Interpipe railway product sales volume drops 22% m/m in August

Railway product sales volume at Ukraine’s largest
producer Interpipe (INTHOL) was 11.8 kt in August, a 22.1% m/m drop, according
to the company’s monthly operational report released on Sept. 17. Pipe sales
dropped 10.1% m/m to 34.9 kt, while external billet sales lost 22.0% m/m to 1.7
kt. Total sales volume decreased 13.8% m/m to 48.3 kt.

 

The m/m drop in railway product sales in August was
driven by sales of wheels (-23.0% m/m to 9.9 kt).

 

The m/m loss in pipe sales volume in August was driven
by the plunge for OCTG pipes (-38.2% m/m to 5.5 kt) and welded pipes (-20.2%
m/m to 7.6 kt), partially offset by a gain for line pipes (+9.7% m/m to 20.7 kt).
Interpipe’s sales to the MENA region drove the dynamics in sales volumes of
both OCTG and line pipes in August, according to the report.

 

During 8M20, Interpipe’s pipe sales dropped 25.6% yoy
to 310.0 kt, driven mostly by a 53.1% plunge for OCTG pipes to 58.8 kt and a
31.5% drop for welded pipes to 54.4 kt. Railway product sales in 8M20 slid 1.3%
yoy to 131.4 kt, driven mostly by a 5.1% loss for wheels to 114.1 kt, partially
offset by a 40.0% jump for wheelsets to 13.5 kt.

 

Ukraine’s share of pipe sales in 8M20 dropped 6pp from
2019 to 19%, and the share of sales in the Americas plunged 12pp to 12%. At the
same time, Europe’s share in pipe sales gained 6pp to 30%, and the share of
MENA rose 8pp to 23%. The share of CIS countries in 8M20 climbed 3pp to 13%.

 

The share of Interpipe’s railway product sales in
Ukraine in 8M20 dropped 8pp from 2019 to 14%, while the share of sales to
Europe gained 10pp to 36% and the share of sales to CIS countries slid 3pp to
42%.

 

Regarding production volumes, which might be
indicative of sales volumes in future months, Interpipe’s pipe production
gained 19.9% m/m to 40.7 kt in August, while railway product output remained
flat m/m at 14.1 kt. Steel production rose 13.1% m/m in August to 64.2 kt.

 

Dmytro Khoroshun: Regarding
railway products, Interpipe’s average monthly sales volumes so far in 3Q20
(July-August), 13.5 kt, are 13% below the 2Q20 level, which is negative. We
also expect further qoq decline in Interpipe’s railway product prices in 3Q20.

 

Therefore, Interpipe’s railway product segment EBITDA
(before reallocation of steel segment EBITDA) will likely drop further qoq in
3Q20 after a 45% qoq plunge to USD 38 mln in 2Q20 we expect Interpipe to report on September 22.

 

Interpipe’s average monthly sales volumes of pipes
so far in 3Q20, 36.6 kt, are also down qoq, by 12%. However, pipe prices likely
will have increased qoq in 3Q20, which might help this segment’s EBITDA to turn
positive in 3Q20 after the negative USD 5 mln we expect for 2Q20.