Haynes International — Q4 FY2014 Earnings Presentation
26 slides from Haynes International's earnings presentation, September 2014
Slide 1: Investor Presentation, September 2014 – 4th Quarter
I n v e s t o r P r e s e n t a t i o n , S e p t e m b e r 2 0 1 4 – 4 th Q u a r t e r Mark Comerford Dan Maudlin President and Vice President and Chief Executive Officer Chief Financial Officer
Slide 2: Haynes International, Inc.
Haynes International, Inc. 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 ex
Slide 3: We operate in the specialty high-performance alloy market
We operate in the specialty high‐performance alloy market Ni k l d cobaltbased Nickeland b lt b d highperformance hi h f alloys ll • Primarily flat product producer • Specialty high‐performance alloy flat product sector is 200 million lbs versus a total metals market in excess of a billion tons •
Slide 4: Our products
Our products We are an innovative, innovative marketleading market leading producer of highperformance high performance nickel nickel and cobaltbased cobalt based alloys used in corrosion and hightemperature applications. Revenue by Alloy Application (FY 2014) Revenue by Alloy Product Forms (FY
Slide 5: We have a unique business model
We have a unique business model • Manufacturing support at mill level Net Revenues by Route to Market (FY 2014) • Distribution through service centers • Cultivate closer customer relationships to Direct to Customer help customers solve technical issues Sales 22% • Increase value‐added capabilities •
Slide 6: Global presence facilitates superior customer service
Global presence facilitates superior customer service • Our locations are well positioned to supply valueadded services to both existing and emerging areas of growth • Only high performance alloy manufacturer operating its own service centers with locations highperformance in North America, Europe
Slide 7: We have exposure to diverse set of worldwide markets
We have exposure to diverse set of worldwide markets Geographic diversity of sales offsets risk of regional performance • Approximately 43% of net revenues are to customers outside of the U.S. • International sales / growth through strategic positioning of service and sales centers Market diversity
Slide 8: Aerospace is our largest market
Aerospace is our largest market • Commercial airplane p build rates are the primary p y driver of OEM demand • Commercial aerospace backlogs are at record levels • MRO market provides a recurring base of business which is increasing • Global passenger air traffic projected annual growth rate: 5.0%(1
Slide 9: Aerospace market trends
Aerospace market trends Solid Potential for both Shortterm and Longterm Outlook • Airbus & Boeing have a combined backlog • The commercial aircraft fleet is expected to of about 11,000 aircraft (78 years).(1) grow an average 3.6% per year and double in i size i from f 20,910 20 910 aircraft i f t
Slide 10: Our alloys are used in a strong suite of Aerospace applications
Our alloys are used in a strong suite of Aerospace applications Hot Section rings, rings seals, seals cases HAYNES® 214®, 242®, 263, 282®, 625, 718, HASTELLOY® X and Waspaloy alloys Diagram by Jeff Dahl used courtesy of http://en.wikipedia.org/wiki/Turbojet under GNU Free Documentation License v.1.2
Slide 11: Chemical Processing Industry
Chemical Processing Industry • Large, existing North American, Asian and European markets driving a base MRO business • Demand largely follows GDP growth however global chemical industry growth will be led by US low prices for natural gas and natural gas liquids • The American Chemistry Council repo
Slide 12: Chemical processing applications and alloys
Chemical processing applications and alloys HASTELLOY® C-22® alloy for centrifuge pharmaceutical processing HASTELLOY® G-35 G 35® and G-30 G 30® alloys for phosphoric acid evaporators HASTELLOY® B-3® and C-276 alloys in acetic acid plant p HASTELLOY® C-2000® alloy reactor for pharmaceutical processi
Slide 13: Land-based gas turbine market
Land‐based gas turbine market • Over the next 10 years, years 11 11,613 613 gas turbines (excluding microturbines) are forecast to be built at a value of almost $146.9 Billion.(1) • Continued emphasis on increasing efficiency and reduced emissions. Higher operating temperatures require more advanced
Slide 14: Land-based gas turbine applications and alloys
Land‐based gas turbine applications and alloys HAYNES ® HR120 ® and 230® alloys for microturbines HAYNES® 263 alloy transition section for hot gas path HAYNES® 230® alloy hot gas casing HASTELLOY® X alloy combustor can 4th Qtr. FY2014 13
Slide 15: Emerging technologies applications and alloys
Emerging technologies applications and alloys HASTELLOY® C22HS® alloy for oil and gas production Photograph courtesy of SolarReserve ©2013 – Used by permission HAYNES® alloys enable advanced concentrated solar power plants to provide environmentally clean and efficient electricity into the evening
Slide 16: Leader in developing new alloys and identifying new applications
Leader in developing new alloys and identifying new applications • Competitive advantage • Industry leader in developing new highperformance alloys • Since 2000, 2000 our technical programs have yielded eight new proprietary alloys. • We have new alloys under development • New applications represen
Slide 17: Strong relationships across broad blue-chip customer base
Strong relationships across broad blue‐chip customer base • C t Customers are industry i d t leaders l d with ith proven, sustainable t i bl b business i models d l • Supply chain initiatives, service center support and valueadded service • Provide new products, products material solutions, solutio
Slide 18: Manufacturing high-performance superalloys
Manufacturing high‐performance superalloys • Superalloys demand a longer and more complex multistage manufacturing process than commodity stainless grades and carbon steels g • Certain alloys may undergo 40 or more distinct stages of production • Tight controls • We are one of the few manufacturers
Slide 19: Our manufacturing process
Our manufacturing process Basic Steps Product Form Melt/ Forgings/ Tubular/ Forging Billet Bar/Wire Fittings Remelt All products go through melt and remelt Round/long products go through forging 4Hi Rolling g Plate Mill/Reheat Furnaces Hot rolling process for sheet and plate (other than finishing
Slide 20: Capital improvements are expected to yield substantial benefits
Capital improvements are expected to yield substantial benefits • Growth h Capitall • Tubular revenue ‐ $50.0 million plus • Flat product – 4.0 million pounds Strategic Capital Spending Projects • ROIC – in excess of 40% • Gross margin percentage improvement of 200 to Fiscal Years 2012 through 2015
Slide 21: Financial overview and strategy
Financial overview and strategy • Strong financial position with flexibility to fund growth • Capacity and margin expansion potential • Built strong balance sheet with positive cash flow • New capital programs designed to increase capacity and expand margin • $45.9 million of cash and no debt as of
Slide 22: Quarter-over-quarter P&L trends
Quarter‐over‐quarter P&L trends Trend of Quarterly Profitability for Fiscal 2010 (dollars in millions) Dec 31, 2009 Mar 31, 2010 Jun 30, 2010 Sep 30, 2010 FY 2010 Net Revenues $81.0 $94.6 $101.3 $104.6 $381.5 • Q1 – Q2 FY14: reduced Gross Profit Margin $ 6.8 $10.2 $ 16.9 $ 19.9 $ 53.8 Gross Profit M
Slide 23: Financial performance
Financial performance Net Revenues Operating Income $600.0 $579.6 $80.0 $76.9 $542.9 $70 0 $70.0 $500.0 $482.7 $455.4 $60.0 $400.0 $381.5 $49.3 $50 0 $50.0 $300.0 $40.0 $32.0 $30.0 $ $200.0 $20.0 $15.5 $100.0 $10.0 $5.0 $0.0 $0.0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 ASP $21.41 $22.97 $2
Slide 24: Liquidity
Liquidity Sources of Cash Haynes International Inc. Liquidity Cash From Operations Cash Revolver Debt • Cash on hand at September 30, 2014 of $45.9 ($MM) million and revolver debt of zero $80.0 $ • Cash provided by operations for FY2014 was $73.4 $68.3 $26.9 million $70.0 • Credit facility availabil
Slide 25: Strong balance sheet
Strong balance sheet Remained debt free with continued investment in capital expenditures (in millions) Summary Balance Sheet FY2010 FY2011 FY2012 FY2013 FY2014 Cash $ 64.0 $ 60.1 $ 46.7 $ 68.3 $ 45.9 Accounts Receivable 62.9 87.7 100.6 82.6 72.4 Inventory 231.8 250.1 263.2 232.2 254.0 PP&E, Net 107
Slide 26: We are positioned for long-term growth
We are positioned for long‐term growth • We are a market leader in the specialty highperformance alloy market • Serving diverse geographic and end markets with longterm relationships with our broad blue bluechip chip customer base • Our unique business model facilitates strong customer service an
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