Interpipe pipe and railway product sales surge in September

Railway product sales volume at Ukraine’s largest
producer Interpipe (INTHOL) was 16.0 kt in September, a 36.1% m/m jump,
according to the company’s monthly operational report released on Oct. 19. Pipe
sales surged 40.8% m/m to 49.1 kt, while external billet sales gained 13.4% m/m
to 1.9 kt. Total sales volume advanced 38.7% m/m to 66.9 kt.

 

The m/m jump in railway product sales in September was
driven by sales of wheels (+43.1% m/m to 14.1 kt).

 

The m/m surge in pipe sales volume was driven by line
pipes (+72.5% to 35.8 kt). An increase in Interpipe’s sales to the UAE, as well
as growing demand in Europe and Ukraine, drove the dynamics in sales volumes of
line pipes in September, according to the report.

 

During 9M20, Interpipe’s pipe sales dropped 24.1% yoy
to 359.1 kt, driven mostly by a 54.0% plunge for OCTG pipes to 64.0 kt and a
32.7% drop for welded pipes to 61.0 kt. Railway product sales slid 3.0% yoy to
147.2 kt in 9M20, driven mostly by a 6.0% loss for wheels to 128.1 kt,
partially offset by a 29.7% jump for wheelsets to 14.4 kt.

 

Ukraine’s share of Interpipe’s pipe sales in 9M20
dropped 6pp from 2019 to 19%, and the share of sales in the Americas plunged
13pp to 11%. At the same time, Europe’s share in pipe sales gained 5pp to 29%,
and the share of MENA rose 11pp to 26%. The share of CIS countries in 9M20
climbed 2pp to 12%.

 

The share of Interpipe’s railway product sales in Ukraine
in 9M20 dropped 8pp from 2019 to 14%, while the share of sales to Europe gained
9pp to 35% and the share of sales to CIS countries slid 2pp to 43%.

 

Regarding production volumes, which might be
indicative of sales volumes in future months, Interpipe’s pipe production
inched up 1.5% m/m to 41.4 kt in September, while railway product output gained
10.9% m/m to 15.7 kt. Steel production inched up 1.2% m/m in September to 64.7
kt.

 

Dmytro Khoroshun: We
preliminarily expect Interpipe’s railway product segment EBITDA (before
reallocation of steel segment EBITDA) for 3Q20 to drop about 27% qoq to USD 30
mln. The decrease in profits will be driven by an 8% qoq drop in sales volumes
of railway products, and by an estimated 10% decrease in prices.

 

Interpipe’s average monthly sales volumes of pipes in
3Q20, 40.8 kt, is only 2% less qoq, and we expect pipe prices to increase
slightly qoq in 3Q20. Therefore, the EBITDA of Interpipe’s pipe segment might
remain slightly positive in 3Q20, close to the USD 3 mln value for 2Q20.

 

The profitability of Interpipe’s steel segment
might drop qoq in 3Q20 from USD 19 mln in 2Q20 because of a rise in steel scrap
prices in Ukraine.