TMK Investor Presentation 1H 2011 IFRS Results September 2011 - PowerPoint PPT Presentation

PROPRIETARY & CONFIDENTIAL TMK Investor Presentation 1H 2011 IFRS Results September 2011

Disclaimer No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the Company, or any of its shareholders or subsidiaries or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this presentation. This presentation contains certain forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. OAO TMK does not undertake any responsibility to update these forward-looking statements, whether as a result of new information, future events or otherwise. This presentation contains statistics and other data on OAO TMK’s industry, including market share information, that have bee n derived from both third party sources and from internal sources. Market statistics and industry data are subject to uncertainty and are not necessarily reflective of market conditions. Market statistics and industry data that are derived from third party sources have not been independently verified by OAO TMK. Market statistics and industry data that have been derived in whole or in part from internal sources have not been verified by third party sources and OAO TMK cannot guarantee that a third party would obtain or generate the same results. 2

Presentation Outline  Company Overview 4  Financial Review 8  Russia 17  North America 22  Investments 27  Appendix – Summary Financial Accounts 29  Appendix – TMK Global Assets 33  Contacts 36 3

Company Overview 4

Investment Highlights  One of the largest tubular capacity  High exposure to the oil & gas industry: approximately 75% of 2010 shipments went to the oil & gas sector Global  Leading producer of value-added steel pipes for the oil & gas industry Market Leader  12% global seamless OCTG (1) , 14% of the U.S. OCTG market in 2010  Russia: 53% seamless pipe market, 60% seamless OCTG market, 20% LD pipe market in 2010 Leading Position in  Strategic partnerships and long-term contracts with Russian oil & gas majors Russia and the U.S.  One of the leading supplier to shale oil & gas in the U.S.  Strong industry fundamentals driven by robust demand for oil & gas  Stable demand from Russian oil industry little affected by fluctuations in oil prices Favorable  Consolidated industry with significant barriers to entry Industry Fundamentals  Demand for seamless OCTG expected to experience significant growth driven by increasing complexity of drilling  Oil & gas plays are to be more resilient to possible economic recession due to limited supply from traditional deposits and geopolitical risks  Structural cost advantages over major international competitors Vertically Integrated  Fully vertically integrated seamless pipe production (upstream and downstream operations) in all 3 divisions Low Cost Producer  Long-term proven ability to pass cost increase to customers  Strategic Investment Programme (2004-14) aimed at 48% capacity increase is nearly completed Growth Potential  Ability to efficiently integrate acquired businesses and realise synergies and Deleveraging  The effect from the recent investment projects to be realized in 2012-2015 which will facilitate deleveraging 2007 2008 2009 2010 1H 2011 LTM Key Performance Revenue, U.S.$ mln 4,179 5,690 5,578 6,560 3,461 Figures 920 1,047 EBITDA, U.S.$ mln 328 942 1,153 ROE, % 28.9% 9.4% neg 6.9% 19.2% (1) OCTG - Oil Country Tubular Goods 5

Global Operational and Sales Footprint TMK’s Strategic Positioning Made it the Steel Tubular Industry Leader Steel Tubular Industry Leader, with Nearly 4 million Tonnes Sold in 2010 and more than 2 million Tonnes in 1H 2011. Pipe Maintenance Department Truboplast Sinarsky Seversky Moscow RosNITI Central Pipe Yard Orsky Calgary Cologne Astana Volzhsky Resita Zurich Kaztrubprom Tagmet Chicago Artrom Lecco Beijing Camanche Baku Ashgabat Brookfield Geneva Wilder Koppel Tulsa Ambridge Odessa Blytheville Baytown Houston Management Dubai Production Oil & Gas Services Scientific and Technical Center Sales and Marketing Global Drilling Activity Capacity North Russia Europe Total (tons) America and CIS Europe Africa Asia 3% 5% Steelmaking 450,000 450,000 2,450,000 3,350,000 Pacific Cape Town U.S. 7% Middle 33% Seamless Pipes 300,000 200,000 2,420,000 2,920,000 East TMK Domestic Markets 9% Welded Pipes 1,150,000 2,200,000 3,350,000 (Russia (including Caspian) and the U.S.) Represent 55% Canada Heat Treat 441,000 1,500,000 1,941,000 10% of Global Drilling Activity Threading 981,000* 1,560,000 2,541,000 Latin Russia America Caspian 14% 11% Note: *Including ULTRA Premium connections of 240,000 tons� 8% Source: TMK data Source: M-I SWACO 6

Global Leader in Cost Efficiency Russia is One of the Lowest Cost Regions for Steel Products Manufacturing Low Raw Material Costs Scrap purchase price (U.S.$/tonne) 1H 2011 Cash Cost per Tonne (U.S.$)  393 – TMK  436 – Shredded – FOB Rotterdam  471 – S. Europe domestic DRI - Italy import, CIF 2,619 Favourable Unit Labour Cost* Labour cost, U.S.$/month 1,974  768 for TMK  750 in Russia 1,341  4,200 in USA  5,900 in Germany Low Regulated Energy Prices* Electricity price, U.S.$/MWh  80 in Russia Vallourec Tenaris TMK  100 in China  90 in USA  100 in Germany Low Gas Prices Gas price, U.S.$/ ’000 m 3 Source: TMK data  88 in Russia  380 in Europe Note: Cash cost per tonne is calculated as (Revenue minus EBITDA) divided by sales volume * 2010 data 7

Financial Review 8

1H 2011 Sales Volumes by Segment and Groups of Product Russia Americas Europe Thousand Change, Change, Change, 1H 2011 1H 2010 1H 2011 1H 2010 1H 2011 1H 2010 Tons % % % Seamless Pipe 994 846 146 142 95 89 17% 3% 7% OCTG 494 448 10% 128 113 13% 2 5 -60% Line Pipe 283 229 24% 10 15 -33% 13 18 -28% Industrial Pipe 217 169 28% 8 14 -43% 80 66 21% Welded Pipe 654 539 290 270 - - 21% 7% n/a OCTG - - 173 180 -4% - - n/a n/a Line Pipe 111 92 21% 42 29 45% - - n/a Industrial Welded 162 165 -2% 75 61 23% - - n/a Large Diameter 381 282 35% - - - - n/a n/a Total Pipes 1,648 1,385 436 412 95 89 19% 6% 7% Source: TMK data 9

1H 2011 Key Consolidated Financial Highlights Summary 1H 2011 Financial Highlights 2Q 2011 Revenue U.S.$ mln (1) +13% Q-o-Q +42% Y-o-Y 1H 2011 1H 2010 Y-o-Y, % 2,000 (unless stated otherwise) U.S.$ mln Net Sales 3,547 2,566 38% 1,500 Adjusted EBITDA (2) 625 415 51% 1,000 1,879 1,879 1,668 Adjusted EBITDA Margin (%) 18% 16% n/a 1,326 500 Net Income / (Loss) 258 67 285% Net Margin (%) 7% 3% n/a 0 1Q2011 2Q2011 2Q2010 2Q2011 2Q 2011 Adjusted EBITDA Pipes Sales ('000 tonnes) 2,179 1,886 16% Average Net Sales / Tonne (U.S.$) (3) +13% Q-o-Q 1,628 1,361 20% +57% Y-o-Y 350 Adjusted EBITDA / Tonne 287 220 30% U.S.$ mln 280 210 Capex 190 165 15% 332 332 293 140 Total Debt 4,017 3,644 10% 211 70 Net Debt 3,843 3,555 8% 0 1Q2011 2Q2011 2Q2010 2Q2011 ST Debt / Total Debt 13% 23% n/a 2Q 2011 Net Income Net Debt / Adj. EBITDA LTM 3.3x 6.0x n/a Adj. EBITDA LTM / +48% Q-o-Q +126% Y-o-Y 3.7x 1.5x n/a 160 Interest Expenses LTM U.S.$ mln Source: TMK Consolidated IFRS Financial Statements, TMK data 120 Notes: (1) IFRS financials figures were rounded for the presentation’s purposes. Minor 80 154 154 differences with FS may arise due to rounding 104 (2) Adjusted EBITDA is calculated as profit before tax plus finance costs minus 40 68 finance income plus depreciation and amortization adjusted for non-operating and non-recurrent items 0 (3) Sales include other operations 1Q2011 2Q2011 2Q2010 2Q2011 10

1H 2011 Key Financial Highlights by Segment Europe (1) Russia Americas Change, Change, Change, U.S.$ mln 1H 2011 1H 2010 1H 2011 1H 2010 1H 2011 1H 2010 % % % (unless stated otherwise) Volumes- Pipes, kt 1,648 1,385 19% 436 412 6% 95 89 7% Net Sales 2,589 1,830 41% 765 620 23% 193 116 66% 581 180 53 Gross Profit 424 37% 137 31% 25 112% Margin, % 22% 23% 24% 22% 27% 22% Adjusted EBITDA 430 160 35 285 51% 122 31% 8 338% Margin, % 17% 16% 21% 20% 18% 7% Avg Net Sales / 1,571 1,321 19% 1,755 1,505 17% 2,032 1,303 56% Ton (U.S.$) Avg Gross Profit / 353 306 15% 413 333 24% 558 281 99% Ton (U.S.$) Avg Adjusted EBITDA / 261 206 27% 367 296 24% 368 90 309% Ton (U.S.$) Source: Consolidated IFRS Financial Statements, TMK data Notes: (1) Financial results of European Segment include sales of billets to third parties (66 kt in 1H 2011 and 22 kt in 1H 2010) 11