Hilong Holding Ltd. · HKEX:1623
Hilong — H1 2011 Earnings Presentation
28 slides from Hilong's earnings presentation, August 2011
Slide 1: 2011 Interim Results Presentation
2011 Interim Results Presentation August 2011
Slide 2: Disclaimer
Disclaimer The presentation material contains forward-looking statements. Such forward-looking statements are subject to various risks, uncertainties and assumptions, certain of which are not under our control, causing actual results and growth which may differ materially from these direct or indire
Slide 3: Company Overview
Company Overview Hilong is a leading PRC-based non-state owned integrated oilfield equipment and service provider with a focus on drill pipes, line pipes and OCTG coatings and oilfield services Drill pipe and related products Business Segments Line pipe and OCTG coating materials and services Oilfie
Slide 4: 2011 First Half Review
2011 First Half Review Successfully listed on the Main Board of the Stock Exchange of Hong Kong on 21 April 2011 in a volatile market environment. The Group issued 400 million new shares at HK$2.60, raising a total proceeds of HK$1.04 billion Extended global footprint Attracted new quality custome
Slide 5: I. Results Highlights
I. Results Highlights SS 2.1/1 ONG
Slide 6: Revenue: Strong Growth Across Segments
Revenue：Strong Growth Across Segments Revenue Increased by 32.0% YoY RMB MM 800 755.1 174.4 600 572.0 89.9 225.7 400 192.0 200 355.1 290.2 0 1H2010 1H2011 Drill Pipe and related products Coating materials and services Oilfield services 6
Slide 7: Revenue Breakdown
Revenue Breakdown Revenue Breakdown by Product Oilfield services Oilfield services 16% 23% Drill pipe and Drill pipe and related products related products 50% 47% Coating Coating materials and materials and services services 34% 30% 1H2010 1H2011 Revenue Breakdown by Geography West Africa Middle Eas
Slide 8: Gross Profit
Gross Profit Gross Profit Increased by 48.1% YoY Gross Margin by Segment RMB MM Gross Margin % 42.5% 400 45% 32.5% 43.9% 331.8 300 39.2% 40% 78.9 1H2010 1H2011 49.8% 224.1 45.2% 34.2 102.0 200 35% 95.6 1H2010 1H2011 45.3% 100 30% 38.0% 151.0 94.3 0 25% 1H2010 1H2011 1H2010 1H2011 Drill Pipe and rela
Slide 9: Operating and Net Profit
Operating and Net Profit Operating Profit Increased by 50.8% YoY Net Profit Increased by 106.5% YoY (1) RMB MM Operating Margin % RMB MM Net Margin % 160 151.8 30% 250 24.2% 25% 21.2% 200 20% 116.2 182.9 120 20% 150 15% 20.1% 121.3 80 100 10% 56.3 15.4% 10% 40 50 5% 9.8% 0 0% 0 0% 1H2010 1H2011 1H20
Slide 10: Capital Structure and Return
Capital Structure and Return Capital Structure Average Return on Assets (1) RMB MM % 2010YE 1H2011 8.3% 4.5% Current Assets 1,845 1,703 Total Assets 2,768 2,801 1H2010 1H2011 Average Return on Equity(2) Short-Term Debt 803 441 % 19.6% 15.0% Long-Term Debt 1.2 - Total Liabilities 1,863 948 1H2010 1H2
Slide 11: Liquidity and Turnover Days
Liquidity and Turnover Days Current Ratio Average Inventory Days(1) % Days 199.9% 160 159 104.2% 2010 1H2011 2010 1H2011 Average Trade Payable Days(2) Average Trade Receivable Days(3) Days Days 187 186 110 104 2010 1H2011 2010 1H2011 Note: 1: Average Inventory days = number of days in this period* a
Slide 12: II. Business Review & Outlook
II. Business Review & Outlook 12
Slide 13: Drill Pipe and Related Products
Drill Pipe and Related Products Segment Revenue: +22.4% YoY Drill Pipe Analysis RMB MM Gross Margin % 2010 1H 2011 1H Change 360 355.1 50% Annual capacity (Ton) 40,600 40,600 0.0% 42.5% 290.2 Sales Volume (Ton) 10,106 10,193 0.9% 40% 270 Domestic 6,813 4,629 -32.1% 32.2% International 3,293 5,564 69
Slide 14: Drill Pipe and Related Products (Cont'd)
Drill Pipe and Related Products (Cont’d) New Products and Technologies HL- V150 high strength drill pipe Specialised in deep and ultra-deep oil and gas drilling High density and high torque capacity Double box tool joint drill pipe Firstly specially designed for special requirements of Jiangsu
Slide 15: Drill Pipe and Related Products (Cont'd)
Drill Pipe and Related Products (Cont’d) New Products and Technologies (Cont’) Drill pipe for shale gas exploration Made bulk sales of double-shoulder drill pipes designed for shale gas exploration Modified and upgraded its double shoulder drill pipe to adapt to the requirement for shale gas exp
Slide 16: Coating Materials and Services
Coating Materials and Services Segment Revenue: +17.6% YoY Capacity Expansion Progress RMB MM Gross Margin % 2010 2011 Change Development 250 60% 225.7 Line pipe 20,760 25,000 20.4% 3 new production coating lines in Shanghai materials started working in 192.0 200 (ton) June 50% 86.9 49.8% Line pipe
Slide 17: Oilfield Services
Oilfield Services Segment Revenue: +94.0% YoY Order Backlog RMB MM Gross Margin % 200 100% Service Contracts 174.4 5 land rigs, 1 workover rig and 1 oil pump working on long term contracts 80% Confirmed contract value totaled at 150 ~US$20.2MM in the second half of 2011 60% Potentially, 2 more
Slide 18: Use of IPO Proceeds
Use of IPO Proceeds Gross Proceeds of HK$1.04 Bn, Net Proceeds of HK954MM HK MM Planned at IPO % Used as 1H 2011 Remainder Capacity Expansion and Upgrade - Coating materials and 229 24% 134 95 service - Oilfield service 224 23% 165 59 - Drill pipe 95 10% 89 6 Repayment of outstanding balances due to
Slide 19: 2011 Second Half Outlook
2011 Second Half Outlook Market demand is expected to be stronger for the rest of the year Adapting to the market condition, upgrade and expand production capacity, focus on R&D of high end products and widen products application Further expand international markets and recruit more quality cust
Slide 20: Future Plans and Strategies
Future Plans and Strategies Hilong’s long-term objective is to become a leading integrated global oilfield equipment and service provider focusing on high-end products and services 1 Continue to focus on higher-end products in existing product categories 2 Further expand into drilling and other oilf
Slide 21: Appendix. Company Highlights
Appendix. Company Highlights 21
Slide 22: Company Highlights
Company Highlights Market leadership in 1 key oilfield equipment products and services Established Experienced relationships with management team major international oil 5 with a proven track 2 and gas companies record supported by proven product quality Innovation-driven Significant benefits resear
Slide 23: Market Leadership in Key Oilfield Equipment Products and Services
1 Market Leadership in Key Oilfield Equipment Products and Services World Leading Drill Pipe Producer Hilong Hilong Others Others 13% Hilong 20% 19% 25% 30% Tenaris 9% NOV Grant Long Bright Vallourec Prideco 13% NOV Grant DP Master Prideco Others 12% 47% 13% 20% 80% Global Drill Pipe Market Chinese
Slide 24: Established Relationships with Major International Oil and Gas Companies
Established Relationships with Major International Oil and 2 Gas Companies Supported by Proven Product Quality Established Relationships with Major International Oil and Gas Companies Domestic Customers International Customers Hilong is the largest drill pipe supplier to PetroChina and Sinopec, whic
Slide 25: Significant Benefits Derived From a Vertically Integrated Business Model
3 Significant Benefits Derived From a Vertically Integrated Business Model • As the principal raw • Hilong develops and • Hilong has developed a • As drill pipes account for material in manufacturing manufactures in-house number of proprietary approximately 25-30% of drill pipes, steel pipes are API
Slide 26: Innovation-Driven Research and Development Capabilities
4 Innovation-Driven Research and Development Capabilities Selected Successfully Commercialized In- Leading Research Institute in China house Developed Products and Technologies Dedicated research and development team, with 61 Photo Product members as of December 31, 2010, has developed a series of
Slide 27: Experienced Management Team with a Proven Track Record
5 Experienced Management Team with a Proven Track Record UMW Proven track record Other than providing financing as a pre- Since founding the company in 2001, IPO investor, UMW will promote the use management has transformed Hilong of Hilong’s products and services in from a simple coating plant to a
Slide 28: Strong Underlying Industry Fundamentals
Strong Underlying Industry Fundamentals Global Drill Pipe Market Global OCTG Coating Market (US$ MM) (US$ MM) 1,500 1,367 500 1,276 1,138 1,189 388 1,104 362 400 336 972 313 1,000 854 880 292 769 818 275 300 237 238 647 223 194 188 200 500 100 0 0 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 201