12 July 2023

During January-March 2023, Interpipe reduced the volume of sales of pipe and wheel products, but the profitability of the activity remains high.

Interpipe has released its key operating figures and financial report for the first quarter of 2023.

	Q1 2022	Q4 2022	Q1 2023
Steel output, k tons	163	132	184
Pipes output, k tons	94	84	105
Wheels output, k tons	23	19	20
Pipes sales, k tons	103	102	82
Wheels sales, k tons	25	23	19
Revenues, $mln	239	294	229
EBITDA, $mln	15	81	79
Operating cash flow, $mln	60	57	56

In the first quarter of 2023, Interpipe improved production figures both in comparison with the previous quarter and the corresponding period ща еру last year.

Steel output comprised 184,000 tons (132,000 tons in the previous quarter, the main reason for the increase is the improvement of the situation with electricity supply). In accordance with this, the production of pipe products also increased - up to 105 thousand tons (84 thousand tons in the fourth quarter of 2022), while the output of railway products remained almost unchanged (20 thousand tons).

Sales volume in the reporting quarter, on the contrary, significantly decreased. Pipe sales decreased by 20% compared to the previous quarter to 82,000 tons. In our opinion, one of the reasons is a significant decrease in product stocks as of January-February (in the fourth quarter of 2022, sales significantly exceeded production - due to restrictions on electricity supplies).

In turn, in the comments to the report, Interpipe also notes some worsening of the situation on the market (especially this applies to the most marginal type of product – OCTG pipes), which was favorable during most of 2022.

Interpipe's total revenue in the first quarter of 2023 was $229 million, compared to $294 million in the previous quarter and $239 million in the first quarter of 2022.

Due to duty-free access to premium US and EU markets and relatively cheap raw materials (mainly metal scrap) in Ukraine because of the war, profitability remains very high. In the reporting quarter, Interpipe's EBITDA amounted to $79 million (EBITDA margin - 34%, despite significant logistics costs), which is almost the same as in previous quarter, despite the decrease in sales - the margin per ton of sold products even increased.

Despite some growth in inventory stocks during the reporting quarter, the company's operating cash inflow made $56 million, which led to an increase in the amount of cash on the company's accounts from $154 million to $208 million.

After the restructuring (factually hair-cut) of a significant part of the company's debt in 2019, the total debt burden of Interpipe decreased significantly, as of March 31, 2023, the total amount of debt was $390 million (the main part should be repaid in 2026).

The main risk for the company in the future (besides the actual risk of military actions) is the potential deterioration of the situation in the main export markets. It is also expected that the increase in the price of electricity in Ukraine will have a negative impact on Interpipe (the share of electricity in the cost of the company's products in 2022 was 15-20%).

Despite this, from the point of view of general financial standing, Interpipe currently has the necessary margin of safety to continue normal operational activities.