Haynes International — Investor Presentation (September 2011)
33 slides from Haynes International's investor presentation, September 2011
Slide 1: Investor Presentation, September 2011
Developer, Manufacturer and Marketer of High-Performance Alloy Products Investor Presentation, September 2011
Slide 2: Forward-looking statements
Forward-looking statements The information contained in this presentation, and in the oral statements made as part of the presentation, may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and exp
Slide 3: Haynes International, Inc.
Haynes International, Inc. Mark Comerford President and Chief Executive Officer Marcel Martin Vice President and Chief Financial Officer Dan Maudlin Controller and Chief Accounting Officer September 2011 2
Slide 4: Overview
Overview Unique business model, emphasizing customer service Leader in niche market for high-performance alloys Outstanding O t t di ttechnical h i l expertise ti Financial strength g Maximize efficiencies from FY2005-FY2011 capital upgrades to drive operating results Positioned to take
Slide 5: Our products
Our products We are a leading world-wide developer, manufacturer and marketer of high- performance nickel- and cobalt-based alloys used in corrosion and high- temperature p applications. pp Revenue by alloy application(FY2011 percentages similar to 2010). Application FY2010 High-temperature allo
Slide 6: Unique business model fosters strong customer retention
Unique business model fosters strong customer retention FY2010 Net Revenues by route to market¹ Mill Direct & Distribution & Sales Service Center Sales 79% Agents 21% 1 Includes sales to distributors Service centers are critical to our strategy Cultivate closer customer relationships Increase
Slide 7: Exposure to diverse set of markets worldwide
Exposure to diverse set of markets worldwide Geographic diversity of sales offsets risk of regional performance Approximately 39% of net revenues are to customers outside of the U.S. International sales / growth through strategic positioning of service and sales centers Market diversity offs
Slide 8: Global presence facilitates superior customer service
Global presence facilitates superior customer service Our locations are well positioned to supply value-added services to both existing and emerging areas of growth Only high-performance alloy manufacturer operating its own service centers with locations in North America, Europe and Asia Our Fac
Slide 9: Aerospace market
Aerospace market Commercial build rates are the primary driver of OEM demand MRO market provides a base of business which is increasing Global passenger air traffic - projected annual growth rate: 5.1%(1) Global cargo air traffic - projected annual growth rate: 5.6%(1) Asia/China will be t
Slide 10: Aerospace market trends
Aerospace market trends Short-term Outlook - 10 Years Aircraft Delivered Airbus & Boeing have a combined 2000 backlog g of about 7,000 , aircraft ((6-7 1500 years) (1) 1000 Increased fuel efficiency and reduced 500 emissions driving new engine 0 technology. Smaller, hotter engine cores requiri
Slide 11: Strong suite of aerospace applications
Strong suite of aerospace applications Rings, seals, cases 214®, 242®, 263, 263 282®, 625, 625 718, 718 X, X and Waspaloy alloys Combustors 230®, 188, 188 263 263, 617 617, 625, 625 and X alloys Exhaust section 25, 188, 282®, 625, 718 X, 718, X Waspaloy, Waspaloy and R-41 alloys September 2011 10
Slide 12: Chemical processing industry
Chemical processing industry Large, existing North American and European markets driving a base MRO business Demand largely follows GDP growth Global chemical industry recovering, led by Asia Haynes Annual Revenue and Pounds Shipped Global Chemistry Outlook - % Change In Millions 18 $250.0 Rev
Slide 13: Chemical processing applications and alloys
Chemical processing applications and alloys HASTELLOY® G-30 and HASTELLOY® C-22® G-35® alloys for alloy for centrifuge phosphoric acid pharmaceutical evaporators processing HASTELLOY® C-2000® HASTELLOY® B-3® alloy reactor for and C-276 alloys in pharmaceutical acetic acid plant processing September
Slide 14: Land-based gas turbine market
Land-based gas turbine market Over the next 10 years, 16,417 gas turbines forecast to be built (almost $165 billion)(1) Natural gas currently provides 25 percent of US energy and is projected p j to increase to 45% byy 2035(2) Continued emphasis on increasing efficiencies and reduced levels of
Slide 15: Land-based gas turbine applications and alloys
Land-based gas turbine applications and alloys HAYNES ® HR-120 ® and 230® alloys for micro-turbines HAYNES® 263 alloy transition section for hot gas path HAYNES® 230® alloy hot gas casing HASTELLOY® X alloy combustor can September 2011 14
Slide 16: Leader in developing and applying alloys to new applications
Leader in developing and applying alloys to new applications Competitive Advantage Industry leader in developing new high-performance alloys Six new alloys in last ten years – all are patented or patent-pending Company currently has seven new alloys under development New applications repre
Slide 17: Emerging technologies: applications and alloys
Emerging technologies: applications and alloys HAYNES® 230® alloy selected for solar power technologies. HAYNES® 282® alloy is a leading candidate for boiler and steam turbine components in HAYNES® 230® and 625 alloys advanced ultrasupercritical coal-fired power selected for solid oxide fuel plants
Slide 18: Longstanding relationships across broad customer base
Longstanding relationships across broad customer base Customers are industry leaders Supply chain initiatives, service center support and value-added service Provide new products, material solutions, technical support, forming and fabrication know-how through a direct sales force Aerospace Che
Slide 19: Manufacturing process and capital improvements
Manufacturing process and capital improvements Basic Steps Product Form Melt/ Forgings/ Tubular/ Forging Billet ll Bar/Wire Fi i Fittings Re-melt All products go through melt and re-melt Round/long products go through forging 4-Hi Rolling g Plate Mill/Reheat Furnaces This is our hot rolling process
Slide 20: Financial Overview and Strategy
Financial Overview and Strategy (See Appendix) Strong financial position with flexibility to fund growth Improving working capital $52.0 million of cash and no debt Inventory turn improvement 5-year revolver with availability of $170.0 million Working capital as a percentage of sales imp
Slide 21: Summary
Summary We are a market leader in the niche high-performance alloy market We serve diverse geographic and end markets We have long-term relationships with our broad customer base Our unique business model facilitates strong customer service and retention Service and sales centers Value-a
Slide 22: Appendix – Financial Overview and Strategy
Appendix – Financial Overview and Strategy Profitability Balance Sheet Gross Margin Trends Working Capital Backlog B kl Cash C h Sources S and dUUses FY2011 $ IN MILLIONS FY2007 FY2008 FY2009 FY2010 9 Mo. M NET REVENUES $559.8 $637.0 $438.6 $381.5 $388.6 % change from prior year 28.9% 13
Slide 23: Profitability
Profitability Improving economic environment during fiscal 2010 and 2011 Aerospace destocking complete Transactional business improved for all markets Improved pricing, particularly in service centers Compression on pricing and volumes affected profitability Industry capacity utilization
Slide 24: Quarter over Quarter Gross Profit Margin Trend
Quarter over Quarter Gross Profit Margin Trend Trend of Gross Profit Margin and Gross Profit Margin Percentage for Fiscal 2009 Since the last Quarter Ended quarter of fiscal (dollars in millions) December 31, March 31, June 30, September 30, Fiscal Year 2009, gross profit 2008 2009 2009 2009 2009
Slide 25: Gross Profit Margins
Gross Profit Margins % 30 255 20 (3) 15 Bus Cycle Decline (2) 10 5 Restructuring Recession 0 FY FY FY FY FY FY FY FY FY FY FY FY FY FY (1) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gross Profit Margin (By Year) 1) As of August 31, 2004, the effective date of the Company
Slide 26: Backlog & Inventory Management
Backlog & Inventory Management Backlog Dollars Pounds 350 12.0 Through FY2009 pricing and volume were down in all our three primary markets 300 10.0 Starting in FY2010 improving order entry g ($ millions) $250 contributed to improving backlog in all three of 8.0 unds (000s) 200 those markets 6.0
Slide 27: Strong Balance Sheet
Strong Balance Sheet (in millions) Summary Balance Sheet FY2007 FY2008 FY2009 FY2010 6/30/11 Cash $ 5.7 $ 7.1 $ 105.1 $ 64.0 $ 52.0 Accounts Receivable 106.4 99.3 47.5 62.9 87.6 Inventory 286.3 304.9 182.8 231.8 259.7 Goodwill & Other Intangibles 49 8 49.8 51 6 51.6 72 7.2 67 6.7 63 6.3 PP&E, Net 97
Slide 28: Improving Working Capital
Improving Working Capital Working Capital as a Percentage of Revenue WC $ WC% of Sales 400 65.0% 350 Worrking Capital $ ((in millions) 60.0% 300 ales 55.0% pital as a % of Sa $250 200 50.0% 150 45 0% 45.0% Working Cap 100 40.0% 50 0 35.0% Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Jun-1
Slide 29: Cash Sources and Uses
Cash Sources and Uses Sources of Cash Cash on hand at June 30, 2011 of $52.0 million Working capital revolver availability of $120.0 million (can go to $170.0 million) Funds from operations Uses of Cash FY2011 thru FY2014 Strategic capital initiatives $85.0 million FY10 to FY14 – $30.0 mil
Slide 30: Capital improvements yield substantial benefits
Capital improvements yield substantial benefits Capital Spending Investments have yielded, and will Fiscal Years 2005 through 2009 - $75.8MM continue to yield, substantial benefits Process Projects $MM Current finished capacity in excess of 30.0mm lbs – Sheet finishing capacity increased from 9.
Slide 31: Capital improvements yield substantial benefits
Capital improvements yield substantial benefits Capital Spending 4-Hi Hot Rolling Steckel Fiscal Years 2010 through 2014 - $85.0MM Charger crane Process Projects $MM Motor room upgrade Automatic gauge control – AGC Thickness profile gauge Hot Rolling 4-Hi $30.0 Roll bending New / addit
Slide 32: Positioned for long-term growth
Positioned for long-term growth Strong balance sheet Company’s markets support long-term growth Strong research and development program Continuallyy improving p g manufacturing g capabilities Global footprint and value-add service centers Additional capacity available September 2011 31
Slide 33: Non-GAAP Items
Non-GAAP Items Reconciliation of Non-GAAP Financial Measures (Unaudited) In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP financial measures included in this presentation, together with the most directly comparable financial measures calculated in accorda
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