In the current challenging economic environment, TMK is implementing a range of initiatives focused on key business segments and core assets, cost optimisation, cost saving, and, accordingly, better financial performance.
Cost optimisation programme
In 2015, TMK took further steps to implement its cost optimisation programme to minimise the impact of adverse economic environment on its business. The programme is mostly focused on savings of feedstock and materials, and payroll optimisation.
As a result of the cost optimisation programme, the economic effect on EBITDA in the reporting year was estimated at about USD 115 m.
Working capital management
In 2015, we continued optimising our working capital, successfully releasing USD 105 m. These results were delivered through a range of inventory management measures and improved payment discipline among our major customers.
| USD | 2014 | 2015 | 2014 | 2015 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | 12M | 12M | |
| Increase/(decrease) in inventories | (22) | (25) | (63) | (21) | 6 | 92 | (39) | (19) | (130) | 40 |
| Decrease/(increase) in trade and other receivables | 27 | 6 | (91) | (19) | (6) | 121 | 49 | (45) | (76) | 119 |
| Increase/(decrease) in prepayments | 6 | (3) | 0 | (24) | 12 | 7 | (29) | (2) | (21) | (12) |
| Increase/(decrease) in trade and other payables | (28) | (44) | 44 | 69 | (46) | (77) | (19) | (6) | 41 | (148) |
| Increase/(decrease) in advance payments from buyers and customers | (14) | (2) | (10) | 52 | (24) | 6 | 120 | 4 | 26 | 106 |
| Working capital, USD m | (30) | (67) | (119) | 58 | (59) | 150 | 82 | (68) | (159) | 105 |
Liquidity management
During the reporting year, TMK continued implementing its deleveraging strategy. In particular, we succeeded in reducing our financial debt from USD 3,223 m as of 31 December 2014 to USD 2,801 m as of 31 December 2015, partially due to rouble depreciation against the US dollar. In 2015, net debt repayment was USD 193 m. Net debt was down to USD 2,496 m as compared to USD 2,969 m as of 31 December 2014.
As in previous periods, one of the Company’s strategic goals is reducing its Net Debt / EBITDA ratio to 2.5x. We assume that this target is achievable subject to recovery and stability of financial performance by TMK’s American division.
Our debt portfolio comprises a variety of instruments, including bank loans and bonds. As of 31 December 2015, TMK’s debt portfolio was USD 2,738 m as compared to USD 3,148 m as at 31 December 2014.
The share of short-term outstanding debt reduced to 21% as of 31 December 2015 as compared to 24% as at 31 December 2014.
Outstanding debts to major Russian banks account for c. 90% of the Company’s debt portfolio. Weighted average nominal interest rate was 9.06% as of 31 December 2015 versus 7.26% as at 31 December 2014.
