Maverick Overview Market capitalization$1.0 billion Sales Revenue$1.3 billion HeadquartersSt. Louis, MO Company founded1977 Employees2,500 Largest oil country tubular goods (OCTG) producer and one of the largest conduit producers in North America 1.7 million tons of tubular products capacity Largest buyer of hot rolled steel in North America Geographically diverse production facilities 24 mills in 10 North American locations Maverick’s operations are segmented into energy and industrial products 2 * Based on closing stock price on April 16, 2004
Summary of Products Energy Products Industrial Products OCTG Line pipe Coiled tubing HSS Conduit 3 Used in completions of newly drilled wells Used to gather, transmit and disperse oil and natural gas Used in well servicing, flowline and umbilical applications Structural tubing used in construction and other applications Sheathing for wiring in non-residential construction 67% of 1Q2004 Revenues 65% of 1Q2004 EBITDA 33% of 1Q2004 Revenues 35% of 1Q2004 EBITDA
CHINA is a major player 6 Bright spot of the global economy GDP grew more than 9% in 2003 Averaging 9.7% in past 24 years World’s largest recipient of foreign direct investment $53.7 billion in 2002 World’s 2nd largest economy measured by purchasing power Second largest foreign currency reserves $400 billion by end of 2003 World’s 4th largest trading nation over $700 billion in 2003 Full integration of China into WTO provides further stimulus to internationalize industry and markets.
CHINA growth everywhere 8 China’s economy is between 8-10 times the size that it was at the beginning of reform in 1978. Domestic demand as growth engine – exports are less than 30% of overall production. Less than 50% of GDP now state-controlled and only an extremely small number of goods are price controlled. Dramatic expansion in the private sector – aggressive entrepreneurialism has produced 2.5 million firms, providing bulk of employment, tax and overall national growth. China’s growth has been powered by latent demand, the entrepreneurial energy unleashed by the country’s unprecedented reforms, and inherent inefficiencies Emerging large and consuming middle class - growing fast +300 million with significant discretionary spending power by 2010
CHINA a hungry dragon 9 China has become the world’s largest consumer of copper, consuming 22,000 tons and importing more than 7,000 tons every day China has become the world’s largest producer of steel, outpacing both Japan and the USA, importing 408,000 tons of iron ore every day China is now importing 1,750,000 barrels of oil every day signing up LNG deals with Australia, Indonesia, and Iran pipelines being built from Kazakhstan and planned from Siberia
CHINA capital flow continues 10 China is attracting external capital as the global epicenter for manufacturing, largely because of its’ low labor costs. Investment exceeds $50 billion US annually Investments in processing, assembly, redistribution and value added businesses in China continue to increase relative to Southeast Asia, India and Latin America. Foreign and Chinese manufacturers are building out global supply channels from China. Chinese consumers and raw material users are influencing global pricing in many industries.
CHINA Export and Import Growth Source: U.S. Commerce
China vs USA Steel Consumption Source: Steel Dynamics
STEEL COSTS Steel costs have risen sharply Rise in the cost of scrap metal, coke, pig iron & other raw materials are pushing steel costs higher Base price has risen $180 to $240 per ton since the first of the year Base prices are set to rise Unprecedented steel surcharges $125 per ton April 2004 Anticipate steel cost to be volatile throughout 2004 16
SUMMARY 20 Tight steel supplies and higher prices will be prevalent for the foreseeable future Anticipate drilling activity to increase 7% for 2004 in U.S., 5% in Canada Energy prices will stabilize but remain elevated The 21 st century is the “Chinese” century Figure out how this impacts your business!