Boart Longyear — H1 2013 Earnings Presentation
36 slides from Boart Longyear's earnings presentation, Aug 26, 2013
Slide 1: 1H 2013 Results
Sonic – Tasmania, Australia 1H 2013 Results August 2013
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: 1H 2013 – Consolidated Results Summary
1H 2013 – Consolidated Results Summary (US $M) Revenue 1,500 1,099 • Sector-wide decline driven by reduced customer spend 1,000 719 • Stable demand for underground applications and products 500 • Drill rig utilisation down ~25% year over year 0 1H 2012 1H 2013 EBITDA 300 208 200 100 80 • Further cos
Slide 4: Industry indicators continue to decline...
Industry indicators continue to decline... Mining Performance Key Commodity Trends SNL MEG* Jan 2009 - Pipeline Activity Index- Dec 2012 30%* ($/oz) Gold Apr 2013 Jul 2013 - 500 1,000 1,500 2,000 Jan 2009 Copper Dec 2012 15%* ($/lb) Apr 2013 Jul 2013 - 1.0 2.0 3.0 4.0 Jan 2009 Iron Ore ($/mt) Dec 20
Slide 5: …driving key events in the mining industry…
…driving key events in the mining industry… Barcelona Mining Conference 100% Miners focused on cost reductions & reduced capex Gold Selloff China’s GDP 90% Largest in 33 years The International Monetary PDAC: SNL Metals Fund cut its growth outlook Economics Group for China from 8% to 7.75% Expects 2
Slide 6: …which continue to impact demand for our services and products.
…which continue to impact demand for our services and products. Drilling Services Historical Utilisation 80% 70% • Decrease in utilisation driven by 60% market conditions 2009 Utilisation Rates • Excess capacity likely to create 2H 50% pricing headwinds 40% Feb-09 Apr-09 Feb-10 Apr-10 Feb-11 Apr-11
Slide 7: Key Focus Areas
Key Focus Areas 1. Continue to reduce costs 2. Improve organisational efficiencies 3. Generate cash to reduce debt 4. Explore refinancing alternatives 1H 2013 Earnings Presentation 7
Slide 8: Clear Results and Ongoing Focus on Reducing Costs
Clear Results and Ongoing Focus on Reducing Costs May 2013 AGM Presentation Year-to-date SG&A of $110M is down We recently announced actions $45M from 1H 2012. We remain on to further reduce costs by ~$90M track to realise at least the $70M announced last year 1H 2013 Earnings Presentation 8
Slide 9: Improve Operating Margins
Improve Operating Margins Drive Costs Out of the Business Cost Out Opportunity $200 173 60 13 $150 $ in Millions 160 $100 30 70 $50 $- 2012 Cost 1H2013 Cost 2H2013 Cost Total Margin Opportunity Reduction Actions Reduction Actions Reduction Actions Focus Areas • Streamline organisational structure –
Slide 10: Financial Overview
Financial Overview Jay Clement – Acting CFO
Slide 11: 1H 2013 Consolidated Overview
1H 2013 Consolidated Overview (US $M) 1 STATUTORY ADJUSTED 1H 2012 1H 2013 % Change 1H 2012 1H 2013 % Change Revenue 1,099 719 -35% Revenue 1,099 719 -35% Gross Margin 312 134 -57% Gross Margin 312 134 -57% Gross Margin as a % of Revenue 28% 19% Gross Margin as a % of Revenue 28% 19% EBIT / Op Profi
Slide 12: Reconciliation: Statutory to Adjusted EBITDA and NPAT
Reconciliation: Statutory to Adjusted EBITDA and NPAT (US $M) EBITDA 57 26 14 80 (235) 53 166 June 2013 Goodwill Equipment Inventory Intangibles/ Severance June 2013 Statutory Impairment Impairment Impairment Other Adjusted EBITDA EBITDA NPAT (329) (60) 19 10 40 37 163 June 2013 Goodwill Equipment I
Slide 13: 1H 2013: Debt Bridge
1H 2013: Debt Bridge (US $M) Operations Working Capital Investing/Financing 1,000 329 (307) 900 800 90 (40) 22 1 (55) 700 (71) 602 5 598 22 600 500 400 300 200 100 0 Gross Debt Net Loss Impairments/ Depreciation/ Taxes/ AR AP Inventory CAPEX Dividends/ Change Gross Debt1 Dec 2012 Other Non- Amortiza
Slide 14: Debt
Debt (US $M) Debt Maturity Bank Loan Facility $400 $500 Bank Loan1 $350 Senior Notes $400 $300 145 Undrawn $250 $300 $200 350 $150 300 $200 305 Drawn $100 $100 $50 50 50 $0 $0 2013 2014 2015 2016 …. 2021 1 2013 30 June 1 Scheduled reductions in commitments under bank loan facility (per amendment dat
Slide 15: Bank Debt Covenant Compliance
Bank Debt Covenant Compliance Compliant (as of 30 June 2013) 4.0x 4.0x Max. 9.0x 8.0x 7.7x Leverage Ratio (per amendment dated 29 June 3.5x 2013): Gross Debt / EBITDA 7.0x EBITDA / Interest 3.0x 2.8x 6.0x Maximum Leverage Ratio 2.5x Reporting Period 5.0x 30-Jun 31-Dec 2.0x 2013 4.00x 4.75x 4.0x 1.5x
Slide 16: Tax
Tax Significant assessments received from Canada Revenue Agency (CRA) related to: • Transfer pricing for goods produced in Canada • Royalties paid to US affiliate for company intellectual property • Management fees paid to US affiliate for services provided to Canada Audit Period Assessed Company Ac
Slide 17: Business Overview
Northern Canada Business Overview Alan Sides Sr. Vice President - Drilling Services
Slide 18: Operations
Operations (US $M) Drilling Services 1H 2012 1H 2013 % Change • Cost: Global actions flowing through P&L • Utilisation: At early 2009 levels Revenue 817 538 -34% • Markets: Recent key wins – Chile, Saudi Arabia, Democratic Republic of Congo EBITDA1 177 84 -53% • Price: Expect increasing pressure in
Slide 19: Driving Cost and Efficiencies
Driving Cost and Efficiencies Drilling Services Zone Restructure - Before 23 Zones Globally Marked locations are zone offices. Operations remain in 40+ countries. 1H 2013 Earnings Presentation 19
Slide 20: Driving Cost and Efficiencies
Driving Cost and Efficiencies Drilling Services Zone Restructure - After 11 Territories Globally Marked locations are territory offices. Operations remain in 40+ countries. 1H 2013 Earnings Presentation 20
Slide 21: Driving Cost and Efficiencies
Driving Cost and Efficiencies Improve Synergies: Products & Drilling Services Consolidate Maintenance Groups • Over 40% reduction in employees • New costing process • Implementing models to reduce downtime & increase productivity • Global coverage • Elimination of duplicate sites Consolidate Supply
Slide 22: Richard O'Brien, President & CEO
LF230 Coring Rig – Canada Richard O’Brien President & CEO
Slide 23: Key Performance Indicators
Key Performance Indicators 2013 2012 2009 Mid-Aug Mid-May Mid-Feb June June Rig Count ~1,035 ~1,040 1,065 ~1,200 ~1,200 Rig Utilisation ~50% ~60% 58% ~70% ~50% Product ~$20M ~$35M $51M ~$62M ~$18M Backlog Headcount ~6,300 ~8,000 8,680 ~11,400 ~6,100 Net Debt1 ~$545M ~$585M $554M ~$373M ~$750M Positi
Slide 24: Analyst Consensus Appears to be Lagging Current Market Conditions
Analyst Consensus Appears to be Lagging Current Market Conditions (US $M) 2013 Analysts’ EBITDA Forecast = Consensus • Company expects the 2H 2013 results to be lower than the 1H 2013 • Analyst expectations may not adequately reflect the risk of price erosion in the 2H and may assume larger benefit
Slide 25: Roadmap to Improve Performance
Roadmap to Improve Performance • Position business to perform better “Through- the-Cycle” • New leadership • Increase capital structure • Launched operational flexibility business review • Improve cash flow and • Reduced overhead & reduce debt levels Shareholder Value infrastructure • Increase opera
Slide 26: Questions?
QUESTIONS? 1H 2013 Earnings Presentation 26
Slide 27: Appendix
Appendix
Slide 28: Diversified End Market Exposure
Diversified End Market Exposure 1H 2013 Total BLY Revenue – Products & Services 1H 2013 Total BLY Revenue by Region – Products & Services Other, 2% Production Drilling, 5% Over 25% of total revenue comes from Rotary/RC, non-exploration LAM, 13% 20% USA, 22% Surface Global Coring, 32% revenue base Un
Slide 29: 1H 2013 Consolidated Overview
1H 2013 Consolidated Overview (US $M) Revenue Bridge 1,099 (21) (351) (9) 719 1H-12 Price Volume/Mix FX 1H-13 Adjusted1 EBITDA Bridge 208 (21) (136) 43 (1) 80 (14) 1H-12 Price Volume/Mix Material/Labor SG&A/Other FX 1H-13 Inflation 1 The income statement is presented on both a statutory and an adjus
Slide 30: EBITDA Operating Divisions
EBITDA Operating Divisions (US $M) Drilling Services EBITDA1 Bridge 177 (20) (78) (15) 20 (1) 84 1H-12 Price Volume/Mix Material/Labor SG&A FX 1H-13 Inflation Products EBITDA1 Bridge 68 (1) (58) 12 (0) 22 1 1H-12 Price/Productivity Volume/Mix Material/Labor SG&A FX 1H-13 Inflation 1 Does not include
Slide 31: Reconciliation: Statutory to EBITDA
Reconciliation: Statutory to EBITDA (US $M) Statutory Restructuring Adjusted Statutory Restructuring Adjusted $ in Millions 1H 2012 Charges 1H 2012 1H 2013 Charges 1H 2013 Revenue 1,099 - 1,099 719 - 719 EBIT 148 1 149 (307) 315 8 2 Cash from Operations 61 1 62 16 18 34 EBITDA 208 1 209 (235) 315 80
Slide 32: Inventory
Inventory (US $M) Inventory Balance 600 534 (40) (57) 500 (26) 411 400 • Peaked at ~$570M in October 2012 • Progress being made: ~$66M reduction 300 through 1H 2013 • Additional $10M - $15M of non-cash expense 200 expected in 2H 2013 related to this policy 100 0 Inventory Volume Impairment/ FX Inven
Slide 33: Income Statement
Income Statement Half-year Half-year ended ended 30 June 2013 30 June 2012 Note US$'000 US$'000 Continuing operations Revenue 718,863 1,098,795 Cost of goods sold (584,463) (786,738) Gross margin 134,400 312,057 Other income 4 327 440 General and administrative expenses (85,538) (122,762) Selling an
Slide 34: Balance Sheet
Balance Sheet 30 June 31 Decem ber 2013 2012 Note US$'000 US$'000 Current assets Cash and cash equivalents 34,181 89,628 Trade and other receivables 8 250,524 260,502 Inventories 410,571 533,690 Current tax receivable 44,343 39,331 Prepaid expenses and other assets 27,171 42,021 766,790 965,172 Asse
Slide 35: Cash Flow Statement (1 of 2)
Cash Flow Statement (1 of 2) Half-year Half-year ended ended 30 June 2013 30 June 2012 Note US$'000 US$'000 Cash flow s from operating activities (Loss) Profit for the year (329,394) 97,731 Adjustments provided by operating activities: Income tax expense recognised in profit 7,090 38,019 Finance cos
Slide 36: Cash Flow Statement (2 of 2)
Cash Flow Statement (2 of 2) Half-year Half-year ended ended 30 June 2013 30 June 2012 Note US$'000 US$'000 Cash flow s from investing activities Purchase of property, plant and equipment (17,498) (114,322) Proceeds from sale of property, plant and equipment 12,200 605 Intangible costs paid (4,403)