Khartsyzk Tube's (HRTR -SELL) Sales Rise 45% In 2004 To USD 109 Mn

HRTR’s EBITDA was slashed 42% in 2004 to USD 8.8 mn. The EBITDA margin declined from 20.2% in 2003 to 8% in 2004. For the same period, the net margin fell from 2.78% to 0.36%. Concorde Capital: The reduced profitability of HRTR can be attributed to an increase in COGS by 68.9% yoy, which significantly exceeded sales growth. Apparently, the cost of strip needed for making LD pipes grew faster than the prices HRTR charged for its pipes. This is due to the fact that HRTR works under a tolling agreement with Azovstal, which supplies it with strip feedstock. Azovstal and SCM’s trader, Leman Pipe, sell HRTR?s pipes to Russia and other regions at prices significantly higher than those charged by HRTR.