipe emphasized in the presentation. Overall, Interpipe expects a qoq
improvement in its business performance in 2Q21, the presentation stated.

 

Dmytro Khoroshun: We continue
to expect Interpipe’s EBITDA to drop at least 30-40% yoy in 2021 to USD 165-190
mln.

 

Interpipe’s progress with increasing prices for its
products, most importantly pipes, will be crucial for its financial performance
this year, and the management expectations disclosed on June 3 suggest the
situation is improving.