Interpipe EBITDA rises 8% in 9M20

EBITDA at Ukraine’s
largest pipe and railway wheel producer Interpipe (INTHOL) rose 8% yoy to USD
216 mln in 9M20, according to the company’s financial statement and
accompanying presentation published on Dec. 16. The company’s net profit was
USD 162 mln in 9M20, compared with a USD 61 mln loss a year before.

Interpipe’s revenue
dropped 24% yoy to USD 660 mln in 9M20, driven mostly by a decline in pipe
segment revenue by
35% yoy to USD 349 mln. The decline was due to both sales volume declining (by 24% yoy) and
lower prices (down 14%, on average). Revenue from its railway product segment
decreased 6% yoy to USD 280 mln on a moderate (3% yoy) decline in both,
prices and volumes.

The company’s EBITDA
in its railway product segment (before reallocation from its steel segment)
increased 14% yoy to USD 140 mln in 9M20. Its pipe segment EBITDA was USD 10
mln (down 79% yoy), while its steel segment EBITDA surged 123% yoy to USD 67
mln in 9M20.

In 3Q20, Interpipe’s
railway product revenue plunged 27% qoq to USD 64 mln (mostly due to a 22% qoq
decline in prices) and the segment’s EBITDA plunged 29% qoq to USD 29 mln. Its
pipe segment revenue decreased 2% qoq to USD 117 mln and EBITDA surged 4x qoq
to USD 12 mln in 3Q20 (which the company attributed to a USD 14 mln release of
provisions).

Interpipe’s net
operating cash flow decreased 3% yoy USD 120 mln, while its cash ouflow for
investments decreased 32% yoy to USD 26 mln in 9M20.

The company directed
USD 218 mln for debt repayment in 9M20, making its gross debt falling 64% YTD
to USD 122 mln and the ratio of gross debt to L12M EBITDA falling to 0.44x as of end-September (from
1.31x as of end-December 2019). Its net debt decreased 85% YTD to USD 12 mln.

In its presentation
to investors, the company stated that its 4Q20 operating performance is expected to be similar
to 3Q, while its costs are likely to be inflated further due to increased
prices for key inputs, scrap metal and energy.

Alexander
Paraschiy: The company’s
3Q railway product EBITDA is fully in line with our estimates, while we were expecting a more
moderate decline in average prices in the segment. The quarterly results of the
company’s pipe segment are weaker than we expected. We see the company will be
able to show a slight increase in its EBITDA in 2020, while in the next year
the company’s P&L will likely deteriorate on weakness in the railway
segment. As the company did a good job in decreasing its debt in 2020, a
possible future decline in its earnings is not a risk for its stability.