Tmk · RUS:TRMK

Tmk — Q1 2021 Earnings Presentation

48 slides from Tmk's earnings presentation, June 2021

  1. Slide 1: TMK IR Presentation

    TMK IR PRESENTATION June 2021

  2. Slide 2: Contents

    Contents I. COMPANY OVERVIEW 2 II. TMK RUSSIAN DIVISION: MARKET OVERVIEW 8 III. TMK EUROPEAN DIVISION: MARKET OVERVIEW 15 IV. STRATEGIC OVERVIEW 19 V. ENVIRONMENTAL, SOCIAL & GOVERNANCE 22 VI. SUMMARY FINANCIAL RESULTS 27 VII. APPENDIX – SUMMARY FINANCIAL ACCOUNTS 37 VIII. APPENDIX – TMK PRODUCTS 42

  3. Slide 3: Company Overview

    Company Overview TMK 2

  4. Slide 4: TMK – Global Supplier of Full Range of Pipes for Oil and Gas Industry

    TMK– Global Supplier of Full Range of Pipes for Oil and Gas Industry The largest steel pipe producer globally TMK sales by region TMK sales by product (12M 2020, revenue) (12M 2020, in tonnes) ME, Asia and Share of Oil & Gas = 74% CIS; Africa; 2% 8% Europe; 11% Seamless; 72% Americas; 2% Welded; Rus

  5. Slide 5: Chelpipe acquisition

    Chelpipe acquisition Transaction highlights Chelpipe overview  Favorable location of assets close to major customers and raw material  In March 2021 TMK acquired 86.54% of shares in PJSC "ChelPipe" suppliers  The deal was financed largely out of TMK own funds as well as debt  Own scrap collectio

  6. Slide 6: TMK Today – Key Investment Highlights

    TMK Today – Key Investment Highlights Industry-leading market position and large modern asset base  #1 player in Russian pipe market and #1 steel pipe producer globally  State-of-the-art production base with major investments completed over 10 years in 2004-14  Established longstanding relationsh

  7. Slide 7: TMK – Superior Earnings Resilience Through the Cycle

    TMK – Superior Earnings Resilience Through the Cycle Competitor 1 Competitor 2 3,784 3,989 3,828 3,458 3,571 3,271 1,113 1,246 1,177 2,811 877 1,046 2,618 671 2,398 2,364 Total 2,256 2,291 785 1,990 461 480 pipes sales 355 1,599 1,281 volume(a) 2,412 2,671 2,743 2,651 710 2,694 2,600 2,026 2,157 1,9

  8. Slide 8: Strong Position in Multiple End-Markets for Pipes Beyond Oil & Gas

    Strong Position in Multiple End-Markets for Pipes Beyond Oil & Gas Automotive Civil Construction  TMK-ARTROM is qualified as an authorised supplier for  Galvanised pipe for the outer steel frame of the Otkritie Dacia (a subsidiary of Renault) Arena stadium in Moscow  Impact resistant seamless pip

  9. Slide 9: TMK Russian Division: Market Overview

    TMK Russian Division: Market Overview TMK 8

  10. Slide 10: Oil Production Trends in Russia Create Long-term Demand for High-End Oil & Field Services

    Oil Production Trends in Russia Create Long-term Demand for High- End Oil & Field Services Supported by increasing development of greenfields and Russian total oil output hard-to-recover reserves 11.5 CAGR’21-26(a): +9% 22% (% of total oil production 11.0 20% 16% MMbpd 10.5 14% 14% 11% 11% 10% 10.0

  11. Slide 11: Attractive Portfolio of Premium OCTG Projects

    Attractive Portfolio of Premium OCTG Projects Arcticgas Yamal LNG, Arсtic LNG, Vostok Oil Vankorskoye cluster Ob LNG fields • 2018-2023 • 2014-2023 • 2021-2025 • 2008-2023 • OCTG with premium • OCTG, including pipes • OCTG with premium • OCTG, including pipes with RN- connections with premium connec

  12. Slide 12: TMK's Home Market is One of the Lowest Cost Oil Producing Regions

    TMK’s Home Market is One of the Lowest Cost Oil Producing Regions Global oil production supply curve Coal to Liquid Gas to Liquid 125 Low-cost supply completely in the money at current Brent price Asia DW(3) Permian tight Breakeven price (U.S.$/Boe)(1) 100 Bakken Oil Sands Canadian (primarily Brazil

  13. Slide 13: Strong Position on the Domestic Market

    Strong Position on the Domestic Market 12 No.1 on the Russian tube and pipe market (1Q 2021) 10 Market share of Market share of Non-Energy total pipe market energy pipe demand 8 mln tonnes 6 TMK TMK 39% 70% 4 Energy 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022

  14. Slide 14: LDP Demand in Russia

    LDP Demand in Russia LDP demand in Russia, 2012–2023E 3,500 15% 3,000 2,500 20% 20% '000 tonnes 26% 2,000 26% 35% 25% 26% 30% 30% 9% 1,500 31% 30% 15% 11% 30% 9% 11% 20% 41% 14% 65% 12% 1,000 26% 12% 65% 54% 59% 64% 61% 54% 500 54% 58% 50% 44% 47% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F

  15. Slide 15: Technology cooperation programmes

    Technology cooperation programmes ROSNEFT GAZPROM Within the technology partnership programme (2021-2024), 5 R&D cooperation Programmes implemented in 1998-2020 cooperation has been organized in the following areas:  Pipeline transportation (oil and gas line pipe, including with protective Products

  16. Slide 16: TMK European Division: Market Overview

    TMK European Division: Market Overview TMK 15

  17. Slide 17: Well Established European Steel Platform With a Strong and Resilient Business Model

    Well Established European Steel Platform With a Strong and Resilient Business Model  VERTICALLY INTEGRATED → Steel and seamless steel pipes platform integrated upstream with a modern mini-mill and downstream with three trading entities well positioned to serve Production Units Trading Entities clie

  18. Slide 18: Diversified And Attractive Global Customer Base

    Diversified And Attractive Global Customer Base Core countries Others TMK-ARTROM sales by region in 2020 (in terms of value) RoW Americas 1% 10% Europe 89% Americas includes also Canada, Brazil, US, Mexico Europe includes also Middle East, Turkey and North Africa  45 countries with a focus on Europ

  19. Slide 19: Distinctive Product and Client Portfolio Decoupling the Company from the Global Steel Market

    Distinctive Product and Client Portfolio Decoupling the Company from the Global Steel Market Strongly positioned in multiple end-markets for pipes, …quality oriented and certified for the automotive industry, beyond oil & gas… differentiating the Company from most of its peers In volume terms, 2020

  20. Slide 20: Strategic Overview

    Strategic Overview TMK 19

  21. Slide 21: Strategy 2027 Targets

    Strategy 2027 Targets  Strengthening leading positions in key product segments both in the Russian and global markets Operating  Maintaining a stable financial position in line with the world's leading pipe manufacturers, maximizing operating cash flows and optimizing the asset portfolio  Expandi

  22. Slide 22: Debt Maturity Profile as at March 31, 2021

    Debt Maturity Profile as at March 31, 2021  Total debt(1) amounted to RUB 347.5 billion ($4.6 billion*) as at 1,200 1,134 March 31, 2021. EUR  Net debt(2) amounted to RUB 260.7 billion ($3.4 billion*) as at RUB March 31, 2021. 1,000 264  The weighted average nominal interest rate increased by 25

  23. Slide 23: Environmental, Social & Governance

    Environmental, Social & Governance In 2019 TMK received an MSCI ESG Rating* of BB Note: (*) disclaimer link: https://www.msci.com/documents/1296102/15233886/How-to-Reference-an- MSCI-ESG-Rating-Final.pdf/c2ca92cb-1783-ae6e-d351-f9920c18b79b?t=1564729359833 Governance…… 3 (as of March, 2021) Lower go

  24. Slide 24: Corporate Governance

    Corporate Governance Composition of the Board of Directors Structure of the Board of Directors Capital structure Dmitry Pumpyanskiy  Founder of TMK Chairman Non-Executive Director  Member of the Board of Directors since 2004 Free float TMK Steel Holding 4.36% Ltd, incl. affiliates  25+ years of s

  25. Slide 25: Environmental Protection and Health & Safety

    Environmental Protection and Health & Safety Environmental management Health & Safety >20 investment projects in 2020 Water and Waste management Annual Steel Safety Day key results in 2020:  Approx. 40k employees of TMK and Key area: air protection contractors participated Total environmental expen

  26. Slide 26: Social

    Social Local communities Charity and social initiatives > RUB 185m donated by TMK Providing support to local Social and charitable activities of TMK are implemented through enterprises to a range of charities communities the corporate charity fund Sinara launched in 2001  Building up professional e

  27. Slide 27: Personnel

    Personnel Personnel management Personnel development 37.2 thousand employees as of end 2020 USD 1.5m invested in training and personnel development in 2020 94% employees at the Russian division, 6% - at the European division Corporate University ТМК2U is the main educational center Staff breakdown b

  28. Slide 28: Summary Financial Results

    Summary Financial Results TMK 27

  29. Slide 29: Consolidated Results Snapshot (RUB)

    Consolidated Results Snapshot (RUB) Revenue Volumes and realised prices 60.66 350 Average 66,9 58,4 62,7 64,7 72.2 74.3 USD/RUB rate(a) 65 300 Average 65 67 81 83 82 82 revenue per 250 RUB bn tonne, th RUB 53 57 64 63 51 60 5,000 200 3,784 3,989 3,828 Thousand tonnes 319 4,000 3,458 150 308 256 1,11

  30. Slide 30: Consolidated Results Snapshot (USD)

    Consolidated Results Snapshot (USD) Revenue Volumes and realised prices Average 66.90 58.35 62.71 64.62 72.15 74.3 6,000 USD/RUB rate(a) Average USD $970 $1,152 $1,294 $1,288 $1,138 $1,109 5,000 revenue/ tonne $796 $976 $1,021 $981 $713 $803 US$ mln 4,000 5,000 Thousand tonnes 3,784 3,989 3,828 3,00

  31. Slide 31: Gross Margin, SG&A and Cash Conversion (RUB)

    Gross Margin, SG&A and Cash Conversion (RUB) Gross profit SG&A and corporate overheads(a) 70 22% 25% 40 35.7 20% 20% 31.7 32.4 33.1 60 18% 19% 20% Gross profit margin, % 30 50 40 15% RUB bn RUB bn 20 30 57.5 61.6 10% 50.6 48.6 11.0 20 10 5% 10 12.5 0 0% 0 2017 2018 2019 2020 2021 1Q 2017 2018 2019 2

  32. Slide 32: Gross Margin, SG&A and Cash Conversion (USD)

    Gross Margin, SG&A and Cash Conversion (USD) Gross margin SG&A and corporate overheads(a) 1,000 22% 25% 800 21% 20% 20% 19% 800 18% 20% Gross profit margin, 600 544 518 552 459 600 15% US$ mln US$ mln 952 400 872 916 400 10% % 704 673 200 149 200 5% 168 0 0% 0 2016 2017 2018 2019 2020 2021 1Q 2017 2

  33. Slide 33: Segmental Performance

    Segmental Performance Russian division European division 1,490 1,553 1,590 1,529 Sales 1,435 1,432 1,320 1,318 volume (ths. tonnes) 664 93 92 100 100 99 88 84 90 46 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1Q21 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1Q21 25.0 Adjusted 19.6 EBITDA(a), 16.9 16.9 15.2

  34. Slide 34: 1Q 2021 vs. 4Q 2020 Summary Financial Highlights

    1Q 2021 vs. 4Q 2020 Summary Financial Highlights Revenue increased QoQ, due to a gradual recovery in business Sales declined QoQ, mainly due to lower sales of large diameter activity, resuming demand in the key sales markets, as well as the pipe at the Russian division consolidation of the results o

  35. Slide 35: 1Q 2021 vs. 1Q 2020 Summary Financial Highlights

    1Q 2021 vs. 1Q 2020 Summary Financial Highlights Sales declined marginally YoY, mainly due to lower sales of large Revenue increased YoY, due to a gradual recovery in business diameter pipe, which were compensated by higher sales of activity, a resuming demand in the key sales markets, as well as in

  36. Slide 36: 1Q 2021 vs. 4Q 2020 Sales by Division and Product Group

    1Q 2021 vs. 4Q 2020 Sales by Division and Product Group Sales by division  Russian division sales decreased QoQ, mainly due to the lower -4% sales of large diameter pipe 900  European division sales remained flat QoQ Thousand tonnes 600 689 664 -1% 300 46 46 0 Russia Europe 4Q2020 1Q2021 Sales by

  37. Slide 37: 1Q 2021 vs. 1Q 2020 Sales by Division and Product Group

    1Q 2021 vs. 1Q 2020 Sales by Division and Product Group Sales by division  Russian division sales decreased YoY, mainly due to the lower 800 -2% sales of OCTG on the back of the decline in demand for oil and reduction in drilling volumes as a result of OPEC+ oil production cuts and large diameter p

  38. Slide 38: Appendix – Summary Financial Accounts

    Appendix – Summary Financial Accounts TMK 37

  39. Slide 39: Key Consolidated Financial Highlights

    Key Consolidated Financial Highlights (RUB mln)(a) (US$mln)(a) 2020 2019 2018 2020 2019 2018 Revenue 222,621 308,378 319,399 3,086 4,764 5,099 Adjusted EBITDA(b) 42,480 43,540 44,052 589 673 700 Adjusted EBITDA Margin(b)(%) 19% 14% 14% 19% 14% 14% Profit (Loss) 24,301 3,946 2,142 337 61 - Net Profit

  40. Slide 40: Income Statement

    Income Statement (RUB mln) (US$mln) 2020 2019 2018 2020 2019 2018 Revenue 222,621 308,378 319,399 3,086 4,764 5,099 Cost of sales (174,051) (246,736) (261,915) (2,412) (3,811) (4,183) Gross Profit 48,570 61,642 57,484 673 952 916 Selling and Distribution Expenses (17,180) (15,372) (14,377) (238) (23

  41. Slide 41: Statement of Financial Position

    Statement of Financial Position (RUB mln) (US$mln) 2020 2019 2018 2020 2019 2018 ASSETS Cash and Cash Equivalents 73,036 21,899 27,221 989 354 392 Accounts Receivable 71,857 65,910 61,005 973 1,065 878 Inventories 61,805 56,281 74,074 837 909 1,066 Prepayments 16,860 9,845 7,028 228 159 101 Other Fi

  42. Slide 42: Cash Flow

    Cash Flow (RUB mln) (US$mln) 2020 2019 2018 2020 2019 2018 Profit / (Loss) before Income Tax 30,358 6,027 5,004 421 93 45 Adjustments for: Depreciation and Amortisation 12,382 13,043 16,473 172 201 268 Net Finance Cost 11,874 14,104 16,765 165 218 232 Others (20,309) 9,462 13,384 (281) 146 137 Worki

  43. Slide 43: Appendix – TMK Products

    Appendix – TMK Products TMK 42

  44. Slide 44: Utilisation of TMK Pipe Products in Oil and Gas Industry

    Utilisation of TMK Pipe Products in Oil and Gas Industry  OCTG – Oil Country Tubular Goods (drilling, casing, tubing) used for oil & gas exploration, well fixing and oil & gas production  Line pipe – used for short distance transportation of crude oil, oil products and natural gas  LDP - large di

  45. Slide 45: Wide Range of Products and Services

    Wide Range of Products and Services Seamless Welded Premium Threads Premium connections are Threaded pipes for the oil and proprietary value-added The short-distance gas industry including drill pipe, products used to connect OCTG transportation of crude oil, oil casing and tubing. pipes and are use

  46. Slide 46: Premium Solutions: TMK UP Series

    Premium Solutions: TMK UP Series Lite Series • Gas wells • Higher pressure Higher resistance to torque for casing while drilling and rotating • Steam-Assisted Gravity Drained (SAGD) • Offshore Classic Series • When casing is rotated and pushed into place • Oil wells with high gas-oil ratio Easy and

  47. Slide 47: High-tech OCTG Pipe Solutions for Oil & Gas Industry

    High-tech OCTG Pipe Solutions for Oil & Gas Industry TMK UP™ TMK UP™ TMK UP™ TMK UP™ TMK UP™ TMK UP™ TMK UP™ TMK UP™ CWB Magna GF FMC FMT PF PF ET CENTUM CAL IV CAL IV CAL IV  Onshore and offshore fields  Horizontal and directional drilling  High H₂S and CO₂ concentrations  Drilling with casing

  48. Slide 48: TMK Investor Relations

    TMK Investor Relations 40/2a, Pokrovka Street, Moscow, 105062, Russia +7 (495) 775-7600 [email protected] Learn more Premium connections TMK E-trade About TMK TMK UP www.e-commerce.tmk-group.com www.tmk-group.ru www.tmkup.ru

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