TMK cut pipe shipments 7.7 percent quarter-on-quarter to 822,000 tons in the third quarter of 2016, the company said in a press release on October 15, 2016. “This drop was mainly due to lower welded pipe shipments and pre-planned capital repairs at TMK’s Russian plants,” it said.

“Overall, the company expects a marginal year-on-year decline in deliveries for the full year,” TMK reported.

According to TMK, in the fourth quarter of 2016, the demand for oil country tubular goods (OCTG) will grow due to the start of the procurement season for tubular products at Russian oil and gas companies. Following a slowdown in the implementation of pipeline projects, large-diameter pipe (LDP) shipments will continue to decline. The demand for industrial pipe will also drop due to a downturn in the construction industry.

The gradual growth in the active rig count, which started in the second quarter of 2016, and the resulting increase in the demand for OCTG in the United States, are expected to continue, subject to further increases in global hydrocarbon prices. The oil market is expected to reach equilibrium by mid-2017, which will allow the American division to increase sales.

In the fourth quarter of 2016, the European pipe market is expected to show sluggish demand for industrial pipe, as the construction and repair season is coming to an end and consumers seek to run down their inventories towards the end of the year. The drop in overall sales in the third quarter of 2016 was mainly due to lower welded pipe orders and pre-planned capital repairs at TMK’s Russian plants.

The increase of seamless pipe deliveries in the third quarter was driven by an increase in seamless OCTG shipments. The decline in welded pipe shipments was mainly due to lower orders of low-margin welded line pipe and welded industrial pipe. Higher shipments of OCTG pipe, TMK’s core product, were driven by an increase in orders in the seamless OCTG category.

Shipments of premium threaded connections were up 32.0 percent quarter-on-quarter to 148,000 joints, as deliveries of premium products grew in the American division on the back of the U.S. pipe market’s recovery.

TMK is planning in 2019 to reach a net debt-to-EBITDA ratio of less than 3x, TMK deputy CEO for strategy and development Vladimir Shmatovich said at the company’s “investors’ day” event on October 30, 2016. The company’s long-term plans call for reaching a net debt-to-EBITDA ratio of 2.5x. At the end of June, that ratio was 4.6x, with net debt at USD2.497 billion.

The target will be achieved as a result of modest capital expenditures, optimizing working capital, divesting non-core assets, and holding a secondary public offering (SPO). Mr. Shmatovich said the company was looking at the sale of assets and the SPO as potential options, and that there were no specific plans yet. Mergers and acquisitions are not under consideration at the present time, nor are Eurobonds, Mr. Shmatovich said. Mr. Shmatovich said capex might fall short of USD200 million in the years to come. TMK said in a presentation that the capex figure could be USD170 million in 2016 and USD190 million in 2018 and in 2019.

The company said in its materials that it refinanced USD400 million in loans in September of the current year, deferring repayment from the second quarter of 2017 until 2021. It plans to refinance another USD237 million in debt that comes due in the fourth quarter of 2016 in November. The company’s long-term plans call for reaching a net debt-to-EBITDA ratio of 2.5x.

TMK sold 75 percent of its service company in the United States, OFS Development S.a r.l., the group said in its materials on November 17, 2016. The cost of the deal, which was agreed upon in September of the current year, stood at USD2.4 million. TMK said that the pipe company completely sold its stake. “This is a small service company in North America, and it does not have great material significance for the company,” a TMK spokesperson said.

TMK is Russia’s largest pipe producer and one of the top three pipe companies in the world. TMK has plants in Russia, the United States, Romania, Kazakhstan, and Oman.