Interpipe NTRP plant EBITDA turned negative in 3Q21

EBITDA at Interpipe NTRP, a subsidiary of Ukraine’s
largest pipe and railway wheel producer Interpipe (INTHOL), dropped to negative
USD 2.4 mln in 3Q21 (vs. positive USD 5.9 mln in 2Q21), according to the
plant’s standalone financial report published on Oct. 29. The plant’s revenue
added 4.0% qoq to USD 72.4 mln in 3Q21.

The prices for railway wheels, which Interpipe
produces only at its NTRP plant, were 1,423 USD/t in 3Q21, an 11% qoq increase.

Dmytro Khoroshun: It is
possible that the qoq drop in NTRP’s EBITDA in 3Q21 was driven in part by the
rises in natural gas and electricity tariffs.

In any case, NTRP’s standalone EBITDA does not fully
reflect the profitability of Interpipe’s integrated railway product business,
because a substantial portion of profits
are captured by the group’s steel segment.

Nevertheless, even after reallocation from the steel
segment, the EBITDA of Interpipe’s railway product segment will drop
substantially yoy, possibly by as much as 40-60%, we expect.

There are several reasons to expect such a drop.
First, railway product prices dropped 33% during 2020
and have remained stagnant in 9M21, although some rebound in August and September
was encouraging. Second, Interpipe will likely lose up to 10-20% in railway
product sales volumes due to Russia’s ban on imports
from Ukraine. Third, prices for several cost elements, most importantly for
steel scrap and recently also for natural gas and electricity, jumped in 2021.