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OAO TMK revenue decline accelerated from 6.6% in 2014 to 31.3% in 2015

04 Mar 2016 • About OAO TMK ($TMKS) • By InTwits

OAO TMK reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • OAO TMK is a company in decline: 2015 revenue growth was -31.3%, 5 years revenue CAGR was -5.9%
  • OAO TMK has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.7%. At the same time it's in pair with industry average of 10.7%.
  • CAPEX is quite volatile: 42.1 in 2015, 248 in 2014, 50.2 in 2013, 6.2 in 2012, 35.9 in 2011
  • The company has business model with low profitability: ROIC is at 8.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

OAO TMK ($TMKS) key annual financial indicators

mln. $201120122013201420152015/2014
P&L
Revenue6,7546,6886,4326,0094,127-31.3%
Gross Profit1,4461,4831,3581,169845-27.8%
SG&A624667649596438-26.4%
EBITDA1,020999927780572-26.7%
Net Income380277214-216-36368.5%
Balance Sheet
Cash2312259325330520.7%
Short Term Debt5801,044370737575-21.9%
Long Term Debt3,1882,8173,2962,4592,201-10.5%
Cash flow
Capex402445397293208-28.9%
Ratios
Revenue growth21.1%-1.0%-3.8%-6.6%-31.3%
EBITDA growth13.3%-2.1%-7.1%-15.9%-26.7%
Gross Margin21.4%22.2%21.1%19.5%20.5%1.0%
EBITDA Margin15.1%14.9%14.4%13.0%13.9%0.9%
Net Income Margin5.6%4.1%3.3%-3.6%-8.8%-5.2%
SG&A, % of revenue9.2%10.0%10.1%9.9%10.6%0.7%
CAPEX, % of revenue6.0%6.7%6.2%4.9%5.0%0.2%
ROIC11.9%11.2%9.8%9.0%8.1%-0.9%
ROE23.3%14.9%10.6%-13.3%-38.9%-25.6%
Net Debt/EBITDA3.5x3.6x3.9x3.8x4.3x0.5x

Revenue and profitability


The company's Revenue dropped on 31.3% in 2015. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 0.88 pp from 13.0% to 13.9% in 2015.

Gross Margin increased slightly on 1.0 pp from 19.5% to 20.5% in 2015. SG&A as a % of Revenue increased slightly on 0.70 pp from 9.9% to 10.6% in 2015.

Net Income marign decreased on 5.2 pp from -3.6% to -8.8% in 2015.

Capital expenditures (CAPEX) and working capital investments


The company's CAPEX/Revenue was 5.0% in 2015. The company showed small CAPEX/Revenue decline of 1.6 pp from 6.7% in 2012 to 5.0% in 2015. Average CAPEX/Revenue for the last three years was 5.4%.

Return on investment


The company operates at low but positive ROIC (8.08%) and negative ROE (-38.92%). ROIC decreased slightly on 0.94 pp from 9.0% to 8.1% in 2015. ROE dropped on 25.6 pp from -13.3% to -38.9% in 2015.

Leverage (Debt)


Debt level is 4.3x Net Debt / EBITDA and 4.9x Debt / EBITDA. Net Debt / EBITDA jumped on 0.5x from 3.8x to 4.3x in 2015. Debt dropped on 13.1% in 2015 while cash surged on 20.7% in 2015.

Appendix 1: Peers in Industrial Metals & Mining


Below we provide OAO TMK benchmarking against other companies in Industrial Metals & Mining industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Afarak Group ($AFRK)-19.2%5.4%27.4%8.7%
Cheliabinsk Elektrolit Zink Plant ($CHZN)8.2%2.4%-0.1%26.4%
Norsk Hydro Asa ($NHY)-10.2%1.1%20.1%12.6%
Aluminium Bahrain Bsc ($ALBH)-15.8%0.8%9.7%-6.7%
Ambrian ($AMBR)28,056.2%-26.8%44.6%6.8%
 
Median (14 companies)15.2%-9.0%0.3%2.4%-9.0%
OAO TMK ($TMKS)-1.0%-3.8%-6.6%-31.3%


Top companies by Gross margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Mmc Norilsk Nickel ($MNOD)59.0%49.1%43.4%52.2%
Severstal PJSC ($SVST)31.0%23.5%29.9%34.4%40.4%
Cheliabinsk Elektrolit Zink Plant ($CHZN)22.5%17.7%15.1%28.6%
Novolipetsk Iron And Steel Corp ($NLMK)28.6%23.8%19.4%28.3%
First Quantum Minerals ($FQM)50.6%37.3%31.9%28.2%11.4%
 
Median (13 companies)19.6%14.8%14.9%18.0%13.5%
OAO TMK ($TMKS)21.4%22.2%21.1%19.5%20.5%


Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Mmc Norilsk Nickel ($MNOD)49.5%38.6%29.2%46.8%
First Quantum Minerals ($FQM)47.7%80.0%38.1%39.9%17.8%
Severstal PJSC ($SVST)22.5%14.9%19.3%26.4%32.4%
Cheliabinsk Elektrolit Zink Plant ($CHZN)17.1%12.7%5.7%25.3%
Novolipetsk Iron And Steel Corp ($NLMK)19.2%15.6%13.8%21.8%
 
Median (15 companies)16.3%12.9%12.1%12.6%17.3%
OAO TMK ($TMKS)15.1%14.9%14.4%13.0%13.9%


Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Base Resources Ltd ($BSE)401.9%6.3%
First Quantum Minerals ($FQM)40.6%46.5%73.2%81.7%72.5%
Mmc Norilsk Nickel ($MNOD)15.6%22.3%17.1%10.8%
Cheliabinsk Elektrolit Zink Plant ($CHZN)9.0%7.0%7.9%9.9%
Vimetco Nv ($VICO)8.8%
 
Median (15 companies)7.7%7.0%7.7%6.4%6.0%
OAO TMK ($TMKS)6.0%6.7%6.2%4.9%5.0%


Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Zibao Metals Recycling Hldgs Ltd ($ZBO)41.7%56.6%55.8%26.6%
Mmc Norilsk Nickel ($MNOD)32.4%21.8%14.2%34.1%
Cheliabinsk Elektrolit Zink Plant ($CHZN)13.6%6.2%-2.7%25.6%
Severstal PJSC ($SVST)21.3%10.3%9.6%17.7%30.3%
Novolipetsk Iron And Steel Corp ($NLMK)11.8%7.2%4.1%12.0%
 
Median (15 companies)11.0%5.4%4.1%7.5%5.6%
OAO TMK ($TMKS)11.9%11.2%9.8%9.0%8.1%


Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Ambrian ($AMBR)3,395.4x42.6x176.1x
Ezz Steel ($AEZD)3.4x4.8x3.6x19.4x
Vimetco Nv ($VICO)5.4x7.7x10.9x
First Quantum Minerals ($FQM)-0.3x0.0x2.5x4.0x10.5x
Posco ($PIDD)2.9x3.3x3.9x3.7x3.6x
 
Median (14 companies)2.2x1.9x2.0x0.8x0.4x
OAO TMK ($TMKS)3.5x3.6x3.9x3.8x4.3x


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