Bank of Moscow skeptical of TMK

Pipe Metallurgical Company (TMK) came up with a performance report for 2009. The state of the company’s financial affairs looks a bit bleak: despite EBITDA growing by 84% in the second half of 2009 against the first half, this performance indicator was still below expected and below the market consensus, Bank of Moscow’s Analytical Department reports.

‘The main reason why TMK’s actual results are so different from our forecasts is that the company’s North American division finished the year off with $5m worth of EBITDA losses (in fact, at the end of the first half of 2009 the loss figures came to $14m). Frankly speaking, we had hoped the improved sales in the second half of the year could have made the enterprise’s financial performance look better, but these expectations had to be put off until the year 2010. Actually, the demand keeps going back to normal over the first few months,’ the bank says.

‘With the exception of the North American division’s reports, the company’s papers look not so bad. Due to the shrinking floating capital in the second half of the year, TMK managed to raise its money flow to $566m against only $286m in the first half of 2009. This was enough not only to finance some moderate capital investment ($232m in six months) and relatively big interest payments ($248 in six months) but also to achieve a 2% reduction in the amount of net debt: this figure dropped from $3.56bn to $3.5bn in six months,’ Bank of Moscow’s analysts explain.

Unlike the ferrous metallurgical enterprises, which went back to 100% use of their production facilities as early as last fall, the pipe manufacturers are still gradually returning to their pre-recession production outputs.

‘We believe the growing output and prices will allow TMK to improve its financial performance dramatically this year, which means last year’s report is not so important after all. We intend to reconsider our assessment of the company’s stock by taking into account all the recent trends on the pipe market and TMK’s financial results in 2009,’ the analysts report.


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