OREANDA-NEWS. The following contains forward looking statements concerning future events. These statements are based on current  information and assumptions of TMK management concerning known and unknown risks and uncertainties.
OAO TMK (“TMK” or “the Company”), one of the world’s leading producers of tubular  products for the oil and gas industry, announces today its unaudited consolidated IFRS  financial results for the three months ending March 31, 2013.

Total pipe sales decreased by 2% from the prior quarter to 1,060 thousand  tonnes, mainly due to weaker demand for welded industrial pipe. Year-on-year  growth of 5% was largely driven by higher consumption of large diameter pipe (LDP), seamless line pipe and seamless OCTG.
•  Seamless pipe sales remained almost flat quarter-on-quarter at 627 thousand  tonnes and increased by 3% year-on-year. Seamless OCTG pipe volumes  decreased by 4% from the prior quarter while growing 3% compared to the first  quarter of 2012. Seamless line pipe rose by 3% quarter-on-quarter and by 14%  year-on-year.
•  Welded pipe sales decreased by 6% from the prior quarter to 433 thousand tonnes, mainly due to lower demand for welded industrial pipe. Year-on-year  growth of 9% was largely due to higher LDP sales in connection with some large  pipeline projects now underway. Welded OCTG and line pipe sales posted 16%  and 9% growth compared to the fourth quarter of 2012 primarily due to stronger  shipments in the U.S. The year-on-year performance of welded OCTG pipe  remained almost flat while welded line pipe grew by 5%.
Financials
•  Revenue rose by 6% over the prior quarter to USD 1,725 million on higher volumes and improved product mix of seamless pipe and a favorable currency translation effect. Year-on-year revenue increase of 4% was mainly due to the growth of LDP and welded line pipe sales in the Russian division.
•  Gross profit rose by 11% over the prior quarter to USD 369 million, largely as a result  of improved product mix of seamless pipe in the Russian division. Gross profit  decreased by 10% year-on-year mainly due to lower volumes and pricing in the  American division in the first quarter of 2013.
•  Gross profit margin improved to 21% from 20% in the fourth quarter of 2012 but  was down from 25% in the first quarter of 2012.
•  Adjusted EBITDA increased by 24% quarter-on-quarter to USD 273 million, supported by an improved product mix of seamless pipe and lower operational  expenses in the Russian division. Adjusted EBITDA fell 7% year-on-year due to lower sales and weaker pricing in the American division in the first quarter of  2013.
•  Adjusted EBITDA margin was 16% for the first quarter of 2013, up from 13% in  the fourth quarter of 2012 but down from 18% in the first quarter of 2012.
•  Net income was USD 85 million for the first quarter as compared to USD 32 million in the  fourth quarter of 2012 and USD 105 million in the first quarter of 2012. Net income  adjusted for the gain/(loss) on changes in fair value of derivative instruments amounted to USD 80 million; adjusted net income margin was 5% for the first quarter  of 2013.
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As of 31 March 2013, total debt decreased to USD 3,849 million compared to USD 3,885  million as of 31 December 2012, mainly due to the Rouble’s depreciation against  the U.S. dollar.
•  Net debt increased to USD 3,727 million as of 31 March 2013 from USD 3,656 million as  of 31 December 2012, due to a decrease of cash and cash equivalents at the  end of the reporting period. The net Debt-to-EBITDA ratio was 3.7x. Recent Developments
•  In January 2013, casing with TMK PF premium connections was run in the  onshore and offshore portions of one of the wells in NOVATEK’s Yurkharovskoye  field. ТМК supplied the casing column and supervised its running in the well.
•  In March 2013, TMK shipped its first pilot batch of vacuum insulated tubing (VIT)  made of 13CrS steel (super-chrome steel) for Gazprom’s Bovanenkovo oil and  gas condensate field in the Yamal peninsula.
•  In March 2013, Gulf International Pipe Industry LLC (GIPI), the first manufacturer  of 8" to 24" high pressure carbon steel pipes in Oman and part of the TMK Group,  received a recognition award from Petroleum Development of Oman LLC (PDO)  for the successful production and delivery of the 158 km South Oman Gas Line  project.
•  In March 2013, TMK IPSCO, the American division of TMK, opened a new pipe  threading and service facility in Edmonton, Alberta, Canada, that will supply the  full line of ULTRA TM premium connections on pipe and accessories to TMK
IPSCO’s growing customer base in Alberta and neighboring British Columbia.
•  In April 2013, the Company acquired pipe services and precision manufacturing  assets located northeast of Houston with a production capacity of more than 700  thousand joints of threaded pipe and around 250 thousand couplings. In addition,  the facility provides pipe inspection services and manufactures down-hole tools  and accessories for a wide range of oil and gas applications.

In April 2013, ТМК completed a placement of USD 500 million Eurobonds maturing in  2020 with a coupon of 6.75% p.a., payable semi-annually. The Eurobonds are listed on the Irish Stock Exchange.
•  In May 2013, TMK’s Board of Directors recommended that the AGM adopt a  resolution to pay a final dividend for 2012 in the amount of RUR 788 million (USD 25  million on 16 May, 2013) or RUR 0.84 (USD 0.03) per ordinary share bringing,  together with previously distributed interim dividends, the total dividend for the  year to RUR 2,194 million (around USD 71 million) which is in line with TMK’s  dividend policy of a 25% dividend pay-out ratio.
Russia
In the first quarter of 2013, revenue for the Russian division increased by 5% over the  prior quarter to USD 1,277 million, mainly as a result of higher volumes and improved  product mix of seamless pipe as well as the positive effect from currency translation.
Compared to the first quarter of 2012, revenue for the Russian division grew by 13%, largely driven by higher sales of LDP and welded line pipe, seamless line pipe and  seamless OCTG and a favorable pricing environment in both seamless and welded  segments. 
Gross profit for the Russian division increased by 16% quarter-on-quarter to USD 321 million, supported by a favorable product mix in seamless pipe. Gross profit margin  improved to 25% in the first quarter of 2013 from 23% in the fourth quarter of 2012.
Year-on-year growth of 13% was driven by an improved sales mix of seamless products,  higher volumes of welded pipe, particularly LDP, and lower prices for raw materials.
Gross profit margin remained flat year-on-year.
Adjusted EBITDA amounted to USD 247 million, an increase of 31% and 32% compared to  the fourth quarter of 2012 and the first quarter of 2012, respectively. The growth was  mainly due to higher gross profit and lower operating expenses.
Americas
In the first quarter, revenue for the American division increased by 5% over the prior  quarter to USD 369 million primarily due to higher volumes of welded OCTG pipe offset by  lower prices for welded pipe. Compared to the first quarter of 2012, revenue for the  American division fell by 16% due to weaker pricing, an unfavorable sales mix across all  product lines and lower volumes of welded pipe.  
Gross profit for the American division decreased by 14% compared to the prior quarter to USD 36 million, largely due to weaker pricing for welded pipe not fully offset by lower raw  materials prices. Sequentially, gross profit margin decreased from 12% in the fourth  quarter of 2012 to 10% in the first quarter of 2013. Gross profit fell by 66% year-on-year, primarily due to a decline in the average selling price for pipe products relatively greater than the reduction in raw materials prices.
In the first quarter, adjusted EBITDA amounted to USD 20 million, a 13% decrease from the  prior quarter and a 78% decrease from the first quarter of 2012.
Europe
In the first quarter, revenue of the European division increased by 19% over the prior  quarter to USD 79 million, mainly as a result of growth in steel billets sales and the positive  effect of currency translation. Revenue for the European division fell by 8% year-on-year, due to weaker pricing across all product lines given strong competition on the  stagnating European market as well as an unfavorable sales mix.
Gross profit for the European division fell by 5% quarter-on-quarter to USD 12 million, mainly due to lower pricing across all product lines while scrap prices remained almost  flat. Gross profit margin fell to 15% against 19% in the fourth quarter of 2012. In an  unstable market, gross profit of the European division decreased by 44% year-on-year, as falling average selling prices of pipe products outpaced falling scrap prices.
Adjusted EBITDA fell by 30% quarter-on-quarter and by 62% year-on-year. 
1Q 2013 Market Conditions
Russia
In the first quarter of 2013, the Russian pipe market decreased by 7% compared to the  prior quarter, largely due to weaker demand for welded industrial pipe. At the same time, Russian industrial production showed a quarter-on-quarter decline of 7%.
The Russian pipe market grew by 13% year-on-year, mainly driven by higher seamless  OCTG and LDP consumption.
Demand for TMK’s core products, seamless OCTG and line pipe, remained relatively  strong in the first quarter of 2013. The seamless OCTG market increased by 22%  compared to the fourth quarter of 2012 while seamless line pipe market fell by 9%  quarter-on-quarter.
At the same time the seamless line pipe market grew by 3% year-on-year following the commencement of the construction of gas pipelines as well as the development of new  oil and gas fields supported by high oil prices and robust E&P activity.
Americas
In the first quarter of 2013, crude oil prices recovered from their lows in the prior quarter.
Natural gas prices increased quarter-on-quarter as the inventory of gas in storage was  drawn down due to colder winter weather. The Baker Hughes rig count further declined  and closed out the first quarter of 2013 at 1,756 compared to 1,784 as of 31 December  2012 and down 12% compared to the prior year. Lower crude oil prices in the fourth  quarter of 2012 negatively impacted the oil rig count in the first quarter of 2013, but it is  anticipated that the count will respond positively in the second quarter of 2013 to the  higher oil prices in the first quarter of 2013. The higher than expected first quarter natural gas prices were, however, not enough to reverse the downward trend in rigs  drilling for gas. Due to high gas production and the end of the winter heating season, it  is not expected that gas prices will reach levels sufficient to generate returns necessary  for operators to justify adding gas-directed rigs.

The rig count activity continues to shift  from gas to oil thereby changing customer demand although oil exploration continues to  support demand for TMK’s line of premium connections. While the total rig count  declines, the percentage of rigs drilling horizontally continues to increase. According to  Preston Pipe and Tube, consumption measured in tonnes decreased quarter-on-quarter  by 5% and year-on-year by 12%. The rise of total shipments, quarter-on-quarter by  more than 5%, nevertheless caused the months of supply of inventory to increase by  4% resulting in downward price pressures. Pipe Logix also reports quarter-on-quarter  downward price pressures with the OCTG composite price decreasing 3% quarter-on-quarter and 10% year-on-year.
Industrial products continued to exhibit slow but steady demand despite the overall subdued economic growth. Pricing power is weak with abundant supply and short   delivery times.
Europe
In the first quarter of 2013, the European market continued to be challenging, with consequently decreasing demand for tubular products from the machine building,  automotive and power generation industries in almost all European markets, further  pressure on prices and customers’ inventory adjustments.
2Q 2013 and Full-Year 2013 Outlook
In 2013, the Russian division expects strong demand from oil and gas companies,  particularly for OCTG, line pipe and LDP, supported by growing investments and E&P  activity by Russian oil and gas majors as well as further pipeline construction. While  maintaining its positive long term U.S. outlook, given the delay in economic recovery, high import penetration and additional capacity of other pipe producers, TMK expects  continued market challenges on the U.S. market in the near term. The Company  believes that no noticeable upturn in the European economy will be seen before the end  of 2013.
The Company conservatively expects full-year 2013 results to be approximately in line  with the results of the full-year 2012.