Interpipe pipe sales volume rebounds 23% m/m in March

Pipe sales volume at Ukraine’s largest producer Interpipe
(INTHOL) was 45.5 kt in March, a 23.0% m/m rise, according to the company’s
March operational report released on Apr. 16. Railway product sales inched up
1.0% m/m to 18.5 kt, while external billet sales skyrocketed 6.9x m/m to 5.5
kt. Total sales volume jumped 23.8% m/m to 69.4 kt.

 

The m/m jump in pipe sales volume in March was driven
by line pipes (+26% m/m to 26.2 kt), welded pipes (+45% m/m to 6.4 kt) and OCTG
pipes (+7% to 11.2 kt).

 

The m/m increase in railway product sales was driven
by sales of wheelsets, which jumped 61.2% m/m to 2.0 kt, which was partially
offset by a decrease in sales of wheels (a 3.4% drop to 16.2 kt).

 

During 1Q20, Interpipe’s pipe sales dropped 28.4% yoy
to 112.2 kt, driven by a 52.6% plunge for welded pipes to 15.4 kt, a 33.1% drop
for OCTG pipes to 30.1 kt, and a 12.2% drop for line pipes to 62.6 kt. Railway
product sales in 1Q20 jumped 27.1% yoy to 58.2 kt, driven mostly by a 24.1%
rise for wheels to 51.7 kt and a 77.8% jump for wheelsets to 5.4 kt.

 

Interpipe’s share of pipe sales in Ukraine in 1Q20
dropped 7pp in comparison with 2019 to 18%, and the share of sales in the
Americas plunged 13pp to 11%. At the same time, Europe’s share in pipe sales
gained 8pp to 32%, and the share of MENA rose 9pp to 24%. The share of CIS
countries in 1Q20 rose 2pp to 12%.

 

The share of railway product sales in Ukraine in 1Q20
dropped 5pp compared with 2019 to 17%, while the share of sales to Europe
gained 4pp to 30% and the share of sales to CIS countries remained unchanged at
45%.

 

Regarding production volumes, which might be
indicative of sales volumes in future months, Interpipe’s production of pipes
gained 13.4% m/m to 43.4 kt in March, while railway product output inched up
4.3% m/m to 19.0 kt.

 

Dmytro Khoroshun: Interpipe’s
pipe sales in March are only 9% below the average 2019 monthly level of 50 kt.
The average monthly pipe sales volume in 1Q20 was 37.4 kt, 25% below the 2019
average. However, in 2Q20-3Q20 these volumes are likely to plunge due to the
crash of the oil markets and the coronavirus pandemic.

 

Recall, Interpipe’s CEO Fadi Hraibi warned in late March that the
company’s pipe sales and production volumes might plunge 30-50% in 2Q20-3Q20,
but he did not specify the comparison base for that decline. A 30-50% yoy drop
will bring Interpipe’s pipe sales monthly volume to 25-35 kt, whereas a 30-50%
drop from the 1Q20 levels will result in 19-26 kt per month of pipes sold.

 

Because pipe sales volumes in March approached very
closely the average 2019 monthly level, it is possible that Hraibi’s comparison
base was 2019, not 1Q20. In any case, the situation on the oil markets and in
the world economy in general remains negative and uncertain for the company’s
pipe segment.

 

We continue to expect Interpipe will report by
the end of April net revenue of USD 1,112 mln (a 4%
yoy rise) and EBITDA of USD 277 mln (a 76% yoy jump) for 2019.