Russia-based Chelyabinsk Pipe Plant states it could maintain positive financial reports in H1 2020 despite the COVID-19 outbreak. The company supplies pipes for the oil and gas industry. Chelyabinsk, however, posted lower revenue and a fall in shipments due to a sharp decline in domestic demand.
The company made the necessary transformations in client-centric services to avoid incurring losses. It expects demand to revive in the second half of 2020.
Outlook 2020
The company plans to focus on developing a high-margin product line, improving operational efficiency, improving customer experience, enhancing offerings, and increasing its presence in adjacent markets to expand target geography as per the key goals outlined in its strategy to 2024.
The holding company ChelPipe Group has announced its plans to set up an industrial and financial group with Zagorsk Pipe Plant to secure the supply of pipes and related products for the energy companies.
Production and sales
In H1 2020, total pipe shipments dropped by 24.7pc to 741,000mt from 984,000mt in H1 2019. A decline in demand for large diameter pipes from energy companies and a lack of new large infrastructure projects in CIS and non-CIS countries resulted in a drop in shipments in H1 2020.
| Sales volume (1,000mt) | H1 2020 | H1 2019 | Change |
| Seamless industrial pipes | 254 | 270 | -5.90% |
| OCTG | 220 | 247 | -10.90% |
| Line pipes (O&G) | 67 | 74 | -9.50% |
| LDPs | 180 | 377 | -52.30% |
| Other welded pipes | 20 | 16 | 25.00% |
| Total | 741 | 984 | -24.70% |
A decline in seamless industrial pipe shipments was caused by a decreased activity in the construction industry and operations of regional small and mid-sized enterprises amid social distancing restrictions.
In H1 2020, demand for OCTG was under pressure as oil majors looked to revise their upstream investments due to a decrease in the global demand for oil products.
Financials H1 2020
The company’s revenue amounted to RUB71,844mn ($981mn), down by 16.3pc from the prior year. Revenue decreased amid lowered shipments, mostly of large-diameter pipes (LDP).
The net profit increased by 7.2pc from the prior year to RUB4,480mn ($61mn). The company also saw increased capital investments in H1 2020. Capital investments increased by 18.6pc from the prior year to RUB3,112mn.
| (mn RUB) | H1 2020 | H1 2019 | Change, % |
| Revenue | 71,844 | 85,838 | -16.30% |
| Operating profit | 11,250 | 10,853 | 3.70% |
| EBITDA | 15,541 | 15,811 | -1.70% |
| Net profit | 4,480 | 4,179 | 7.20% |
| EBITDA margin | 21.60% | 18.40% | 3.2 p.p. |
| Operating cash flow | 1,334 | 532 | 150.80% |
| Net debt | 73,906 | 73,709 | 0.30% |
| Capital investment | 3,112 | 2,623 | 18.6 |