Boart Longyear — FY2014 Earnings Presentation
41 slides from Boart Longyear's earnings presentation, Feb 23, 2015
Slide 1: 2014 Full-Year Results
Drilling Services – California, USA 2014 Full-Year Results February 2015
Slide 2: Important Notice and Disclaimer
Important Notice and Disclaimer • This presentation has been prepared by Boart Longyear Limited, ABN 49 123 052 728 (Boart Longyear or the Company). It contains general information about the Company’s activities as at the date of the presentation. It is information given in summary form and does not
Slide 3: Safety & Environment
Safety & Environment Our goal is adding value with zero harm – leading our industry with our employees returning home safely each day and performing our work with minimal impact to our neighbours or the environment. 4.00 0.40 Total Case Incident Rate1 Lost Time Incident Rate1 0.34 3.50 3.26 0.35 3.0
Slide 4: FY 2014 – Consolidated Results Summary
FY 2014 – Consolidated Results Summary (US$M) Revenue Activity levels stabilised beginning in the 2nd half of 2014, 1,500 but remain at historically low levels 1,223 Pricing pressure continues, particularly in the Drilling 1,000 867 Services division 500 Further headwinds beginning in 4th quar
Slide 5: Key mining performance indicators have declined during 2014 and uncertainty persists
Key mining performance indicators have declined during 2014 and uncertainty persists… Mining Performance Key Commodity Trends4 SNL MEG3 Gold ($/oz.) 1,750 - Exploration Spend (US$ Billions) 2012 Avg 21.5 SNL reported 2014 1,500 exploration budgets 2013 Avg 18.2 down ~25% from 2013 1,250 15.2 2014 Av
Slide 6: Continue to reduce our overall cost structure
…leading us to continue to reduce our overall cost structure (US$M) Reduced expenditure profile by over $1.1 billion since 2012 Realised in 2013 Realised in 2014 $2,081 $(460) $(232) $(115) $1,274 $(252) $(25) $(58) Realised over $800m of expenditure $939 reductions in FY2013 Realised over $330m of
Slide 7: Financial Overview
Financial Overview
Slide 8: 2014 Consolidated Overview
2014 Consolidated Overview (US $M) Revenue Bridge $1,223 $(98) $(223) $(35) $867 FY 2013 Price Volume/Mix FX FY 2014 Adjusted EBITDA2 Bridge $107 $(98) $35 $(2) $31 $(70) $59 FY 2013 Price Volume/Mix Productivity/COGS SG&A/Other FX FY 2014 Reductions FY 2014 Results - See pages 40 & 41 for footnote
Slide 9: Year over Year Overview – FY 2013 vs FY 2014
Year over Year Overview – FY 2013 vs FY 2014 (US $M) - (except EPS (cents) and headcount) Statutory Adjusted2 % Change % Change FY 2013 FY 2014 FY 2013 FY 2014 Fav/(Unfav) Fav/(Unfav) Revenue 1,223 867 (29% ) Revenue 1,223 867 (29% ) Gross Margin 202 116 (43% ) Gross Margin 202 116 (43% ) Gross Marg
Slide 10: Half over Half Overview – 1H 2014 vs 2H 2014
Half over Half Overview – 1H 2014 vs 2H 2014 (US $M) - (except EPS (cents) and headcount) Statutory Adjusted2 % Change % Change 1H 2014 2H 2014 1H 2014 2H 2014 Fav/(Unfav) Fav/(Unfav) Revenue 421 446 6% Revenue 421 446 6% Gross Margin 56 60 7% Gross Margin 56 60 7% Gross Margin as a % of Revenue 13%
Slide 11: Business Overview
Roller LatchTM Head Assembly Business Overview
Slide 12: 2014 Performance Bridges – Drilling Services Division
2014 Performance Bridges Drilling Services Division (US$M) Revenue Bridge • Revenue down 31%; driven by lower utilisation and price $917 $(95) $(164) $(22) $636 • Margins negatively impacted by flow-through of price and volume reductions • Productivity gains partially offset impact of price declines
Slide 13: FY 2014 Operations – Drilling Services Division
FY 2014 Operations Drilling Services Division – Operating rigs stabilising, pricing pressure continues Drilling Services % Change % Change FY2013 1H2014 2H2014 FY2014 (US$M) Half over Half Year over Year Revenue 917 308 328 636 6% (31)% COGS 783 281 300 581 7% (26)% SG&A 85 28 30 58 7% (32)% EBITDA
Slide 14: Operating rig trend showing positive signs in 2nd half of 14
Operating rig trend showing positive signs in 2nd half of 2014 Year over Year % Change in Drilling Services’ Operating Rigs 50.0% 40.0% 30.0% 20.0% YoY % Change 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% Flat -50.0% May-11 May-10 May-12 May-13 May-14 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Feb-14 Nov-09 Nov-
Slide 15: Revenue by rig type – Drilling Services Division
Revenue by rig type Drilling Services Division 100% 10.7% 14.5% 15.5% 90% 13.5% 80% 20.5% 24.3% 70% % of total DS Revenue Water Well 60% UG Coring 50% 50.6% Surface Coring 37.2% Sonic 31.8% 40% Rotary Percussive 30% 4.1% 6.8% 6.1% 20% 17.2% 14.1% 10% 14.8% 4.3% 6.9% 7.1% 0% 2012 2013 2014 Total $1,5
Slide 16: Revenue by commodity – Drilling Services Division
Revenue by commodity Drilling Services Division 100% 4% 5% 7% 5% 3% 1% 90% 5% 7% 9% 5% 5% 80% 5% 9% 7% 9% 4% 70% Other % of total DS Revenue 12% 6% Environmental 60% 23% Energy 19% 50% 22% Other Metals Nickel 40% Iron Copper 30% Gold 44% 45% 20% 39% 10% 0% FY2012 FY2013 FY2014 Total Revenue $1,516M
Slide 17: Drilling Services Market Update
Drilling Services Market Update Niche Opportunities Production Revenue Key Wins Agricultural work in Underground drilling at Scope expansion with California near-functional capacity key customer in Canada Non-mining work to Water-well utilisation Five-year underground diversify revenue b
Slide 18: FY 2014 Performance Bridges – Products Division
FY 2014 Performance Bridges Products Division (US $M) Revenue Bridge • Revenue down 25%; primarily due to lower volume and FX (minimal price impact) $306 $(3) $(60) $(13) $230 • EBITDA decrease primarily driven by flow- through of lower volume FY 2013 Price Volume/Mix FX FY 2014 • Impact of lower vo
Slide 19: FY 2014 Operations – Products Division
FY 2014 Operations Products Division – Markets appear to be stabilising from 2nd half of 2014 Products % Change % Change FY2013 1H2014 2H2014 FY2014 (US$M) Half over Half Year over Year Revenue 306 113 117 230 4% (25)% COGS 237 85 84 169 (2)% (29)% SG&A 65 29 28 57 (1)% (12)% EBITDA 16 6 8 14 33% (1
Slide 20: Product Innovation
Product Innovation Focus on Safety & Productivity BLH DTH™ Hammers Launched and bits: a full line of conventional hammers for geotechnical drilling, quarrying, and mining LM™110 underground rig: TruCore™ Core Orientation: applications More powerful power pack first-in-industry integrated increases p
Slide 21: Company Outlook
TruCoreTM Orientation System Company Outlook
Slide 22: Demand for our services and products remains at low levels
Demand for our services and products remains at low levels Drilling Services’ Historical Operating Rigs13 700 • In 4Q2013 and 1Q2014, the number of operating rigs fell below the 600 previous low point experienced in 500 2009 400 2009 Lowest Operating Rigs • In 4Q2014, the number of operating 300 rig
Slide 23: 2015 Full Year Outlook
2015 Full Year Outlook Bloomberg Consensus Revenue EBITDA Net Debt • If the market does not improve quickly, analysts’ full-year forecasts for (20 Feb 2015)19 revenue and normalised EBITDA, even at the low end of the range of Low $823M $50M $529M estimates, may not be based on the most current avail
Slide 24: 125 Years Strong
125 Years Strong • Make safety personal Safety • Product innovation to enhance safety on site • Continuous improvement initiatives • Remain focused on maintaining and growing relationships Customer • Focus product development efforts around customer needs • Continue to drive efficiencies throughout
Slide 25: Questions?
QUESTIONS? FY 2014 Results - See pages 40 & 41 for footnote descriptions 25
Slide 26: Appendix
UMX™ Diamond Bit BOART LONGYEAR 2
Slide 27: Key Performance Indicators
Key Performance Indicators (US $M) - except headcount, utlilisation and rigs 2014 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Positives Total Company • Drilling services for underground and Revenue 197.4 224.1 239.3 205.8 370.2 348.7 279.5 224.5 large rotary have remained stable, albeit EBITDA 2 (1.9) (31.1) 12.3
Slide 28: Successful Completion of Strategic Review
Successful Completion of Strategic Review Centerbridge Recapitalisation Overview Comprehensive recapitalisation Total liquidity increased to approximately US$240 million Transaction Extended debt maturity and improved flexibility along with reducing net debt by approximately US$120 million Highlight
Slide 29: Debt Maturity Schedule
Debt Maturity Schedule12 (US $M) $400 Accreted Interest $300 $2 Term Loan - B $105 Term Loan - A $200 7% Senior Unsecured Notes 14 $300 $3 10% Senior Secured Notes $100 $195 $120 $0 2015 2016 2017 2018 2019 2020 2021 • Through the recent recapitalization transaction, the company replaced its $140M r
Slide 30: Net debt increased by $22M to $548M
Net debt increased by $22M to $548M16 (US $M) Operations Working Capital Other $333 $(114) $(77) $46 $(102) $105 $716 $(70) $66 $(44) $11 $(41) $18 $585 3 4 1 2 Net Net Debt6 Debt $548M $526M Gross Debt NPAT Restructuring Tax Effect of Cash Depreciation & Taxes & Interest Cash Taxes & Accounts Accou
Slide 31: Canadian Tax Update
Canadian Tax Update 2005-06 Audit • Reversal of assessment finalised • All security totaling C$35.5M released by CRA and provinces in 2014 2007-09 Audit • Similar to 2005-2006, disputed amounts relate entirely to inter-company transactions (Product sales, Royalties and Management Fees). Total Exposu
Slide 32: Inventory
Inventory (US $M) $450 428.2 $400 343.9 $350 298.9 (40.7) $300 (0.7) (16.3) 241.3 $250 $200 $150 $100 $50 $- Gross Net Inventory Inventory Impairment/ FX/ Net Inventory Gross Inventory Dec 2013 Consumption Obsolescence Other Non Dec 2014 Inventory Dec 2013 Cash Dec 2014 • Gross inventory peaked at ~
Slide 33: Diversified End Market Exposure
Diversified End Market Exposure FY 2014 Total BLY Revenue – Products & Drilling Services FY 2014 Total BLY Revenue by Region – Products & Drilling Services18 Drilling LAM, 13% Drilling Underground Equipment Coring Services: 73% USA, 23% 17% 5% Rotary/RC 22% Global revenue base Products: 27% APAC, 26
Slide 34: End Market Exposure
End Market Exposure Year over year comparison BLY Revenue - Products & Drilling Services BLY Revenue by Region - Products & Drilling Services 18 % of Revenue FY 2013 FY 2014 % of Revenue FY 2013 FY 2014 Production Drilling 5% 8% USA 22% 23% Surface Coring 30% 21% Canada 18% 21% Performance Tooling 1
Slide 35: Income Statement
Income Statement 12 months ended 12 months ended 31 December 2014 31 December 2013 US$'000 US$'000 Continuing operations Revenue 866,588 1,222,853 Cost of goods sold (750,115) (1,020,718) Gross margin 116,473 202,135 Other income 7,565 18,151 General and administrative expenses (124,281) (157,728) S
Slide 36: Balance Sheet
Balance Sheet 31 December 2014 31 December 2013 US$'000 US$'000 Current assets Cash and cash equivalents 168,784 59,053 Trade and other receivables 137,442 196,912 Inventories 241,260 298,947 Current tax receivable 15,446 18,253 Prepaid expenses and other assets 18,723 25,054 Total current assets 58
Slide 37: Cash Flow Statement (1 of 2)
Cash Flow Statement (1 of 2) 12 months ended 12 months ended 31 December 2014 31 December 2013 US$'000 US$'000 Cash flows from operating activities Loss for the year (332,718) (619,943) Adjustments provided by operating activities: Income tax expense recognised in profit 81,018 114,040 Finance costs
Slide 38: Cash Flow Statement (2 of 2)
Cash Flow Statement (2 of 2) 12 months ended 12 months ended 31 December 2014 31 December 2013 US$'000 US$'000 Cash flows from investing activities Purchase of property, plant and equipment (13,827) (35,528) Proceeds from sale of property, plant and equipment 6,192 14,522 Intangible costs paid (4,39
Slide 39: Significant Items Detail
Significant Items Detail For the year ended 31 Decem ber 2014 2014 2013 2013 US$ Millions US$ Millions US$ Millions US$ Millions US$ Millions EBITDA2 (82.6) (337.1) NPAT (332.7) (619.9) Recapitalisation costs 45.5 45.5 - - Impairments Property, plant and equipment 46.1 46.1 109.9 109.9 Intangible as
Slide 40: Footnote Disclosures
Footnote Disclosures • Footnote 1: Per 200,000 work hours. • Footnote 2: EBITDA, Adjusted EBITDA, Adjusted EBIT, and Adjusted NPAT are non-IFRS measures and are used internally by management to assess the performance of the business. For 2014, the adjusted figures have been derived from the Company’
Slide 41: Footnote Disclosures cont.
Footnote Disclosures cont. • Footnote 11: Excludes interest and taxes. • Footnote 12: Amounts shown reflect principal amounts or, where indicated, accreted interest. • Footnote 13: Operating rigs defined as the number of weekly operating rigs generating revenue. Previously, the Company has provided