Interpipe NTRP plant reaps benefits of lucrative railcar wheel market

Interpipe NTRP, a subsidiary of Ukraine’s largest pipe
producer Interpipe (INPIP), boosted its EBITDA 44% yoy to USD 74.7 mln in 1H19,
according to the company’s quarterly financial report published on July 30. The
plant’s revenue improved 8% yoy to USD 283.7 mln in 1H19.

The sale price for railcar wheels jumped to 1,683
USD/t in 1H19, which is 39% higher than the average price for 2018, according
to Concorde Capital’s analysis of Interpipe NTRP financial data.

Dmytro Khoroshun: The USD 23
mln jump in EBITDA is well explained by the increase in Interpipe’s railcar
wheel sales price, which is the result of a shortage at the Russian market.

Several Interpipe plants, including its largest pipe
producer Interpipe Niko Tube, do not publish their financial data, nor does
Interpipe disclose its consolidated results. However, considering that in 2017
Interpipe NTRP had an EBITDA of USD 44.5 mln while Interpipe’s total EBITDA was reportedly around USD 120 mln,
we think that Interpipe must have had a good 1H19, with its consolidated EBITDA
likely above USD 100 mln.

Considering the recent temporary suspension of the 34.22% duty
on imports of Interpipe’s wheels into Russia until June 1, 2020, a similarly
solid performance in 2H19 and 1H20 might be expected of Interpipe.

We hope that this profitability boost does not
distract the company’s creditors from finishing the restructuring of the
company’s debt, which was last reported to be due by June’s end.
We believe it would be unwise to try to react to the temporary 2019-2020 rise
in profitability by revising the terms of the restructuring deal. That’s
because the railcar wheel deficit in Russia, which boosted Interpipe’s
profitability, is widely expected to be over by the end of 2020.