Tubacex, S.A. · BME:TUB
Tubacex — Investor Presentation (November 2008)
35 slides from Tubacex's investor presentation, Nov 24, 2008
Slide 1: Prospects and strategy
TUBACEX Prospects and strategy Analysts´ meeting Llodio, 24 November 2008
Slide 2: Table of contents
Table of contents Market environment 2008 situation
Slide 3: Market environment
Market environment Álvaro Videgain (Chairman & CEO)
Slide 4: Seamless stainless steel tube sector
Seamless stainless steel tube sector Crude steel 1,344 million tons per year Arcelor Mittal Nippon Steel JFE Baosteel … 72 million tons per year Welded tube (carbon & stainless) TMK Baosteel 36 million tons per year Arcelor Mittal Condesa Carbon seamless tube 27 million tons per year Tenaris Vallour
Slide 5: Sector: main characteristics (I)
Sector: main characteristics (I) Strong growth • Average growth of demand: 6-12% in the past five years. • Stainless steel has a longer life than other materials and it does not require maintenance. • Significant substitution effect when stainless steel prices go down. • Global growth requires safer
Slide 6: Sector: main characteristics (II)
Sector: main characteristics (II) Linked to oil, gas and energy sectors… Carbon Stainless High alloys Several industrial processes Welded Construction tube Food Che- Automotive mistry Aerospace Oil conduction LNG Water Oil and gas exploration Energy generation Seamless Oil and gas extraction tube Pe
Slide 7: Sector: main characteristics (III)
Sector: main characteristics (III) …where Tubacex sells 80% of its products • Onshore • Plants PETROCHEMICAL OIL CHEMICAL AND • Offshore • Organic • Refining • Plastics • Rubber • Fiber • Thermal POWER GEN • Onshore GAS • Combined cycles • Offshore • Cogeneration • Nuclear
Slide 8: Sector: main characteristics (IV)
Sector: main characteristics (IV) New competitors • “Commodity” and non-certified products. • Market share not relevant. • Learning curve. Traditional competitors • Specialization in higher value-added products. Global market • Allowing synergies among the different geographic areas.
Slide 9: Competitors
Competitors Eastern Europe EU Centravis TMK Sandvik Pervouralsky TTI (Tx Group) NAFTA SBER (Tx Group) SALEM (Tx Group) Salzgitter Salzgitter Manesmann China Korea Manesmann ………… Walsin Changwon Pexco (Sand-Sum) Jiuli Baosteel ………… Japan India Sumitomo Sandvik Asia Kobe Ratnamani Nippon Steel ……… San
Slide 10: Tubacex Group: structure
Tubacex Group: structure Raw materials: Nickel FINAL MARKET Stainless scrap Molybdenum Round bars and square billets Ferrochrome Others Commercial offices Hot extrusion Fittings Tube Master distributor Cold rolling and stretching Tube Group stocks
Slide 11: Prospects
Prospects Tubacex sees clear signs of strength in the whole chain of the oil, gas and energy sectors but with more uncertainties in the short term due to the weakening macroeconomic and financial global conditions • Current oil prices unsustainable in the medium/long term. • Reasonable scenario: ret
Slide 12: Tubacex: we know where we want to be
Tubacex : we know where we want to be Energy demand will have increased by 45% in 2030 6.000 5.000 4.000 3.000 2.000 1.000 0 1980 2000 2006 2015 2030 Oil Coal Gas Nuclear Hydro Biomass Other renewables Source: IEA. • Despite the current uncertain scenario, investments in energy are a must. • The amo
Slide 13: Where does Tubacex want to be?
Where does Tubacex want to be? HIGHER VALUE-ADDED PRODUCTS • OIL&GAS • POWER GENERATION • NUCLEAR ENERGY
Slide 14: Oil&Gas: output from current rigs decreases by 6-9% annually
Oil&Gas: output from current rigs decreases by 6-9% annually Rig count evolution Oil production evolution Annual output (thousands barrels daily) 1.400 90.000 1.200 80.000 1.000 70.000 60.000 800 50.000 600 40.000 30.000 400 20.000 200 10.000 0 0 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 95 96 97
Slide 15: Oil: 20 years of underinvestment in the industry
Oil: 20 years of underinvestment in the industry 120 100 80 60 40 20 0 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E Oil price (US$) New offshore platforms Source: Tubacex estimati
Slide 16: Oil: exploration and extraction are increasingly complex
Oil: exploration and extraction are increasingly complex Exploration and production spending: breakdown 2003 2010 Arctic 4% Sulphur acid LNG Deepwater 3% 6% Arctic Tight gas 3% Heavy oil 6% 3% Heavy oil 7% 7% LNG 10% Conventional 57% Deepwater Conventional 80% 14% Source: Morgan Stanley. • Scarcity
Slide 17: OCTG tube: extraction under critical circumstances
OCTG tube: extraction under critical circumstances
Slide 18: Umbilicals: assistance in critical conditions of extraction
Umbilicals: assistance in critical conditions of extraction
Slide 19: Where does Tubacex want to be?
Where does Tubacex want to be? HIGHER VALUE-ADDED PRODUCTS • OIL&GAS • POWER GENERATION • NUCLEAR ENERGY
Slide 20: Coal plants as a primary source of energy still growing strongly
Coal plants as a primary source of energy still growing strongly Energy global demand (GW) Electric generation in China 16.000 3.500 14.000 3.000 12.000 2.500 10.000 11.172 2.000 8.000 9.187 8.377 1.500 6.000 7.444 1.000 4.000 500 2.000 3.237 3.921 2.448 2.961 0 0 90 91 92 93 94 95 96 97 98 99 00 01
Slide 21: Investments in new coal plants is needed
Investments in new coal plants is needed… Coal plants: global annual new capacity (GW) 18 16 14 12 10 8 6 4 2 0 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source: IEA,
Slide 22: Materials more suitable to resist high pressure and temperatures
…with materials that are more suitable to resist high pressure and temperatures Boilers in coal plants: composition and resistance Sub-critical Supercritical Ultrasupercritical Austenitic Austenitic Nickel base 9% 20% 16% Austenitic Ferritic 24% 60% Ferritic Ferritic 91% 80% 250 bars 280 bars 360 ba
Slide 23: Where does Tubacex want to be?
Where does Tubacex want to be? HIGHER VALUE-ADDED PRODUCTS • OIL&GAS • POWER GENERATION • NUCLEAR ENERGY
Slide 24: Nuclear energy: current situation
Nuclear energy: current situation Nuclear reactors in the world 4 10 31 18 19 1 59 36 (1) 29(2) 104 8 1 11 20 55 1 2 2 17 6 2 2 2 440 Working nuclear reactors Sourcee: Tubacex on different sources,. (1) 17 in Germany, 7 in Belgium, 6 in Czech Republic, 1 in Netherlands, 5 in Switzerland. (2) 2 in Bu
Slide 25: Nuclear energy: the alternative in the medium/long term
Nuclear energy: the alternative in the medium/long term Costs per source of energy: evolution Costs breakdown (dollars per btu) 12 12% 10 32% 50% 8 6 76% 41% 16% 4 2 27% 34% 12% 0 Natural gas Coal Nuclear 98 98 99 99 00 00 01 02 02 03 03 04 05 05 06 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 Overh
Slide 26: Nuclear energy: increasing support from governments
Nuclear energy: increasing support from governments USA Japan France •NRC has renewed the •"Long-term program for Research, • No limitations to the useful life of authorizations for 48 reactorss development and utilization of the plants and deveopment of new (~50% of the total base) for 20 Nuclear E
Slide 27: Nuclear energy: potential for Tubacex
Nuclear energy: potential for Tubacex New nuclear capacity and extension of the useful life of the current installed base 344 635 650 600 550 500 450 400 372 267 350 186 300 250 200 150 100 50 0 Installed GW 2006 End of useful life Revamping (current New plants GW 2030 (current base) base) Source: A
Slide 28: 2008 situation
2008 situation Guillermo Ruiz-Longarte (COO)
Slide 29: Projects: current situation
Projects: current situation • Tubacex´s current backlog in projects is guaranteed. • The number of enquiries is still high, a clear indicator that the ongoing projects are not going to be cancelled. • Uncertainties have increased with the weaker macroeconomic and financial environment, but the clear
Slide 30: NOCs and majors: no financing issues
NOC´s and “majors”: no financing issues Impact of the restricted Company type Impact of lower oil prices availability for funds NATIONAL OIL Review priorities in their No impact-very limited COMPANIES (NOC´s) investment plans MAJORS Limited Limited Review priorities in their MID-SIZED IOC´s Possible
Slide 31: New projects awarded are at high levels
New projects awarded are at high levels Backlog of engineering companies: evolution (€ Mill.) 20.000 18.000 16.000 14.000 12.000 Técnicas Reunidas Technip (subsea) 10.000 Saipem 8.000 Aker Solutions 6.000 4.000 2.000 0 03 04 05 06 06 06 06 07 07 07 07 08 08 08 20 20 20 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T
Slide 32: Financial evolution: Profit & Loss account
Financial evolution: Profit & Loss account Sales (€ Mill.) EBITDA (€ Mill) 120 106,2 800 697,2 100 700 +15.9% +22.9% 600 539,1 80 500 64,0 430,5 347,5 60 52,7 400 42,9 286,7 286,7 258,9 300 40 30,8 34,2 200 23,1 20 100 0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 EBIT (€
Slide 33: Raw materials: impact on profitability and cash-flow
Raw materials: impact on profitability and cash-flow 1 Invoicing methods • Fixed price: hedging. No impact. • Variable price: very limited impact due to the use of the alloy surcharge mechanism. 2 Inventory write-downs • Very limited impact on Tubacex due to manufacturing against an order and the hi
Slide 34: Operating measures for 2009
Operating measures for 2009 1 Focus on profitability. 2 Competitiveness as a key strength inside the Group. Efforts on costs and processes. 3 Maximize commercial exposure to OCTG and umbilicals. 4 Highest development of an innovation culture. 5 Efforts on working capital management.
Slide 35: Strengths
Strengths GLOBAL LEADER IN THE SEAMLESS STAINLESS STEEL TUBE SECTOR 9 Flexibility: first “pure player” in the sector. 9 Innovation leaders: to become leaders in the highest value-added products. 9 Capacity adjustments along the whole production process in order to maintain the vertical integration a