Interpipe pipe sales volume skyrockets 60% m/m in May

Pipe sales volume at Ukraine’s largest producer
Interpipe (INTHOL) was 46.6 kt in May, a 60.3% m/m jump, according to the
company’s monthly operational report for May released on June 22. Railway
product sales gained 8.1% m/m to 18.7 kt, while external billet sales jumped
59.7% m/m to 3.0 kt. Total sales volume jumped 41.6% m/m to 68.6 kt.

 

The m/m jump in pipe sales volume in May was driven by
line pipes (+83.4% m/m to 32.8 kt) and welded pipes (+127% m/m to 8.7 kt),
partially offset by OCTG pipes (-36.2% m/m to 3.9 kt).

 

The m/m advance in railway product sales was driven by
sales of wheels (+6.6% m/m to 16.2 kt) and wheelsets (+24.9% m/m to 1.9 kt).

 

During 5M20, Interpipe’s pipe sales dropped 27.8% yoy
to 188.1 kt, driven mostly by a 50.7% plunge for OCTG pipes to 40.3 kt and a
41.7% drop for welded pipes to 27.9 kt. Railway product sales in 5M20 jumped
17.9% yoy to 94.1 kt, driven mostly by a 15.8% rise for wheels to 82.9 kt and a
52.9% jump for wheelsets to 8.9 kt.

 

Interpipe’s share of pipe sales in Ukraine in 5M20
dropped 8pp from 2019 to 17%, and the share of sales in the Americas plunged
13pp to 11%. At the same time, Europe’s share in pipe sales gained 10pp to 34%,
and the share of MENA rose 8pp to 23%. The share of CIS countries in 5M20 rose
2pp to 12%.

 

The share of its railway product sales in Ukraine in
5M20 dropped 7pp from 2019 to 15%, while the share of sales to Europe gained
6pp to 32% and the share of sales to CIS countries inched up 1pp to 46%.

 

Regarding the production volumes, which might be
indicative of sales volumes in future months, Interpipe’s production of pipes
was flat m/m at 40.4 kt in May, while railway product output inched up 1.7% m/m
to 17.6 kt. Steel production added 9.2% m/m to 60.8 kt.

 

In the highlights section of its report, Interpipe
noted that its linepipe sales recovered m/m in May amid lockdown-easing
measures, while low oil prices globally continued undermining OCTG pipe sales.

 

Dmytro Khoroshun: There is a
risk that after May’s rebound, Interpipe’s pipe sales volumes will drop again,
as suggested by the pipe production remaining at 40.4 kt in May.

 

Interpipe’s railway product segment might also
struggle to maintain volumes because it has to partially replace Russia with
other markets after the reintroduction of the 34.22% duty
on imports of its wheels from June 2.

 

One of Interpipe’s strengths is its currently
substantial cash position, USD 190 mln as of mid-June, which allows the company to boost volumes (of both pipes and wheels)
and profits by offering its customers attractive payment terms at the expense
of cash generation. But in doing so, the company has to make sure its
counterparty risk controls are adequate.