Interpipe EBITDA rises 6% in 2020

EBITDA at Ukraine’s largest pipe and railway wheel
producer Interpipe (INTHOL) rose 6% yoy to USD 273.1 mln in 2020, according to
the company’s financial statements published on April 26. Net profit amounted
to USD 195.1 mln in 2020, a 76% yoy drop.

 

Interpipe’s revenue dropped 23% yoy to USD 865.1 mln
in 2020, driven by a 29% drop in its pipe segment revenue to USD 467.2 mln.
Revenue from its railway product segment decreased 16% yoy to USD 359.3 mln.

 

EBITDA (before reallocation from its steel segment) of
Interpipe’s railway product segment dropped 17% yoy to USD 157.5 mln in 2020.
EBITDA of its pipe segment plunged 40% yoy to USD 20.7 mln in 2020. EBITDA of
Interpipe’s steel segment skyrocketed 2.9x yoy to USD 92.6 mln in 2020.

 

For 4Q20, Interpipe’s railway product segment EBITDA
plunged 37% qoq to USD 18.0 mln, despite a 15% qoq rise in prices and a 6% qoq
increase in sales volumes. Its pipe segment EBITDA dropped 15% qoq to USD 10.5
mln in 4Q20, and its steel segment EBITDA gained 8% qoq to USD 27.4 mln.

 

The company’s net operating cash flow dropped 15% yoy
USD 159.9 mln in 2020, while its CapEx decreased 26% yoy to USD 44.0 mln in
2020. Free cash flow was USD 120.7 mln in 2020, down 9% yoy.

 

At end-2020, Interpipe’s gross debt amounted to USD
119 mln (gross debt / L12M EBITDA 0.4x) and its net debt amounted to USD 22 mln
(net debt/EBITDA 0.1x). Interpipe had USD 97 mln in cash at the end of 2020, a
62% yoy drop.

 

In March 2021, Interpipe declared and paid USD 40 mln
in dividends following the full repayment of its Eurobondin January.

 

Dmytro Khoroshun: Interpipe’s
EBITDA will plunge at least 30-40% yoy in 2021, but the planned Eurobond
issuance should provide the company with a cash cushion to comfortably go
through the decrease in its profitability.

 

The 37% qoq plunge in Interpipe’s railway product
segment EBITDA to USD 18 mln despite a 15% qoq rise in prices (we expected a 10% qoq
increase in EBITDA to USD 32 mln and a 1% qoq increase in prices) is puzzling.
One possible explanation is the company’s steel segment charging more for its
billets for railway wheel production due to the rise in steel prices that
started in November. This would explain why Interpipe’s steel segment’s 4Q20
EBITDA, USD 27.4 mln, exceeded our USD 13 mln estimate (by the same USD 14 mln
amount by which railway product segment’s EBITDA undershot our expectations).

 

We also note that Interpipe’s total 4Q20 EBITDA,
USD 56.7 mln, was substantially, by USD 16 mln, better than USD 41 mln we
expected. Pipe segment EBITDA, USD 10.5 mln, was also USD 16 mln higher than
the negative USD 5 mln we expected. One possible contribution is the reversal
of provisions, the gross amount of which was USD 34.6 mln for 2020. The net
movement in provisions for 2020 was a negative (net reversal) USD 18.6 mln,
including a negative USD 25.5 mln for the company’s pipe segment. Recall, for
3Q20 Interpipe reported that its pipe segment EBITDA, USD 12 mln, included a USD 14 mln contribution from release of provisions.