Interpipe wheel sales volume rebounds 42% m/m in July

Railway product sales volume at Ukraine’s largest
producer Interpipe (INTHOL) was 15.0 kt in July, a 41.7% m/m jump, according to
the company’s monthly operational report released on Aug. 17. Pipe sales
dropped 20.6% m/m to 38.9 kt, while external billet sales plunged 60.6% m/m to
2.1 kt. Total sales volume decreased 13.7% m/m to 56.0 kt.

 

The m/m jump in railway product sales in July was
driven by sales of wheels (+47.7% m/m to 12.8 kt). Deliveries of railway
products to Russia and other Eurasian Economic Union (EAEU) countries recovered
in July, as the share of CIS countries in its sales volumes rebounded to 45% in
July from 13% in June, according to Interpipe’s report.

 

The m/m loss in pipe sales volume in July was driven
by the plunge for line pipes (-42% m/m to 18.9 kt), partially offset by a gain
for OCTG pipes (2.1x m/m to 8.9 kt).

 

During 7M20, Interpipe’s pipe sales dropped 24.0% yoy
to 275.2 kt, driven mostly by a 52.6% plunge for OCTG pipes to 53.3 kt and a
30.1% drop for welded pipes to 46.8 kt. Railway product sales in 7M20 inched up
4.2% yoy to 119.5 kt, driven mostly by a 48.3% jump for wheelsets to 12.0 kt.

 

Ukraine’s share of pipe sales in 7M20 dropped 7pp from
2019 to 18%, and the share of sales in the Americas plunged 12pp to 12%. At the
same time, Europe’s share in pipe sales gained 7pp to 31%, and the share of
MENA rose 9pp to 24%. The share of CIS countries in 7M20 climbed 2pp to 12%.

 

The share of its railway product sales in Ukraine in
7M20 dropped 8pp from 2019 to 14%, while the share of sales to Europe gained
9pp to 35% and the share of sales to CIS countries slid 2pp to 43%.

 

Regarding production volumes, which might be
indicative of sales volumes in future months, Interpipe’s pipe production lost
13.7% m/m to 34.0 kt in July, while railway product output rose 16.0% m/m to
14.1 kt. Steel production slid 5.2% m/m in July to 57.0 kt.

 

Dmytro Khoroshun: It is
positive that Interpipe’s sales volumes of railway products to the Russian/EAEU
market rebounded in July after a plunge in June that was possibly related to the reintroduction of a 34.22% import duty
by the EAEU from June 2.

 

Nevertheless, because of the recent drop in Ukraine’s export
prices for railway products, we
continue to see a significant risk of 50% or even larger plunge in Interpipe’s
railway product segment EBITDA in 3Q20 (before reallocation from its steel
segment) from its 1Q20 USD 70 mln level.