Presentation for Investor Conference Call - Boretsborets.com/files/investors/Presentation_for_Investor... · 2016-09-20 · Presentation for Investor Conference Call Thursday 26th

Presentation for Investor Conference Call Thursday 26th March 2015

2015

Contents

Facts & Figures 3 Borets Company Position in ESP Global Market 2013 4 Borets Technologies and Solutions 5 Borets Manufacturing Facilities Worldwide 6 Service Capabilities 7 Borets Service Company Worldwide 8 ESP System Design and Configuration 9 Revenues remain stable 10 Real Revenue keeps on growing while nominal being effected by exchange rate 11 Continuous EBITDA growth and margin improvement 12 Successful business development and growth in existing international operations 13 Leverage ratios are compliant with Leverage Policy 14 Consolidated Net Leverage Ratio calculation 15 Guarantors test 2014 passed successfully 16 Net Capex Breakdown 17 Details of 2014 IFRS Accounts 18

– Income Statement 19-22 – EBITDA 23-24 – Balance Sheet 25-29 – Risk Management 30-32

Slide Number

Facts & Figures

1897 the year Borets began business in Russia $767MM – annual revenue in 2013 #3 ESP global market position in 2014 #1 ESP global market position by number of units

sold 9 000 employees worldwide 3 500+ dedicated field personnel 500+ Clients served internationally 10 Manufacturing Facilities in 5 countries 10 000+ ESP manufactured annually 43 000 ESPs installed base 3 000+ innovative Permanent Magnet Motors in

operation worldwide 24 Service & repair bases in 10 countries 19 000+ serviced wells

3

Borets Company Position in ESP Global Market 2013

Borets Company had 15% of the global ESP market in 2014 Borets Company dominates in the Russian ESP market holding share 41% Borets Company has significant share in the Northern American ESP

market- 7%, in Egypt- 20%, in Colombia – 20%

Global ESP Market in 2014 Broken Down by Competitors, %

28%

26% 15%

10%

6%

4% 3% 8% BHI Centrilift

SLB Reda

Borets (inc. WFT ESP)

Wood Group

Novomet

Al-Khoraef

Alnas

Others

Borets Technologies and Solutions

The only vertically integrated ESP provider in the world supplying complete ESP systems

5

Borets Manufacturing Facilities Worldwide

6

10 Manufacturing Facilities: Russia: Lebedyan, Lysva, Kurgan, Yuryev-Polsky, Stary Oskol;

China: Shanghai; Slovakia: Dubnica; Canada: Edmonton; USA: Midland (Texas), Tulsa (Oklahoma).

Service Capabilities

Borets is the largest ESP service provider worldwide

More than 19 000 serviced wells

24 Service Centers located globally

Capable of servicing and repairing equipment

manufactured by all global ESP manufacturers

Capable of providing turnkey ESP solutions to clients

Maintained stock of equipment & components for repair

and equipment maintenance

Knowledgeable, fully-trained professionals to meet the

needs of our clients 24 hours per day

7

24 Service Centers: Russia: Nizhnevartovsk, Muravlenko, Nefteyugansk, Neftekumsk, Krasnodar, Usinsk, Buzuluk; USA: Midland (Texas), Breckenridge (Texas), Oklahoma City (Oklahoma), Norman (Oklahoma), Kilgore (Texas); Canada: Medicine Hat, Estevan, Nisku; Egypt: Alexandria; Venezuela: Maracaibo; Brazil: Carmopolis, Catu; Colombia: Bogota, Villavicencio, Neiva, Serbia: Zrenjanin; Congo: Pointe-Noire; 8

Borets Service Company Worldwide

ESP System Design and Configuration

VFD

Cable

MLE

Pump

Intake

Motor Seal

Motor

Downhole Sensor

9

10

Revenues, $mm

10

Russia:

Maintained strong performance in 2014 with Revenue increasing 4% in Ruble terms

Growth Drivers

742,7 766,9 720,1

566,0 579,1 510,1

173,6 187,8 210,0

0

100

200

300

400

500

600

700

800

2012 2013 2014

ConsolidatedRussiaInternational

International:

Business Development

Healthy improvement in all established operations

Revenues remain stable

Real Revenue keeps on growing while nominal being effected by exchange rate

11

Total revenue 2011-2015, $mm

11

713

743 767

720

625

709 728

761

555*

713

778 817

872

625

741 767

844

899

500

550

600

650

700

750

800

850

900

950

2011 2012 2013 2014 2015B

Actual, actual rate Budget (rate 60 RUR/USD*)

Actual, rate 29,3 RUR/USD Budget, rate 29,3 RUR/USD

Continuous EBITDA growth and margin improvement

12

Consolidated EBITDA ($mm) and EBITDA margin (%)

101,0 107,1

148,3

131,3 144,2

17% 15%

20%

17%

20%

0%

7%

14%

21%

0

30

60

90

120

150

180

2010 2011 2012 2013 2014

EBITDA

EBITDAmargin

Successful business development and growth in existing international operations

13

International Revenues breakdown*, $mm

73 81 75

68 102

1 30 31

39 39

13 15

20 21

27 7 7 19 35

25 18 19

16 16 21

30 36 33 30 34

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015B

USA Colombia Egypt Venezuela Canada Other

141 193 187 248 210

Leverage ratios are compliant with Leverage Policy

14

116,2 84,8

32,8

339,2 341,5

1,1

0,8

0,2

2,6 2,4

0,0

0,5

1,0

1,5

2,0

2,5

3,0

0

100

200

300

400

500

600

2010 2011 2012 2013 2014

Net debt Net debt/EBITDA

According to the conditions of the Notes the Consolidated Net Leverage Ratio should not exceed 3 to 1 on

an incurrence basis For 2014 the Consolidated Net Leverage Ratio equals 2,37 with headroom of 21% to the covenant

restriction value

Net Debt (US$, mm) and Net Debt /EBITDA multiple

$ mm 2013 2014

Total Debt 426,5 416,9

Cash 87,4 75,5

Net Debt 339,1 341,4

EBITDA 131,3 144,3

Ratio (

Guarantors test 2014 passed successfully

16

Net Assets and EBITDA of the Guarantors, $mm

16

According to the bond issuance documentation after the publication of the annual or interim financial statements the Guarantors undergo Guarantors Test, which implies compliance with the following:

(i)aggregate consolidated net assets after intragroup eliminations of the Guarantors comprises 80 per

cent. or more of the consolidated net assets of the Group

(ii)EBITDA of the Guarantors comprises 80 per cent. or more of the EBITDA of the Group

Guarantors Test 2014

NA EBITDA

Borets Company 178,0 126,7

Lemaz 17,7 0,8

SK Borets 17,8 4,3

Borets US 76,9 -8,8

Borets Canada 13,1 -2,1

ZTS-Kabel sro 12,4 1,4

Borets Int. Ltd. including Colombian branch 143,8 -3,0

Total Guarantors 459,7 119,3

Total Consolidated 132,7 144,2

% of Consolidated Accounts 346,4% 82,7%

Net Capex Breakdown

17

$ mm 2012 2013 2014

Purchase of PPE 21,4 33,5 30,155

Rental Capex 14,1 17,3 10,7

R&D 9,3 8,0 7,513

Net Capex 44,8 58,7 48,4

Divestments -1,1 -9,2 -3,9

Total Capex 43,7 49,5 44,4

Capex calculation

18

Details of 2014 IFRS Accounts

19

2013 2014

- Product Sales

•$mm: 522,3 474,8

• Growth (%): 1,9 (9,1)

• Contribution (%) 68,1 65,9

- Services

•$mm: 244,6 245,3

• Growth (%): 6,3 0,3

• Contribution (%) 31,9 34,1

2013

$766,9 mm

- 6,1%

Income Statement (1/4)

$720,1 mm

2014

1. Sales Revenues

20

2. Gross Profit

Cost of Sales: 2014

$mm

” 2013

%

Materials 317,2 (6,3)%

Labour 147,5 (4,9)%

D&A 45,8 (7,1)%

Prod. overheads 27,8 (8,9)%

Transport 16,9 (19,7)%

Rental tools sold 4,3 (14,4)%

Other (43,1) 13,7%

Total COS 516,3 (8,1) 2013 2014

$203,7 mm

- 0,7%

Margin: 26,7%

Margin: 28,3%

Gross Profit

Income Statement (2/4)

$205,1 mm

3. Operating Profit

Operating Costs: 2014

$mm

” 2013 %

Sales and Marketing 7,5 (10,2)%

Administrative 111,1 (0,02)%

Other expenses 16,3 (33,8)%

2013 2014

$68,7 mm

Margin: 8,0%

Margin: 9,5%

Operating Profit

12,7%

Income Statement (3/4)

$61,0 mm

21

4. Profit before income tax

Profit before income tax is slightly lower

But PBT Margin even improved from 6,1% to 6,3%

5. Net Profit

Net Profit decreased by 22,8%, but 2013 figure contained $11mm tax benefit

Net Profit Margin declined from 7,6% to 6,2%

2013 2014

$44,8 mm - 22,8%

Net Profit

Income Statement (4/4)

$58,0 mm

22

2013 2014

$45,3 mm - 3,8%

Profit before tax

$47,1 mm

$11 mm

22

1.EBITDA 2014 vs. 2013

EBITDA $144,2mm

Up 9,9%

2013 2014

$ 131,3 mm

$144,2 mm

9,9%

EBITDA (1/2)

23

2. EBITDA Reconciliation

2013 ($mm) 2014 ($mm)

Net Profit 58,0 44,8

Adjustments for:

• Income Tax (11,0) 0,5

• Interest Expense (net) 13,8 33,1

• Service Agreement 11,3 15,0

• D&A 52,5 50,8

•Extraordinary item 6,7 -

EBITDA 131,3 144,2

EBITDA (2/2)

24

1. Cash

Cash down 13,6%

Days Cash on Hand Ratio*

2013: 221 days

2014: 204 days

Δ 2013 % (7,69%)

Cash Balance Ratio**

2013: 57 days

2014: 54 days

Δ 2013 % (5,26%)

2013 2014

$75,5 mm - 13,6%

Balance Sheet (1/5)

* Cash ÷ (operating expenses/365) * * Cash ÷ (cost of sales {excluding depreciation}/365)

$87,4 mm

25

2. Trade & Other Receivables

2013 ($mm) 2014 ($mm)

Trade Receivables 124,5 126,5

Impairment (2,2) (4,9)

Net 122,3 121,6

Others (net) 7,9 9,4

Total 130,2 129,8

Days Receivable* 62 66

Δ 2013 Days Receivable (%) 6,45 (%)

2013 2014

$129,8mm

- 0,3%

Balance Sheet (2/5)

*Total Receivables ÷ (Sales Revenues/365) 26

$130,2mm

3. Inventories

2013

$mm

2014

$mm

Inventories:

• Raw Materials 91,9 72,1

• W.I.P 20,2 16,0

• Goods for Sale 67,2 62,9

179,3 151,0

• Impairment 14,7 13,9

Total (net) 164,6 137,2

Days Inventory*: 78 70

Δ 2013 Days Inventory (%) (10,26)% 2013 2014

$137,2mm

$164,6mm

- 16,6%

Balance Sheet (3/5)

*Total Inventory ÷ (Sales/365)

27

4. Current Ratio

2013 $mm 2014 $mm

Current Assets

• Inventories 164,6 137,2

• Receivables 130,2 129,8

• Tax 6,1 2,5

• Others 20,6 10,8

• Cash 88,1 75,5

Total 409,7 355,8

Current Liabilities

• Loans 14,0 9,5

• Payables 87,5 92,1

• Tax 0,7 0,7

• Others 30,8 23,1

Total 133,0 125,4

Current Ratio* (x): Covenant > 1.20x 3,08 2,84

Δ 2013 Current Ratio* (x): Covenant > 1.20x (%) (7,79)%

Balance Sheet (4/5)

28

Balance Sheet (5/5)

245,8

237,7

174,2

31/12/12 31/12/13 31/12/14 Additions Disposals Translation Depreciation

& other Additions Disposals Translation Depreciation

& other

76,9

5. Property, Plant & Equipment ($mm)

26,1

17,4

41,2 95,1

10,7

111,5

36,4

Non-current Assets 396,9 $mm 316,2 $mm % of Non-current Assets 59,9% 55,1%

2013 2014

Four largest balances of accounts receivable of the major counterparties :

2014

$mm

2014

% of total AR

Days Sales Outstanding*

Rosneft Group 38,5 29,7 90

ECOPETROL S.A. 10,5 8,2 103

Petrόleos de Venezuela S.A. Group 9,8 7,5 102

Surgutneftegas Group 7,0 5,4 60

Total 65,9 50,8

Risk Management (1/3)

30

* Days Sales Outstanding (DSO) = (Accounts Receivable / Revenue) * 365

2. Currency Exchange Risk Analysis Contractual currency analysis of monetary assets and liabilities is as follows:

If the USD strengthened against the RUR, Euro and other currencies by 10% then this would have the following impact:

If the USD weakened against the RUR, Euro and other currencies by 10% then this would have the equal but opposite effect on the amounts shown above being the other variables remain constant.

Monetary assets (2014 $mm) USD RUR EUR Other Total

Trade and other receivables 50,9 74,0 0,05 4,9 129,8 Current tax assets – 0,8 0,2 1,4 2,4 Other assets net of prepayments made 0,2 1,7 1,2 3,3 6,3 Cash and cash equivalents 40,2 27,4 1,8 6,1 75,5 Total monetary assets 91,3 103,9 3,25 15,7 214,0

Monetary liabilities (2014 $mm) USD RUR EUR Other Total

Loans and borrowings (416,9) - - (0,001) (416,9) Trade and other payables (25,1) (60,8) (1,8) (4,4) (92,1) Current tax liabilities (0,3) (0,17) (0,2) (0,039) (0,6) Other liabilities net of advances from customers and warranty provision (1,2) (13,9) (0,1) (2,1) (17,3) Total monetary liabilities (443,5) (74,9) (2,1) (6,5) (526,9)

Net position (352,2) 29,0 1,1 9,2 (313,0)

Foreign currency 2014 ($mm)

RUR (2,9) EUR (0,1) Other (0,9)

31

Risk Management (2/3)

3. Interest Rate Risk Analysis

At the reporting date the interest rate profile of the Group’s interest bearing financial instruments was:

Fixed rate instruments 2013 ($mm) 2014

($mm)

Term deposits 32,9 24,6

Loans received (426,5) (416,9)

Total (393,5) (392,4)

Variable rate instruments

Loans received - -

Total - -

32

Risk Management (3/3)

Presentation for Investor Conference Call�Thursday 26th March 2015ContentsСлайд номер 3Borets Company Position in ESP Global Market 2013Borets Technologies and SolutionsBorets Manufacturing Facilities WorldwideСлайд номер 7Слайд номер 8ESP System Design and ConfigurationСлайд номер 10Слайд номер 11Слайд номер 12Successful business development and growth in existing international operationsСлайд номер 14Слайд номер 15Слайд номер 16Слайд номер 17Слайд номер 18Слайд номер 19Слайд номер 20Слайд номер 21Слайд номер 22Слайд номер 23Слайд номер 24Слайд номер 25Слайд номер 26Слайд номер 27Слайд номер 28Balance Sheet (5/5) Слайд номер 30Слайд номер 31Слайд номер 32