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Page 1Company presentation INTERPIPE. Page 2Company presentation 7LLD09610_Client Screenshow The materials contained herein (the Materials) have been.

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Presentation on theme: "Page 1Company presentation INTERPIPE. Page 2Company presentation 7LLD09610_Client Screenshow The materials contained herein (the Materials) have been."— Presentation transcript:

1 Page 1Company presentation INTERPIPE

2 Page 2Company presentation 7LLD09610_Client Screenshow The materials contained herein (the Materials) have been prepared by Interpipe Limited (the Company) and its subsidiaries (the Group) solely for use at the presentation to investors on April 18, By accepting the Materials or attending such presentation, you are agreeing to maintain absolute confidentiality regarding the information disclosed in the Materials until notified by the Company. The information set out herein is subject to updating, completion, revision, verification and amendment and such information may change materially. The Company and its respective affiliates is not under any obligation to update or keep current the information contained in the Materials or in the presentation to which it relates and any opinions expressed in them are subject to change without notice. The Company and its respective affiliates, advisors or representatives shall not have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of the Materials. The information contained in the Materials has not been independently verified. The Materials are strictly confidential and do not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should they or any part of them form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Any person considering the purchase of any securities of the Company must inform itself independently based solely on the Companys prospectus and any amendments or supplements thereto (the Prospectus) before taking any investment decision. The Prospectus, when issued, may contain information different from the information contained in the Materials. The Materials have been made provided to you solely for your information and background and are subject to amendment. The Materials (or any part of them) may not be reproduced or redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant persons professional advisers) or published in whole or in part for any purpose without the prior written consent of the Company. Failure to comply with this restriction may constitute a violation of applicable securities laws. No representation or warranty, expressed or implied, is made by the Company or any of its respective affiliates as to the fairness, accuracy, reasonableness or completeness of the information contained herein and no reliance should be placed on it. The Company, its advisers, connected persons or any other person do not accept any liability for any loss howsoever arising, directly or indirectly, from a reliance on the Materials. Disclaimer

3 Page 3Company presentation 7LLD09610_Client Screenshow The Materials may include forward-looking statements. These forward-looking statements are statements regarding the Groups intentions, estimates, forecasts, projections, beliefs or current expectations concerning, among other things, the Groups results of operations, financial condition, liquidity, prospects, growth, strategies and the steel pipe and railway wheel industries. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Group cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industries in which it operates may differ materially from those expressed, implied or suggested by the forward-looking statements contained in the Materials. In addition, even if the Groups results of operations, financial condition and liquidity and the development of the industries in which it operates are consistent with the forward-looking statements contained in the Materials, those results or developments may not be indicative of results or developments in future periods. Neither the Company nor the Group undertake to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of the Materials. The Materials are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. The Materials are not for publication, release or distribution in Australia, Canada, Japan or the United States. The Materials and the information contained herein are not an offer of securities for sale in the United States and may not be distributed to, or be viewed by, any US person within the meaning of Regulation S under the US Securities Act of 1933, as amended. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the Company that will contain detailed information about the Group and management, as well as financial statements. This communication is only directed at (i) persons who are outside the United Kingdom, (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order) or (iii) other persons to whom it may lawfully be communicated, falling within Article 49(2) (a) to (d) of the Order (all such persons together being referred to as Relevant Persons). Any person who is not a Relevant Person should not act or rely on this communication or any of its contents. Any investment or investment activity to which these materials relate is available only to Relevant Persons and will be engaged in only with Relevant Persons. Certain information in this presentation is derived from annual reports of the Groups competitors. While the Company has accurately reproduced such third-party information, it has not independently verified such information. Further, financial data derived from such third-party information (including EBITDA, cost of goods sold, revenue and ratios based thereon) may be calculated on a different basis from the Company. Disclaimer

4 Page 4Company presentation 7LLD09610_Client Screenshow Interpipe - presentation 1.Company overview 2.Interpipe overview and highlights 3.Financial overview 4.Key takeaways Agenda

5 Page 5Company presentation Company overview

6 Page 6Company presentation Key highlights Key products 7LLD09610_Client Screenshow Interpipe at a glance Major global producer of seamless pipes, 2 nd largest producer of forged railway wheels in the world in 2006 Focused on high-margin products: 79% of revenue in pipe business from seamless segment with 23% EBITDA (1) margin (2007) and 36% EBITDA (1) margin in wheels business (2007) Year-on-year growth in EBITDA (1) of 17% (2006 to 2007) Low cost compared to key competitors and vertically integrated Diversified global customer base Logistically well connected to key markets in CIS, MENA and Europe Comprehensive strategy of maintaining cost leadership compared to key competitors, upgrading product portfolio to higher margin products, and growing in attractive markets Strategic US$1.7 billion investment program under way OCTG Line pipe Special pipes Railway wheels (1)EBITDA represents in this presentation Adjusted EBITDA numbers, which are recalculated as profit from operations plus depreciation and amortisation, impairment of assets and loss (gain) on dispositions of property plant and equipment, translation differences and other non-recurring items. Company overview

7 Page 7Company presentation 7LLD09610_Client Screenshow Interpipe manufactures a full range of steel pipe products Examples of products Welded pipes Interpipe produces welded pipes with: Diameters measuring from 15mm to 1,020mm Wall thickness measuring from 1mm to 15mm Interpipe welded product range comprises: Transportation line welded pipes Industrial welded pipes Seamless pipes Interpipe produces seamless pipes with: Diameters measuring from 32mm to 377mm Wall thickness measuring from 3mm to 60mm Interpipe seamless product range comprises: Seamless OCTG, including drill pipe, surface casing, production casing and production tubing VAM compatible UPJ premium joints Seamless transportation line pipes Seamless special application pipes, which include boiler pipes, roller pipes, pipes for submerged pump stations, precision pipes and cold drawn pipes Seamless industrial pipes OCTG Linepipe Industrial applications pipes Special pipes Company overview

8 Page 8Company presentation 7LLD09610_Client Screenshow Interpipe is the largest exporter of railway wheels Overview of wheels productsExamples of products Interpipe is certified to supply its products to all major wheels markets, for an extensive range of forged wheels used for freight cars, passenger carriages, locomotives and underground trains Interpipe produces approximately 240 different designs of railway wheels and tyres According to the European Railway Wheels Association (ERWA) Interpipe was the largest exporter of railway wheels worldwide, and the second largest producer of forged railway wheels worldwide in 2006 Interpipe estimates its worldwide market share was 12% by production volume in 2007 Interpipe has a well diversified customer base across 23 countries Source: ERWA, SCI Verkehr GmbH Company overview

9 Page 9Company presentation Interpipe is a global player in the most attractive pipes and wheels markets In 2007, pipes were sold in 75 countries, wheels – in 23 Company overview US$2m (<1%) US$40m (3%) NAFTA US$ 59m (16%) US$ 119m (9%) Europe US$ 211m (57%) US$ 284m (20%) Ukraine US$ 33m (9%) US$ 264m (19%) Other CIS US$ 52m (14%) US$ 510m (37%) Russia US$ 2m (<1%) US$ 171m (12%) MENA Main Interpipe sales directions: Region Wheel revenue (share of wheels revenue) Pipe revenue (share of pipes revenue) pipes wheels

10 Page 10Company presentation Different customer concentration for pipes and wheels reflects market structure Share of revenue top 10 customers by revenue- pipes (2007) Share of revenue top 10 customers by revenue - wheels (2007) Key pipes customersKey wheels customers Company overview Share of top 10 customers 25% Share of top 10 customers 64% Approximately 1000 customers Largest customer, Gazprom neft, accounts for 5% of pipes revenue (2007) Approximately 90 customers Largest customer, Ukrainian Railways, accounts for 12% of wheels revenue (2007) Technology & Energy Company

11 Page 11Company presentation 7LLD09610_Client Screenshow Integrated business model Steel productionPipe & wheel productionSelling to customers globally 100% of steel billets for wheels and 32% for seamless pipes produced internally in 2007 Steel pipes and wheels are produced and sold to internal trading companies Wheels and pipes sold to end customers and distributors through sales offices and warehouses located in strategic markets Company overview NTRP Open Hearth Furnace Steel billets produced End customer EXTERNAL SUPPLIERS OF RAW MATERIALS NTRP NMPP LLC Niko Tube Raw materials supplied from outside (pig iron, fero alloys, oil, natural gas, electricity) Dneprovtormet Scrap Metal Processing Plant Wheels Seamless pipes Welded pipes DOMESTIC SALES INTERPIPE SALES OFFICES Dneprostal Kazakhstan Russia Ukraine UAE USA Switzerland Seamless and welded pipes

12 Page 12Company presentation Interpipe overview and highlights

13 Page 13Company presentation 7LLD09610_Client Screenshow We are focused on seamless pipe segment with high margins and high barriers to entry Know-how barriers Industry and customer certification requirements Certified by the industry bodies (API, Bureau Veritas, TÜV) and customers (KOC, ADNOC) Welded pipes 17% 23% Seamless pipes Experienced work force Pipe segment (2007)Barriers to EntryInterpipe Position EBITDA split EBITDA margin Welded pipes 83% Seamless pipes 17% Capital intensive Two operating plants with total rolling capacity of 1.6 mt per year and finishing capacity of 1.3 mt per year Interpipe overview and highlights

14 Page 14Company presentation 7LLD09610_Client Screenshow Our product line is focused on the dynamically growing and highly profitable Oil & Gas Industry Oil & Gas (OCTG and linepipe) Key drivers Oil prices Rig count Scope of drilling Oil production Exploration and production Capex Market structur e Oil and gas majors Oil and gas national companies Small-scale oil and gas companies Pipeline contractors Traders and stockists Sales, 2007 Interpipe overview and highlights

15 Page 15Company presentation We have a strong cost position… (1) COGS and tonnes (other that with respect to Interpipe) are as presented in the annual report of each company without adjustment, all figures are IFRS based Source: Companies annual reports Average monthly wages (2006) (1) Average annual wages divided by number of employees Source: EIU Source: Company accounts for Ukraine, IEA for NAFTA and W. Europe Pipes COGS per ton of sold pipes (2007) (1) Low cost environment in Ukraine Electricity costs (2006) Maximizing benefits from our favourable location close to strategic markets Compact layout of production assets, with all plants within 120 km of headquarters Major suppliers of raw materials within km Interpipe overview and highlights

16 Page 16Company presentation …flexible products delivery worldwide… Transportation cost advantage through nearby railway junction and sea ports, as well as proximity to key markets such as Russia, Middle East and Europe Third party inspections can be provided on request by Bureau Veritas, SGS, Bureau Franke, Moody International, Lloyds Register and others. Interpipe overview and highlights

17 Page 17Company presentation … and high and increasing vertical integration 2nd largest scrap processor in Ukraine Capacity expansion program approved with investments of US$35 million until 2012 targeting the maintenance of full self- sufficiency in view of expected increase in demand by electric arc furnaces (EAF) target Dneprovtormet fully covers Interpipes demand for scrap Self-sufficiency in billets close to 50% and increasing further Scrap supply and demand (kt/year) Share of billets produced in-house for seamless pipes and wheels Scrap sourced from a company which will be consolidated into Interpipe In-house billet production 4 open hearth furnaces (OHF) with capacity of 750,000 tons of billets per year In 2012 two electric arc furnaces (EAF) with expected capacity of 2.2 mt of billets per year are expected to be fully operational targeting close to full self-sufficiency OHF self-sufficiency 2012 target - EAF self-sufficiency (1) (1) Based on Danielle contract Source: Company data Vtormet (supply)OHF (demand)Vtormet (supply)EAF (demand) (1) (1) Based on Danielle contract Source: Company data Interpipe overview and highlights

18 Page 18Company presentation A comprehensive strategic investment program is under way Focus on oil and gas: OCTG and line pipe Increase vertical integration Reduce energy and labor costs Focus on high margin product Interpipe overview and highlights Capital Expenditure*, US$mln. * Does not include capital expenditures for Management Information System and capital maintenance **Final decision of the board has not been accepted yet. Decision of the board is expected in Q ***Includes a U.S. $ 155 mln. Investments into the second phase of EAF still under discussion. Decision of the board is expected in Q ****Includes a U.S. $ 65 mln. for which the final decision of the board has not been accepted. Decision of the board is expected in Q Construction of a new seamless pipes mill** 6578 Construction of a new EAF mill*** Upgrade of existing seamless pipes capacities**** Coating line for welded pipes 9- Finishing line for wheels23- Modernization of scrap processor 1115 TOTAL

19 Page 19Company presentation …and best practice corporate governance supporting our strategy Best practice corporate governance Board of directors is established in compliance with UK Combined Code on Corporate Governance: 3 independent directors (INEDs) 3 BoD committees :Remuneration, Audit and Nomination Audit and Nomination committees headed by INEDs Our INEDs have strong and recognized experience: Nikolay Tsekhomskiy (Chairman of Audit Committee): Big 4 audit experience (Ernst & Young), executive positions in major Russian public companies (MTS, VTB), familiarity with IPO and post-IPO processes Jean Pierre Saltiel (Chairman of Nomination Committee): executive and supervisory positions in renowned Ukrainian, French and international economic and industrial bodies Richard P. Norris: executive positions in the oil & gas and mining industries, extensive experience in the areas of tax, treasury, corporate finance and risk management Interpipe overview and highlights

20 Page 20Company presentation 7LLD09610_Client Screenshow Corporate structure, ensuring effective and efficient operations OJSC Interpipe NTRP OJSC Interpipe NMPP LLC Interpipe Niko Tube LLC Dneprosteel LLC Interpipe Management CJSC Nikopolsky Plant of Technological Tools CJSC Power generation Cyprus holding companies Management company registered in Ukraine Ukrainian production facilities Commercial companies (Ukraine, Russia, Kazakhstan, Switzerland, US, UAE) Central trading entity based in Ukraine 20.77%86.47%72.58% LLC Interpipe Ukraine LLC Interpipe-M LLC Interpipe Kazakhstan INTERPIPE EUROPE S.A. KLW Wheelco S.A. NORTH AMERICAN INTERPIPE, Inc Interpipe Middle East INTERPIPE LLC Steel One Limited 100% 25.01% 30.01% 99,9% Saleks Investments Limited 60% Interpipe overview and highlights 99,9% 12% 0,01% CJSC Nikopolsky Reparing Plant OJSC Dneprovtormet 95.95%

21 Page 21Company presentation Financial overview

22 Page 22Company presentation 7LLD09610_Client Screenshow Interpipe 7LLD09610_Client Screenshow EBITDA margin (%) Total 06 07%chg % % 35.3%35.9% (1)Includes unallocated items of US$13m in 2006 and US$23m in 2007 (2)Includes unallocated items of US$1m in 2006 and US$3m in 2007 Revenue split (2007) Pipes %chg0607 %chg Seamless Welded Revenue (US$m) EBITDA (US$m) Revenue from top 5 customers (2007) 891 1,101 24% % 25.8%22.9% 16.1%16.7% Strong financial results with 17% growth in EBITDA 06 07%chg 1,442 (1) 1,792 (1) 24% 375 (2) 438 (2) 17% 26.0%24.5% Wheels %385032% % Volumes (kt) % (1)% 1,4271,4673% Financial overview

23 Page 23Company presentation 7LLD09610_Client Screenshow Strong, diversified revenue growth in attractive markets – seamless pipes Seamless pipes revenue split Overview Overall revenue of seamless pipes up by 24% Fastest growth in strategic markets: Russia (48%) and other CIS countries (45%) Strong increase in revenues in attractive MEA market by 24% Maintaining strong position in the domestic market (14% growth) 891 1,101 2%2% 8%8% 15% 33% 18% 10% 14% 1%1% 4%4% 15% 39% 16% 8%8% 17% Growth (40)% (44)% 24% 48% 14% (6)% 45% Other NAFTA MEA Russia Ukraine Europe Other CIS +24% Financial overview

24 Page 24Company presentation 7LLD09610_Client Screenshow Focused geographical growth and change in product portfolio – welded pipes Welded pipes revenue split Overview 27% 35% 12% 26% Growth (7)% 32% (16)% 140% % 33% 17% 14% Welded pipes revenue increase by 25% Focused growth on domestic and other CIS countries in high margin line pipes segment Increase in welded pipes revenue due to the substitution of general use pipes by higher margin line pipes Russia Ukraine Europe Other CIS +25% Financial overview MEA

25 Page 25Company presentation 7LLD09610_Client Screenshow Improved position of the global player - wheels Wheels revenue split Overview 14% 57% 16% 9%9% Growth 87% 31% 19% 15% <1% (92)% 3%3% 38% 9%9% 54% 16% 10% 8%8% 3%3% Wheels revenue increase by 23% Continued growth in revenues on Ukrainian, Russian and European markets Further penetration into growing Indian market Other NAFTA Russia Ukraine Europe Other CIS +23% Financial overview

26 Page 26Company presentation 7LLD09610_Client Screenshow Maintaining cost leadership position Revenue and Operating cost per ton We successfully coped with increasing volatility of the steel prices, as well as concentrating our efforts on higher value-added products Costs under our control were kept within target We benefited substantially from existing vertical integration into steel in our wheels production. Overview Cost of sales, US$ mln. Growth 2% 39% 12% 38% 5%5% 36% 6% 7%7% +33% +US$184 +US$211 +US$184 +US$ % 6% 7% 9%9% 68% 71% 9%9% 6%6% 5%5% 4%4% 3%3% 2%2% -US$8 1,243 Financial overview

27 Page 27Company presentation 7LLD09610_Client Screenshow Shareholders value in Focus - EBITDA EBITDA per ton EBITDA evolution Overview EBITDA indicator has witnessed substantial increase both in absolute terms as well as in per tonne terms in % 11% 30% 61% 10% 28% Growth,% 10% 32% 25% 17% +5%+24% +17% +31% Financial overview

28 Page 28Company presentation 7LLD09610_Client Screenshow Capital structure re-engineering - Gearing OverviewSignificant financial flexibility Net debt evolution and cost Strategic capital expenditure program as well as increased investment into working capital arising from business expansion are adequately financed by external borrowings Going forward, we are focused on sustaining a controlled level of debt to equity maximizing benefits for the shareholders and keeping financial risks at acceptable level (internal target for gearing 1:1) Debut Eurobonds issue in 2007 with credit ratings B+ obtained from Fitch and S&P Proven record of cooperation with leading financial institutions (both international and local) The most restrictive of our existing external financial covenants leaves enough flexibility for financial manoeuvre (controlled by internal targets setting): - Net Debt/EBITDA: max 2.5:1 - Debt/Equity: max 1.5:1 - EBIT/Interest cover: min 4:1 Financial overview

29 Page 29Company presentation Liquidity management Interpipe objective is to maintain continuity and flexibility of funding. Nearly 60% of liabilities are long term Financial overview

30 Page 30Company presentation 7LLD09610_Client Screenshow Up to date financial control and reporting (estimated) Preliminary IFRS consolidated financial statements Regular IFRS reporting function established Management accounts prepared on a monthly basis with actual results reviewed against budget by top management 2006 Full convergence of management accounts and IFRS reporting achieved Preparation of IFRS accounts on quarterly and annual basis Financial controlling and reporting procedures upgrade started IFRS financial statements available within 75 days Full automation of the MIS reporting function based on Oracle Financial control formalised in accordance with established best practices Full fledged internal audit function operating on a regular basis IFRS financial statements are expected to be available within 60 days Financial overview

31 Page 31Company presentation Key takeaways

32 Page 32Company presentation Key investment highlights Major global producer of seamless pipes High margin seamless segment with high barriers to entry 1 2 High margins in stable wheel business Low cost and vertically integrated 3 4 Substantial margin upside through product portfolio upgrade and operational improvements Comprehensive strategic investment program under way 7 8 Strong international management team Best practice corporate governance and focus on shareholder value 9 10 Leading market position in an attractive industry Sustainable cost advantage and high quality earnings Significant upside in profitability Shareholder value driven company Significant growth prospects Exposure to fast growing / high margin OCTG market Platform to tap into highly attractive growth regions 5 6 Key investment highlights

33 Page 33Company presentation Thank you for your attention Q&A session

34 Page 34Company presentation 7LLD09610_Client Screenshow Calculation of adjusted EBITDA (2006) Appendix Revenue from sales 300, , ,213 12,204 1,441,588 Cost of sales (181,756) (571,345) (173,639) (10,020) (936,759) Other operating income 187 2, ,606 Selling and distribution expenses (10,809) (85,723) (22,426) (258) (119,217) General and administrative expenses (10,762) (28,414) (11,952) (1,743) (52,871) Other operating expenses (2,579) (21,458) (7,360) (24) (31,420) Share of profit of associates Depreciation and amortization (9,742) (38,824) (10,290) (2) (58,858) TotalOtherWelded pipesSmls pipesWheels EBITDA 104, ,103 32, ,905 EBITDA margin, %34.9%25.4%13.6%5.8%25.2% Translation difference and foreign exchange difference (65) (193) (51) (3) (312) Gain/(Loss) on disposal of property, plant and equipment and intangible assets (1,273) (3,782) (788) (18) (5,861) Depreciation and amortization - impairment - - (5,250) - Adjusted EBITDA 106, ,957 38, ,208 adjusted EBITDA margin, %35.3%25.8%16.1%6.0%26.0%

35 Page 35Company presentation 7LLD09610_Client Screenshow Calculation of adjusted EBITDA (2007) Appendix Revenue from sales 371,419 1,101, ,736 22,418 1,792,042 Cost of sales (231,002) (773,759) (218,419) (19,616) (1,242,796) Other operating income 954 1,685 1,561 2,414 6,614 Selling and distribution expenses (9,109) (65,692) (20,499) (92) (95,392) General and administrative expenses (9,428) (39,047) (11,749) (824) (61,048) Other operating expenses (9,941) (15,250) (2,376) (917) (28,483) Share of profit of associates Depreciation and amortization (11,195) (44,010) (5,502) (697) (61,404) TotalOtherWelded pipesSmls pipesWheels EBITDA 124, ,281 50,755 4, ,204 EBITDA margin, %33.4%23.1%17.1%18.2%24.2% Translation difference and foreign exchange difference ,160 Gain/(Loss) on disposal of property, plant and equipment and intangible assets ,410 Holden (9,896) One off gain on investment disposal - 1,390 Adjusted EBITDA 133, ,479 49,643 2, ,276 adjusted EBITDA margin, %35.9%22.9%16.7%11.9%24.5% Note: EBITDA is a measure used by the Company to measure operating performance and is not a recognised term under IFRS and does not purport to be an alternative to operating income or cash flow from operations, as an indicator of operating and financial performance. Because companies do not calculate EBITDA identically, our presentation may not be comparable to similarly titled measures of other companies

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