Khartsyzsk Pipe revenue falls 74% yoy in 9M13

Khartsyzsk Pipe (HRTR UK) reported revenue of USD 105 mln in 9M13 (-74% yoy), while large diameter pipes production fell 34% yoy. EBITDA plunged 49% yoy to USD 27 mln, while net income decreased 2.5x yoy to USD 12.5 mln. In 3Q13, the company increased revenue 40% yoy to USD 51 mln, production jumped 34% qoq to 96 kt, EBITDA grew 14% yoy to USD 13 mln, and net income surged 44% yoy to USD 8 mln.

Roman Topolyuk: Khartsyzsk Pipe’s bright 3Q13 numbers could have been even better if they reported a selling price for its pipes that was closer to the market, on average. For instance, Russia’s Severstal sold its large diameter pipes for USD 1,393/t in 3Q13 vs. just USD 529/t reported by Khartsyzsk.

If not for these price discounts (which most likely are a result of transfer pricing), Khartsyzsk should have reported a doubled bottom line in 9M13. We don’t expect Khartsyzsk to restart any significant dividends payouts soon considering the current market risks. For example, Kazakhstan, a member of the Customs Union that purchased 84% of the company’s pipes in 9M13, may decrease purchases from Khartsyzsk should the Ukrainian government signs the Association Agreement with the EU.