The Russian pipe producer TMK Group (TMK) has announced its preliminary financial figures for 2008, in advance of the publication of its audited IFRS full year, which is to be released in April 2009.
Accordingly, in 2008 TMK successfully completed all of its planned investment projects, improved its financial performance, restructured its debt portfolio and became a truly global company following the acquisition of IPSCO production assets in the United States, the world's largest tubular market.
Despite oil prices falling in the second half of 2008, Russian demand for seamless OCTG and line pipe remained stable, while the North American OCTG and line pipe market grew by about 8 percent in 2008. Driven by strong demand, prices in these segments showed resilience despite the sharp drop in steel prices in the second half of the year. Compared to 2007, pipe prices in Russia and US increased between 10-20 percent and 70-80 percent respectively, depending on the type of pipe.
Favorable raw material prices in the second half of the year partly offset the negative effects of the global financial crisis and weakening demand in the seamless and welded industrial pipe segments. Compared to Q3 2008, the Russian industrial pipe market fell by 50 percent in Q4, with prices falling 15 percent from their August peak.
TMK expects its 2008 consolidated revenues to be about $5.8 billion, while its 2008 EBITDA, adjusted for FX changes and non-cash items, to exceed $1 billion.
In 2009, TMK expects the demand for large diameter pipes in Russia to grow by 10-15 percent in 2009, due to ongoing pipeline projects, but await a decline of Russian seamless OCTG and line pipe markets by 10 to 15 percent in the first half of 2009. In the first quarter of 2009, TMK sees pipe prices in Russia declining some 20 percent over Q4 2008 prices before leveling out.
Meanwhile, North American spending for exploration and production is expected to decline by 25-30 percent, however, TMK does not expect 2009 prices to dip below beginning of year 2008 prices.
Furthermore, in 2009, TMK expects to keep production volumes, despite fall in pipe demand and prices. In addition, a lower raw material price for welded and seamless pipe production coupled with a technologically superior product mix is to help the company's margins in 2009.