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TMK Americas squeezed by lower prices

Keywords: Tags  OAO TMK, TMK Ipsco, quarterly earnings, energy tubulars, OCTG, drill rig count, Baker Hughes, Michael Cowden

CHICAGO — OAO TMK’s Americas operations were squeezed in the third quarter by lower prices and "softening market conditions" as a decline in drilling activity and import pressure took a bite out of profits.

The Moscow-based parent of steel tube and pipe maker TMK Ipsco, Downers Grove, Ill., said in remarks released with earnings data Tuesday that it expected a challenging fourth quarter in the region, given a lower drill rig count, continued high levels of imports and customer efforts to manage inventories.

The rig count, a key indicator of demand for energy tubulars such as oil country tubular goods (OCTG), stood at 1,817 rigs last week, down 183 from the same period last year (, Nov. 26). While the number of rigs drilling for oil has increased by 258 over that period, the number drilling for natural gas has fallen by 437 rigs, according to data from oilfield service firm Baker Hughes Inc., Houston.

But a strong growth in the oil rig count seen earlier in the year did not continue into the third quarter, and the gas rig count continued to decline, TMK Ipsco said.

On the import front, the United States brought in 260,699 tonnes of OCTG in October, according to preliminary U.S. Commerce Department data, down 6.6 percent from 279,108 tonnes the previous month but up 5.4 percent from 247,379 tonnes in October 2011.

TMK Ipsco said that while U.S. imports had fallen slightly in the third quarter, they still continued to exceed domestic shipments. Even given those headwinds, TMK said it was sticking to its positive long-term view of the U.S. market.

TMK posted group net income of $69 million for the third quarter, down 9.2 percent from $76 million in the second quarter, on revenue that dropped 9.2 percent to $1.6 billion. Net income for the first nine months of the year fell 10.4 percent to $250 million from $279 million in the same period last year on revenue that dipped 1.8 percent to $5.1 billion.

In the Americas, TMK Ipsco recorded third-quarter revenue of $410 million, down 9.2 percent from $448 million in the second quarter, on sales volumes that fell 9.7 percent to 214,000 tonnes.

Outside of the Americas, TMK saw markets continue to deteriorate in Europe due to the region’s debt crisis. However, the company said it had high hopes for the Russian oil and gas sector, where strong demand for energy tubulars should provide the foundations for better fourth-quarter results.

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