Operating segments reflect the Group’s management structure and the way financial information is regularly reviewed. For management purposes, the Group is organised into business divisions based on geographical location, and has three reportable segments:
Russia segment represents the results of operations and financial position of plants located in Russian Federation and the Sultanate of Oman, a finishing facility in Kazakhstan, Oilfield service companies and traders located in Russia, Kazakhstan,
the United Arab Emirates and Switzerland.
Americas segment represents the results of operations and financial position of plants and traders located in the United States of America and Canada.
Europe segment represents the results of operations and financial position of plants located in Romania and traders located in Italy and Germany.
Management monitors the operating results of operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on Adjusted EBITDA. Adjusted EBITDA is determined
as profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss, impairment/(reversal of impairment) of non-current assets, movements in allowances
and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment, (gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash items. Group financing
(including finance costs and finance income) is managed on a group basis and is not allocated to operating segments.
The following tables present revenue and profit information regarding the Group’s reportable segments for the years ended December 31, 2014 and 2013, respectively.
Year ended December 31, 2014
Russia
Americas
Europe
TOTAL
Revenue
3 973 155
1 766 253
269 538
6 008 946
Cost of sales
(3 082 160)
(1 543 162)
(214 148)
(4 839 470)
GROSS PROFIT
890 995
223 091
55 390
1 169 476
Selling, general and administrative expenses
(475 941)
(144 616)
(37 497)
(658 054)
Other operating expenses, net
(32 349)
(336)
(2 669)
(35 354)
OPERATING PROFIT
382 705
78 139
15 224
476 068
ADD BACK:
Depreciation and amortisation
205 871
83 282
14 502
303 655
Loss on disposal of property, plant and equipment
3 505
520
370
4 395
Allowance for net realisable value of inventory
7 985
914
(117)
8 782
Allowance for doubtful debts
9 727
(2 122)
338
7 943
Movement in other provisions
3 928
(2 203)
1 522
3 247
231 016
80 391
16 615
328 022
ADJUSTED EBITDA
613 721
158 530
31 839
804 090
Year ended December 31, 2014
Russia
Americas
Europe
TOTAL
RECONCILIATION TO LOSS BEFORE TAX:
Adjusted EBITDA
613 721
158 530
31 839
804 090
Reversal of adjustments from operating profit to EBITDA
(231 016)
(80 391)
(16 615)
(328 022)
OPERATING PROFIT
382 705
78 139
15 224
476 068
Impairment of goodwill
(973)
(150 396)
–
(151 369)
Impairment of property, plant and equipment
(1 135)
–
–
(1 135)
Foreign exchange gain/(loss), net
(299 909)
(1 639)
302
(301 246)
OPERATING PROFIT/(LOSS) AFTER IMPAIRMENT AND FOREIGN EXCHANGE GAIN/(LOSS)
80 688
(73 896)
15 526
22 318
Finance costs
(232 685)
Finance income
6 641
Gain on changes in fair value of derivative financial instrument
2 080
Share of profit of assoсiates
273
LOSS BEFORE TAX
(201 373)
Year ended December 31, 2013
Russia
Americas
Europe
TOTAL
Revenue
4 483 004
1 664 735
284 164
6 431 903
Cost of sales
(3 390 965)
(1 453 201)
(230 145)
(5 074 311)
GROSS PROFIT
1 092 039
211 534
54 019
1 357 592
Selling, general and administrative expenses
(533 050)
(150 980)
(37 677)
(721 707)
Other operating expenses, net
(28 896)
(3 996)
(1 430)
(34 322)
OPERATING PROFIT
530 093
56 558
14 912
601 563
ADD BACK:
Depreciation and amortisation
226 933
86 021
12 935
325 889
Loss on disposal of property, plant and equipment
2 614
2 049
1 198
5 861
Allowance for net realisable value of inventory
1 599
(703)
350
1 246
Allowance for doubtful debts
12 061
2 460
1 107
15 628
Movement in other provisions
2 910
(1 621)
446
1 735
246 117
88 206
16 036
350 359
ADJUSTED EBITDA
776 210
144 764
30 948
951 922
Year ended December 31, 2013
Russia
Americas
Europe
TOTAL
RECONCILIATION TO PROFIT BEFORE TAX:
Adjusted EBITDA
776 210
144 764
30 948
951 922
Reversal of adjustments from operating profit to EBITDA
(246 117)
(88 206)
(16 036)
(350 359)
OPERATING PROFIT
530 093
56 558
14 912
601 563
Impairment of goodwill
(1 080)
–
–
(1 080)
Impairment of property, plant and equipment
(4 243)
–
–
(4 243)
Foreign exchange loss, net
(46 437)
(1 340)
(1 412)
(49 189)
OPERATING PROFIT AFTER IMPAIRMENT AND FOREIGN EXCHANGE LOSS
478 333
55 218
13 500
547 051
Finance costs
(252 247)
Finance income
7 164
Gain on changes in fair value of derivative financial instruments
8 377
Share of profit of assoсiates
176
Gain on disposal of subsidiary
1 862
PROFIT BEFORE TAX
312 383
The following tables present additional information of the Group’s reportable segments as at December 31, 2014 and 2013:
Year ended December 31, 2014
Russia
Americas
Europe
TOTAL
Segment assets
3 541 125
1 698 579
409 684
5 649 388
Property, plant and equipment expenditure
292 934
41 055
17 156
351 145
Year ended December 31, 2013
Russia
Americas
Europe
TOTAL
Segment assets
5 047 725
1 927 441
443 502
7 418 668
Property, plant and equipment expenditure
450 419
44 100
21 695
516 214
The following table presents the revenues from external customers for each group of products and services for the years ended December 31, 2014 and 2013, respectively:
Sales to external customers
Seamless pipes
Welded pipes
Other operations
TOTAL
Year ended December 31, 2014
3 748 470
1 998 483
261 993
6 008 946
Year ended December 31, 2013
3 959 619
2 200 755
271 529
6 431 903
The following tables present the geographic information. The revenue information is disclosed based on the location of the customer. Non-current assets are disclosed based on the location of the Group’s assets and include property, plant and equipment,
intangible assets and goodwill.
