TUBOS REUNIDOS, S.A.
Revenue rose 16.4% to 407.9 million euros.
Sales of special tubes represented 65% of total revenue from the seamless steel tube business.
The order backlog at the end of December 2014 was 33.5% higher than the year-earlier figure.
Debt was slashed by more than 10 million euros to 171.6 million euros, of which 91% is long-term.
The company paid out 3.1 million euros in interim dividends in 2013 and a proposal will be submitted to the General Shareholders' Meeting to approve payment of a gross 0.0115 euros per share interim dividend out of 2014 profit
Net profit for the Tubos Reunidos Group in 2014 rose by 6.6% to 7.1 million euros and consolidated revenue by 16.3% to 407.9 million euros from the year before. Meanwhile, EBITDA for the group was 2% lower, at 41.4 million euros.
In the first year of its 2014-2017 Strategic Plan, Tubos Reunidos entered into an agreement with Marubeni Itochu Steel Corporation, Inc. and JFE that increases its value proposition for customers, offering premium connection technology, field service network and global reach in the OCTG segment for oil and gas exploration and production. Meanwhile, the Group has completed 65% of its transformational investment plan.
Significant events and business trends1.- 16.4% increase in sales. Tubos Reunidos continued to expand its product and service offering in 2014, reinforcing its competitive position and capturing additional volumes in new, high added-value strategic segments in the energy sector.
2.- Higher sales of OCTG products for the oil and gas sector, of 45%, representing 23% of total seamless steel tube sales value. Growth was particularly noteworthy in North America, where after the investments made Tubos Reunidos now boasts a broad and more competitive range of proprietary products, and offers tubes requiring more stringent finishing processes.
3.- Higher sales of special large diameter tubes , that command higher margins, profitability and are geared towards critical phases of power generation, refining and petrochemical plants, implying an increase of 25% in the first half of the year, and staying in line with 2013 in the second half due to the shut-down of certain production facilities at the large diameter plant, prompting a shift in planning towards lower-margin products with fewer special finishing processes.
4.- Special product sales accounted for 65% of Tubos Reunidos' seamless steel tube revenues in 2014, a percentage point higher than in 2013. This improvement is in line with the targets of the 2014-2017 Strategic Plan, which implies reaching 78% of seamless steel tube revenues by 2017, albeit it has been offset by lower levels of prices in 2014.
5.- The order backlog at end-December 2014 was 33.5% higher than the year-earlier figure, with special tubes accounting for a large percentage.
6.- Tubos Reunidos generated 21.1 million euros of free cash flow in 2014, enabling it to reduce debt by 10.4 million euros, from 182.0 million euros in 2013 to 171.6 million at year-end 2014.
7.- The financial structure remains solid, with 91% of net financial debt maturing in the long term. In 2014, Tubos Reunidos took out 43.9 million euros of bank loans, replacing previous loans. Conditions in the financial market allowed the company to reduce the average cost of debt and extend maturities, increasing its financial flexibility. TR had 66 million euros of undrawn credit facilities at 31 December 2014.
8.- Capital expenditure in the seamless steel tube business totalled 22.8 million euros in 2014.. At the Group level, capex amounted to 27.3 million euros.
9.- Sales growth and the improvement in the product mix were undermined by a number of factors that led to a lower EBITDA margin. These include a negative currency effect (euro-dollar) in the first half of the year, lower prices in general and for OCTG products in the USA in particular, hurt by imports from low-cost countries and delays in the approval of antidumping measures until August, and circumstances at the large diameter plant in the second half of the year.
Dividends In 2014Tubos Reunidos paid 3.1 million euros of dividends out of 2013 profit.
The Board of Directors has agreed to propose to the General Shareholders' Meeting payment of an interim dividend out of 2014 profit of a gross 0.0115 euros per share (0.0092 net), for a total of 2,008.830 euros.
Outlook for 2015Tubos Reunidos has begun 2015 amid a sharp drop in oil prices, which is causing oil and gas companies to curtail investment plans and scale back drilling activity and, accordingly, hurting demand for OCTG tubes. Meanwhile, competition is becoming stiffer in other market segments.
To face this environment, Tubos Reunidos boasts balanced geographic and product mixes, with improved product capabilities, service and competitiveness and a favourable exchange rate of the euro against the dollar. The management of the Group continues to work towards the objectives stablished in the 2014 - 2017 Strategic Plan, for which Tubos Reunidos counts with a highly flexible operating management model that enables it to continuously adapt to the levels of market activity. Additionally, the Group will continue to implement cost control and operational efficiency policies, after having gained insight and experience from the new operating processes that have emerged as a consequence of recent transformational investments.
Tubos Reunidos maintains its debt reduction target set for 2015, even after contemplating the investments to be made in the new plant in Alava and in the high diameter plant towards products with very high outside diameter in special and stainless steels. The Group is confident about the sector's positive medium-term fundamentals and is working towards achieving its objectives of becoming more competitive, developing new high performance products to meet demand for premium tubes in the energy sector, and on developing a commercial and corporate strategy focused on offering comprehensive service solutions in the fastest growing segments and geographic areas, backed by the aforementioned JV with Marubeni Itochu Tubulars Inc.
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