In the first half of 2015, world-wide markets for stainless tubes and pipes saw a significant drop in volumes, mainly due to substantially lower demand in the oil and gas industry. As a result, competition became fiercer and prices dropped. Lower price levels were further propelled by the continued decline of the nickel price which eventually fell below USD 10’000 in August of this year.
Project business in general suffered from the fact that many projects were either delayed or completely abandoned. The distribution business remained under pressure as world-wide distributors continued to reduce inventories and final consumers limited purchases in expectation of falling prices.
Despite these unfavorable market conditions, Centravis enjoyed satisfactory sales volumes in the first half year, although at lower levels than in the preceding year. Q2 sales to final customers showed a 9% decrease y-o-y. Revenues declined more, due to generally lower prices.
In Q2 Centravis considerably extended the list of industrial certifications and customers’ approvals. Both Centravis’ cold and hot shops were successfully certified for compliance with Norsok M-650/M-630 standard, one of the most demanding industrial certifications for products made of duplex and super duplex steel grades. The Company also passed the annual surveillance audit for compliance with international OHSAS 18001:2007 and ISO 14001:2004 standards. On top of that, Q2 saw big successes with regard to certifications from end-users. Centravis was put at the AML by such companies as: LyondellBasell and CBI&I in the USA; ADCO, ZADCO and ADMA OPCO (ADNOC Group) in the Middle East; and in the EU by Alstom & Saipem.
The political situation in Ukraine remained quite stable. The economy though is still under pressure, and major improvements can only be expected after 2016. Since late 2013, the local currency has devalued by nearly 200 per cent. As a result, inflation has recently risen to close to 50%.
Expectations for the rest of the year remain subdued, as economies world-wide are slowing down and demand for stainless tubes and pipes does not grow. Uncertainties about China add to the existing woes. Because of the renewed substantial drop in oil and gas prices, the Ruble has suffered another round of devaluation. In the short run, this will again hamper sales to Russia.
In order to cope with quickly reducing margins and improve the competitive position in our markets, Centravis in September started the first phase of a far-reaching business transformation project covering the whole company. Main goals are higher productivity and better efficiencies – both expected to result in significant cost savings. Leading business transformation consultants are engaged to ensure quick and tangible results.
Over the years Centravis has passed through repeatedly turbulent market conditions unharmed. Bearing this in mind, we are very confident that Centravis will use current challenges in its economic environment to again improve, become stronger and better.
Nikopol, September 17, 2015
Peter Kratz Yuriy Atanasov
Chairman of the Board Chief Executive Officer
