TR Corporate Presentation - September 2014 [Sólo lectura] Corporate...Global demand for seamless...

1

September 2014

Special Products & Integral Services Worldwide

Tubos Reunidos

GROUP

TUBOSREUNIDOS

September 2014REUNIDOSTUBOSGROUP

Tubos Reunidos Group

1. Market and Trends

2. Company Overview

3. 2014 – 2017 Strategic Plan

4. Financials

Content

2


Tubos Reunidos Group

• Seamless Steel tubes Company

• Global International Footprint : 84% of Sales (2013)

• Oriented to the Energy Sector: 81% of Sales (2013)

• Focus on Special Products: 64% of Sales (2013)

• Transformational Investment Plan Under Execution: 150 Mill Eur 2012-2016

• Strategy: Specialization + Service + Competitiveness. Current Strategic Plan 2014-2017: Towards a new Tubos Reunidos

3

1.Market and Trends

4

REUNIDOSTUBOSGROUP


Tubos Reunidos Market

Global demand for seamless steel pipes, 2013

Standardtubes & pipes Power

generation,petrochemicals

8%

21%

Specialtubes & pipes:

Other

3%4%

* % of Tubos Reunidos’ seamless steel tube (SST) sales in 2013 in euro terms 5

• OCTG: Premium and Special Grades

• Boilers, Heaters and Pressure Pipes : Special Grades

• Line Pipes :

Special Grades

• Stainless Steel

Tubes• Large-diameter

Pipes : Special

Grades

Tubos Reunidos is strategically focused on the specialty tubing segments(64%)* targeted at the energy sector (81%)*

Tubos Reunidos is strategically focused on the specialty tubing segments(64%)* targeted at the energy sector (81%)*

44 million MT

Oil & Gas

UsesSpecial Seamless Steel Tubes, 12 million MT

42%

12 million MT


Oil & Gas

Non-conventional oil & gas exploration technologyDirectional drilling, off-shore,

shale–gas

‣ Deeper drilling wells

‣More corrosive environments

‣ Extreme temperaturesOff-shore pipes

Need for tubing with more complex and high-performance specifications‣ Steels that are more resistant to corrosion,

pressure and aggressive atmospheres (HPHT)

‣ Tubes tailored to individual well characteristics

‣ Premium threading

Sector Trends

New and more efficient technologies – Growing need for specialty tubing6

‣ Steels that are more resistant to corrosion,

pressure and aggressive atmospheres

‣ Greater range of tube diameters, lengths and

thicknesses

Power generation and petrochemicals

New technologies:

‣ Larger-scale power generation facilities(> 600 MW)

‣Work cycles exposed to higher pressure

and temperatures

‣ More stringent safety requirements


OCTG

• Shift towards Unconventional Drilling (Horizontal wells and deeper wells) drives higher demand for seamless steel and Premium Products. Premium OCTG demandwill grow by 8% over 2012-2018

• OCTG Global demand will see a compound annual growth rate of 5% over 2012-2018, and the value of the market will double

Horizontal Shale vs. Vertical Shale

Source: JP Morgan, Industry Sources

Length, KM % Seamless% Premium Connections

OGTG Tons per well

+50% +25% +25% +4,2x

% small OD <7”Tipe of well

Source: The Metal Bulletin Research. The Five Year Outlook for the Global OCTG Industry, 2013, sector companies

x2

2012 2020 OCTG

2012-2018 GrowthGlobal OCTG

Premium OCTG

+ 5% + 8%

+40%

7

OCTG growth. Higher for non conventional technologies and for Premium ProductsOCTG growth. Higher for non conventional technologies and for Premium Products


36

24

12

60

48

2013 2030

12

CAGR:± 4%

Premium OCTGtubes (2012-2018)

Nuclearplants(2012-2020)

SST

Fossil fuel power plants(2012-2020)

4%GWh installed

Petrochemicals(2011-2018)

5%MT

Source: SBB, sector companies

60

Demand for seamless tubesMillions of MT

44

SpecialtySST

8%MT

6%GWh installed

Source: US EIA, : The Metal Bulletin Research. The Five Year Outlook for the Global OCTG Industry, 2013, Broker Share

Growth in specialty segment set to outpace overall growth in demand for SST products

Growth in specialty segment set to outpace overall growth in demand for SST products

Expected Growth

8

24

CAGR:±1.7%

9

2.Company Overview

REUNIDOSTUBOSGROUP


Manufacturing of a Wide Portfolio of Pipes

• Small and large size outside diameter tubes

• Carbon, alloyed, high alloyed: 1/2”-25” (12mm – 635 mm)

• Stainless steel tubes: 8”-25” (190 mm – 635 mm)

• 325,000 MT production capacity

• Production sites located in the Basque Country (Northern Spain)

• Production process vertically integrated

Large diameter Tubes: up to 24”

Manufactured at

Productos Tubulares

• Diameter: 26.7 – 180 mm. (6-

120mm upon cold-drawn).

• Thickness: 2.6 – 20 mm.

• Carbon, alloyed and high alloy.

• Diameter: 190-635 mm.

• Thickness: 6.30 – 120 mm.

• Carbon, high alloy and stainless.

10

Seamless Steel Tubes CompanySeamless Steel Tubes Company

Small and mid-size diameter tubes: up to 7”

Manufactured at

Tubos Reunidos Industrial


Focused on Special and Niche Products

11

Tubes and pipes up to 25" OD and > 40 mm WT in special types of steel

Large diameter TubesLarge diameter Tubes Stainless steelStainless steel Boilers, Heaters

and Pressure PipesBoilers, Heaters and Pressure Pipes

OCTG Premium and Special GradesOCTG Premium and Special Grades

Special service line PipesSpecial service line Pipes

Tubes of > 8" OD in stainless steel up to 25” OD

High chrome alloys

Special lengths (up to 27 meters)

Rifle tube

Quenching and tempering

High collapse

High chrome alloys

Proprietary steel grades

Quenching and tempering

Sour service

Special grades

Offshore

Power generation and petrochemicals - Critical phases and cutting-edge

technological processes

Power generation and petrochemicals - Critical phases and cutting-edge

technological processes

Oil and gas exploration in extreme corrosion,

pressure and temperature conditions

Oil and gas exploration in extreme corrosion,

pressure and temperature conditions

Offshore and special grades

linepipes

Offshore and special grades

linepipes

Special Products: 64% of sales (2013)Special Products: 64% of sales (2013)


Focused on Special and Niche Products

16%

19%

12

26.6%

11.4%

26.5%35.5%

Energy Sector:

81% of sales (2013)

Energy Sector:

81% of sales (2013)

Special Products:

64% of sales (2013)

Special Products:

64% of sales (2013)

Sales breakdown by client, Seamless Steel Tubes and Pipes

Sales breakdown by product, Seamless Steel Tubes and Pipes

12


Worldwide Presence

• Historic worldwide presence

• 84% of seamless steel tubes and pipes sales in international markets

• 55% of seamless steel tubes and pipes sales out of Europe

Sales Breakdown by Region,Seamless Steel Tubes and Pipes, Millions of Eur, 2013

International Footprint: 84% of sales (2013)International Footprint: 84% of sales (2013)

13


14

Shareholder structure

14,9%10,2%

9,0%

6,6%6,4%

3,8%

49,1%

BBVA

Zorrilla Lequerica Family

N+1 por QMC II Iberian Capital Fund (N+1 AssetManagement)

Ybarra Family

Barandiaran Family

De Miguel Nart

Free Float

15

3.2014 – 2017 Strategic Plan

REUNIDOSTUBOSGROUP


16

Premium products From generalist manufacturers to…

From service predicated on flexibility and versatility to...

From cost-efficient to...

Specialist in premium and niche products

End-to-end service provider

Structurally competitive

New Tubos Reunidosmodel

New Tubos Reunidosmodel

End-to-end service

Competiveness

Strategic cornerstones 2014-2017


Sales and technology strategy focused on higher added-value products:in high-growth, high-return segments

100%

Special Aubes

64% High Value Added

55%Newproducts

5%

Sales 2013 (€) Sales 2017 (€)

Focus on specialproducts

Stronger growth in highadded-value products...

...On the back of new,more Premium products

78%75%

25%

x2

x2

x6

100%

Product Mix Improvement

17


•

•

•

•

producer by 2020New high-added value products in TR since 2014

•

•

•

•

High-growth segmentsStainless steel large outside diameter forenergy uses:Strong competitive advantages and entry barriers for TR

Niche product - TR Group large market share

New special products since 2013

Boilers and Heaters:Present in the maximum grade range, with applications inthe most efficient and high-growth technologies in theenergy generation and petrochemical sectors

OCTG:The oil and gas sector is the largest source of energy tomeet future demandsNon-conventional technologies: higher TSS demand

Long-standing presence in the US - will be the largest oil

Boilers and heaters

OCTG

Mechanical industries and others

Stainless steel large diameter

for energy uses

Service line pipe+++

++

+++

2013 2017

Sales volume increase

18


19

0

10

20

30

40

50

2012 2013 2014 2015 2016 2017

Gradual consolidation of sales of new products

2017 target ROCE: 15%

News products:

2013: 24" diameter tubes, special service line pipes

2014: Premium OCTG tubes, high alloy boilers and heaters

2016: 28” diametertubes

2017: Premium OCTG threading

Investments:2012-2013: 24" diameter tubes, degassing, heat treatment

2015-2016: 28" diameter tubes, OCTG threading

2017: Normalised CapEx400

300

200

100

0CapEx - seamless tubes (€ million) Sales of high added-value tubes (€ million)

Execution of Transforming Investment Plan: 2012-2016 of 150 Million Eur


20

+ +Asia

+

RoWPercentage of 2013 revenue in € Percentage of 2017 revenue in €

USA& Canada 30% -> 35%Higher investment in oil & gas 2012-2035Shale gas revolution• TR boasts entrenched positioning, with new products and capabilities• Vertical integration, finishing and increased local presence

Europe 45% -> 35%Consumption recovering from lows of

2012-2013 (-44% vs. 2007)• Entrenched leadership position bolstered by new product capabilities

Geographic market strategy

25% -> 30%

Positioned in highly value-added products

Middle East + North AfricaM. East: $525bn over 5 years: 50% oil,33% gas, 17% electricity• TR positioned in highly value-added segment• New Almesa strategy

LatamOpportunities in Mexico: energy sector

reformOther areas by means of the new strategy

for Almesa

20


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2003-2013

• EBITDA margin expansion of 7pp between two cyclical troughs

2014-2017:

✓✓✓✓ + Gradual volume traction

✓✓✓✓

✓✓✓✓

✓✓✓✓

✓✓✓✓

+ Mix / prices+ ProfitabilityNormalised capexStreamlined working capital requirements

2012-2013

• Strategic capex

- New products

- New processes

Tubos Reunidos’ EBITDA margin in seamless steel tubes

✓✓✓✓ Cash flow generation

New era of faster growth and enhanced profitability

6,2%

28,2%

13,3%

15,6%14,6%13,3%

New phase for growth

21


More profitable products

450

300

150

600

2014 2015 2016 2017

‣

2.4xRevenue growth +margin expansion

82,5

55

27,5

110

2014 2015 2016

1.7x‣ Growth in all segments:

seamless tubes, distribution and automotive

Consolidated EBITDA,€ million

Consolidated revenue,€ million

350

2013

598

101

42

• Margin expansion of 6percentage points:

‣

‣ Operational gearing

2013

13%

2017

19%

EBITDA margin, seamless tubes% of revenue

2013 2014 2015 2016 2017

Quantitative Objectives 2014-2017

22


Consolidated Capex,€ million

Leverage50

200

150

100

2013 2017

50

40

30

20

10

2012 2013 2014 2015 2016 2017

€108.5mn

Cash flow generation throughout the projection period is expected to drive a significant reduction in leverage without having to jeopardise the capex programme or dividend policy

182

4.3x

1.2x

Quantitative Objectives 2014-2017

23

24

4.Financials

REUNIDOSTUBOSGROUP


Increase in Tubos Reunidos' profit in H1,in line with the targets set for 2014

Consolidated Group:H1 2014 financial performance (€ million)

Sales

Q2 2013

93,7

Net ProfitEBITDA & EBITDA Margin (%)

25

Q2 2014

108,9

+16,2%

H1 2013 H1 2014

188,9207,2

+9,7%

Q2 2013

10,911,6%)

Q2 2014

12

11%

+10,1%

H1 2013 H1 2014

21,5

11,4%

24,6

11,9%

+14,5%

Q2 2013

1,9

Q2 2014

2,1

+7,2%

H1 2013 H1 2014

3,1

4,4

+40,9%


H1 2014 milestones

Increased sales in H1 and improvement of the product mi x, derived from transformationalCapex in 2012-2013:• Special sales grow 15% in H1 2014 vs. H1 2013• OCTG: more competitive in-house manufacture of new special steels (new degassing plant) and greater

capabilities for premium finishing processes (new heat treatment facility) • Large diameter pipes: growth of 25% vs H1 2013 (new processes that enable TR to manufacture tubes

of larger outside diameter)• Slight recovery of activity in the European Union, in a more favourable macroeconomic context• Improved demand in North American activity in the oil and gas and industrial sectors• Award of key projects in the energy generation and petrochemicals sectors, despite the ongoing

slowdown due to financial restrictions and the slower pace of growth in emerging economies

Good order book position at the end of June 2014

26

The backdrop has continued to be adverse , due to the high level of competition and its efect in prices, and an unfavourable EUR/USD exchange rate, which is improving in the third quarter

Ongoing cost control and continued efforts to improve operating efficiency and productivity


2014: Year of consolidation of 2012-2013 investments

2013: Investments focused on seamless steel tubes (85%) in order to launch new higher added-valueproducts and to boost the competitive edge:

New degassing facility in the steelworks plantNew quenching and tempering heat treatment lineNew facilities for large diameter special tubes

50% of 2012-2016 investment plan already met, at €150 million

Capital Expenditures

27

2013 H1 2014

Consolidated Capex 41 10

Seamless Steel Tubes Division Capex 39 8

Consolidated D&A 25 15


Solid financial structure, with 80% of net financial debt maturing in the long term.

Diversified financing sources, with a €59 million long-term loan from the European Investment Bank,in order to support the R&D&I investment plan.

Available credit facilities at June 2014 amounted to €61 million.

84%

Consolidated Group:Debt 1H 2014 (€ million)

Debt structureGrosss debt at June 2014

3%14%

28

77%

20%

3%Bank borrowings

EIB financing

Sales discounts and others

Maturity schedule

20%

30%

18%12%

18%

< 1 year 1 < years < 2 2 < years < 3 3 < years < 4 > 4 years

80% Long Term


Consolidated Group Financials

29

INCOME STATEMENT, Thousands of Euros H1 2014 H1 2013H1 2014 /

H1 20132013 2012

2013 /

2012

Revenue 207.223 188.947 10% 350.451 464.727 (25%)

Changes in inventory 13.462 (2.953) 1.963 240

Supplies (107.607) (83.044) (161.781) (226.403)

Personnel expenditure (55.584) (52.047) (95.952) (108.645)

Other operating expenses (40.613) (38.811) (77.819) (100.282)

Other operating income and net gains/(losses) 7.745 9.410 25.375 19.937

EBITDA 24.626 21.502 15% 42.237 49.574 (15%)

Depreciation and amortisation charge (14.743) (13.986) (24.686) (26.606)

EBIT 9.883 7.516 31% 17.551 22.968 (24%)

Financial income/(expense) (4.917) (4.808) (11.429) (10.443)

Profit before income tax 4.966 2.708 83% 6.122 12.525 (51%)

Profits tax (413) (11) 49 (1.477)

Consolidated profit for the period 4.553 2.697 69% 6.171 11.048 (44%)

Profit from minority interests (121) 449 472 (475)

Profit for the period 4.432 3.146 41% 6.643 10.573 (37%)



30

BALANCE SHEET, Thousands of Euros H1 2014 Q4 2013

NON-CURRENT ASSETS 404.361 411.801

Inventories and customers 233.600 188.107

Cash and other cash equivalents 27.227 25.791

CURRENT ASSETS 260.827 213.898

Assets held for sale 4.799 4.836

TOTAL ASSETS 669.987 630.535

NET EQUITY 250.804 246.037

DEFERRED REVENUES 9.898 10.946

Non-current provisions 14.348 15.183

Bank borrowings and other financial liabilities 169.778 169.054

Other non-current liabilities 56.047 55.656

NON-CURRENT LIABILITIES 240.173 239.893

Short-term provisions 3.554 3.839

Bank borrowings and other financial liabilities 50.687 38.568

Other current liabilities 114.871 91.252

CURRENT LIABILITIES 169.112 133.659

Liabilities held for sale - -

TOTAL LIABILITIES 669.987 630.535

Net financial debt 193.238 181.831



Consolidated RevenueThousands of Euros

Consolidated EBITDA and EBITDA MarginThousands of Euros; % of revenue

31

95.196 93.751

73.919

87.585

98.278

108.945

--

20.000

40.000

60.000

80.000

100.000

120.000

1T 2013 2T 2013 3T 2013 4T 2013 1T 2014 2T 2014

10.598 10.903

7.814

12.539 12.61612.010

11,1%11,6%

10,6%

14,3%12,8%

11,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

--

2.000

4.000

6.000

8.000

10.000

12.000

14.000

1T 2013 2T 2013 3T 2013 4T 2013 1T 2014 2T 2014

EBITDA Margin



Consolidated RevenueMillions of Euros

Consolidated EBITDA and EBITDA MarginMillions of Euros; % of revenue

32

350 404

516

586 637

728

396 378

500 465

350

--

200

400

600

800

1.000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

20 33

70

111

142 153

25

11

62

50 42

5,8%8,3%

13,6%

18,9%22,3%

21,0%

6,4%3,0%

12,5%

10,7% 12,1%

0,0%

10,0%

20,0%

30,0%

40,0%

--

20

40

60

80

100

120

140

160

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EBITDA Margin

33

September 2014

Special Products & Integral Services Worldwide

Tubos Reunidos

GROUP

TUBOSREUNIDOS

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