 |
November 16, 2007 |
|
|
|
 |
TMK OAO: Moody's Changes Outlook on Ba3 Rating to Positive Moody's Investors Service changed the outlook on the Ba3 corporate family and the Aa3.ru national scale ratings of TMK and the B1 senior unsecured rating of the loan participation notes issued by TMK Capital S.A. to positive from stable. "The change in the outlook to positive reflects TMK's continuous robust performance in 2006 and the first half of 2007 and Moody's expectation that the global and, in particular, the Russian tubular goods market will remain benign and will continue to support the financial performance of the company," Larissa Loznova, Vice President -- Senior Analyst at Moody's and lead analyst for TMK, said. In first half 2007, TMK reported US$2.03 billion in revenues, an increase of 28% compared to first half 2006, and US$500 million in EBITDA, leading to an improved EBITDA margin of 25% (vs. 23.5% in 2006), while cash flow generation before capital expenditure and working capital changes remained strong. The positive outlook reflects: (i) TMK's strong position as the market leader in Russia, especially in its most lucrative segment OCTG. (ii) the ongoing and so far successful implementation of the strategic investment program, which encompasses modernization of existing facilities and improved vertical integration with acquisitions of upstream and downstream assets. The positive outlook also reflects Moody's expectation that TMK should sustain its strong financial metrics and maintain cash flow cushion to service the existing debt through the cycle, particularly as its substantial capex program in Russia is at its final stages. Provided that: (i) the positive trend in TMK's industry continues, (ii) the implementation of TMK's sizeable capex program in 2007 and during the course of 2008 will not lead to a significant deterioration of TMK's leverage ratios (as per 06/2007 RCF/Net Debt is 50.8%), (iii) TMK successfully refinances its short term debt maturities and other cash outflows and (iv) the strong increase of its net working capital in the first half 2007 can be reversed in 2008, an upgrade within the next 12 months is possible. Notwithstanding the positive development for TMK, the rating also takes into account: (i) the inherently volatile oil and gas industry; (ii) cost pressures associated with volatile steel and scrap prices; (iii) competition from other Russian producers and imports, notably from Ukraine, in certain product segments; (iv) the potential appetite for international acquisitions; (v) the concentration of ultimate control with one individual controlling the company and (vi) the challenging operating environment in Russia, which is characterized by significant political, legal, fiscal and exchange rate risks. The ratings affected by the action are: -- Corporate Family Ratings at TMK Group. -- Ba3; -- Senior Unsecured rating on global bonds at TMK Capital S.A/. -- B1; -- National scale credit rating at TMK Group. -- Aa3.ru. TMK is Russia's largest and one of the world's leading manufacturers of value-added steel pipe products for the oil & gas industry. TMK has shipped more than 3 million metric tonnes of pipe products, generated revenues of US$3.4 billion and EBITDA of US$794 million in 2006. After the IPO, 77.02% of OAO TMK is indirectly fully owned by Dr. Dmitriy Pumpyanskiy. |
|
|
||
|
Today's Top Stories have been selected from the Troubled Company Reporter - Europe. To receive the Full TCR-EUR please CLICK HERE.
