Annual Report 2013

Adjusted EBITDA

Reconciliation of income before tax to Adjusted EBITDA for the twelve months ended, mln USD

31 December 201330 September 201330 June 201331 March 201331 December 2012
Income before tax312280320365405
Depreciation and amortisation326324327326326
Finance costs, net245253270269275
Impairment of assets/(Reversal of impairment of assets)511888
Loss/(gain) on changes in fair value of derivative financial instrument(8)30(7)7
Foreign exchange (gain)/loss, net49352713(23)
Loss/(gain) on disposal of property, plant and equipment610141817
Movement in allowances and provisions (except for provisions for bonuses)1910131412
Other non-cash items(2)(2)(2)(2)0
Adjusted EBITDA9529249761,0071,028

Adjusted EBITDA is not a measure of our operating performance under IFRS and should not be considered as an alternative to gross profit, net profit or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of our liquidity. In particular, Adjusted EBITDA should not be considered to be a measure of discretionary cash available to invest in our growth. Adjusted EBITDA has limitations as an analytical tool, and potential investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under IFRS

Starting from the interim condensed consolidated financial statements for the three months ended 31 March 2013, the calculation of Adjusted EBITDA was amended by including accruals of bonuses to management and employees instead of actual cash payments. Management believes such approach better reflects the Group’s quarterly performance and eliminates fluctuations during the year.

The following limitations of Adjusted EBITDA as an analytical tool should be considered:

  • Adjusted EBITDA does not reflect the impact of financing or finance costs on our operating performance, which can be significant and could further increase if we were to incur more debt;
  • Adjusted EBITDA does not reflect the impact of income taxes on our operating performance;
  • Adjusted EBITDA does not reflect the impact of depreciation and amortisation on our operating performance. The assets that are being depreciated and/or amortised will have to be replaced in the future and such depreciation and amortisation expense may approximate the cost to replace these assets in the future. By excluding this expense from Adjusted EBITDA, it does not reflect our future cash requirements for these replacements; and
  • Adjusted EBITDA does not reflect the impact of other non-cash items on our operating performance, such as foreign exchange (gain)/loss, impairment/(reversal of impairment) of non-current assets, movements in allowances and provisions, (gain)/loss on disposal of property, plant and equipment, (gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associate and other non-cash items. Other companies in the pipe industry may calculate Adjusted EBITDA differently or may use it for other purposes, limiting its usefulness as comparative measure.We compensate for these limitations by relying primarily on our IFRS operating results and using Adjusted EBITDA only supplementally.