Khartsyzsk Pipe falls 3x yoy in 1H13

Khartsyzsk Pipe (HRTR UK) reported a 6.5x plunge in 1H13 revenue at USD 54.5 mln in a financial report published on July 24. Khartsyzsk Pipe’s EBITDA fell 7x yoy to USD 14 mln, and net income dropped 7x to USD 4 mln. The significant deterioration in earnings was caused by a decline in orders, which lead to a 53% yoy plunge in pipe production in 1H13 to 127 kt. On a quarterly basis, the plant improved its bottom line, having generated net income of USD 5.7 mln in 2Q13 against a loss of USD 1.7 mln in 1Q13, and having boosted EBITDA 4.9x to USD 12 mln qoq. The pipe production grew 70% qoq to 80 kt in 2Q13. The main markets for 2Q13 sales were Kazakhstan (85% of sales), Ukraine (8%) and Russia (3.7%). Roman Topolyuk: Khartsyzsk Pipe improved its financial performance in 2Q13 due to higher production volumes and new orders from Kazakhstan. June production represented 60% of the normal capacity load compared to around 7% in January, and the company is continuing to ramp up output. Nevertheless, we estimate the company’s production performance needs to be higher and more sustainable before the company returns to its practice of paying out dividends, which ceased in April 2013.