Polimex-Mostostal Group results 1-3Q 2012

Transcription

1 Polimex-Mostostal Group results 1-3Q 2012 In accordance with reviewed condensed consolidated financial statement for the 3rd quarter 2012

2 Stipulation The following presentation ("Presentation") has been prepared by the "Polimex-Mostostal" S.A. ("PXM" or the "Company") solely for informational purposes for investors and analysts. Getting acquainted with its contents, you agree to certain restrictions and disclaimers below. The information contained in this Presentation has not been independently verified. The Company undertakes no obligation to update or ensure that the information contained herein would be updated. Any opinions expressed in this Presentation are subject to change without notice to the recipients of this presentation. In any case, should the information contained in this Presentation be considered for the express or implicit representation or warranty of any kind made by the Company or persons acting on its behalf. In addition, neither the Company nor any person acting on its behalf is liable for any damage that may result from the use of this presentation or any information contained therein, nor for the consequences of decisions made on the basis of information contained in this Presentation. Despite the fact that the Company has taken reasonable care that the information contained in this Presentation are true, accurate and complete, the Company cannot guarantee that. There are forward-looking statements included in this presentation. Such forward-looking statements include a declaration on future events, anticipated performance, plans, goals, strategies, and services, as well as assumptions made for such statements. Forward-looking statements include statements about the strategy, development prospects, future plans and potential for further development, liquidity and capital resources and capital investment, the increase in demand for products, the economic outlook and trends in various industries, the development of markets, the impact of legislative initiatives, as well as position of competitors. Due to their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements contained in this Presentation are based on a number of assumptions. Although the Company believes that these assumptions were reasonable at the time they were made they are, however, by their nature, an important unknown factor, and uncertainties difficult or impossible to be predicted and are beyond the Company's control. The Company may not achieve the above objectives, expectations, predictions. The Company notes that forward-looking statements do not constitute forecasts of its financial performance, nor guarantee future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ greatly from those expressed or implied forward-looking statements contained in this Presentation. Neither the Company nor any of its agents, employees or advisors intend to or are required to amend, change, update or re-edit any of the forward-looking statements contained in this Presentation. The company notes that the only reliable source of data on the situation of the Company, forecasts, events concerning the Company, its financial results and indicators are current and periodic reports submitted by the Company under its disclosure obligations under Polish law. The Presentation does not constitute, and should not be construed as, an offer to purchase any securities of the Company or any member of the Company's group. This presentation does not constitute a recommendation regarding any securities of the Company. 2

3 Highlights maintaining liquidity sufficient to allow current operations an agreement for the implementation of the power unit in Kozienice worth 5.1 billion PLN (the Company's participation in the Consortium is 42.7% ) and the guaranteed performance bonds worth million PLN positive decision of the Supreme Administrative Court on the environmental issue for the construction of power units in Opole Power Plant advanced asset sales process - signing sales contracts with a total value of more than 200 million PLN significant progress in the talks with Creditors Shareholders agreement on emissions aiming at the debt conversion and the recapitalization of the Company for a total value of 628 million PLN well advanced organizational restructuring reduction in employment of 620 FTEs (i.e., 6.4%) as compared to 30 June 2012 audit contracts: making the total contract valuation adjustments in the amount of 568 million PLN carrying out adjustments to the opening balance for

4 Consolidated results 4

5 Financial results of Polimex Group in 1-3Q 2012 thousands PLN 1-3Q Q 2012 Change % Revenues from sales % Cost of sales % Gross profit (loss) on sales ( ) - Cost of sales % General and administrative costs % Other operating activities (62 353) Profit (loss) from operating activities ( ) - Financial income % Financial expenses % Share of profit of associates % Profit (loss) before tax ( ) - Income tax (88 342) - Net profit (loss) ( ) - Net profit (loss) attributable to noncontrolling shareholders Net profit (loss) attributable to the parent entity % ( ) - contract valuation adjustment (reduction of gross profit by approximately million PLN, adjustment to the opening balance of approximately million PLN) and restructuring reserve (40.7 million PLN) SG&A cost reduction by 16.9 million PLN despite the recognition of additional costs associated with carrying out the restructuring process (4.9 million PLN) recognition of some of the costs associated with established provisions and write-offs, including the provisions for warranty repairs increase in funding costs due to the growth of the level and rate of debt financing and foreign exchange losses EBITDA ( ) - 5

6 Valuation adjustments of contracts Structure of the contract valuation adjustments H 2012 (356.8 million PLN) 3Q 2012 (211.1 million PLN) 1-3Q 2012 (567.9 million PLN) roads and railways 23.1 general construction 36.6 power engineering and chemistry in the valuation of contracts unreconciled part from over 244 million PLN of action brought against the Company by Orderers mainly on account of additional work and the value of penalties accrued for road contracts (31.2 million PLN) was not included + = 67,4 roads and railways 106,3 general construction 37,4 power engineering and chemistry As a result of the revision, the financial results of the period have been burdened with, among others, contract valuation adjustments (write-offs and provisions) with the total amount of 211 million PLN, including some of the penalties imposed by the Orderer (40.1 million PLN in roads and railways ) roads and railways million PLN general construction million PLN power engineering and chemistry 74.0 million PLN recognition of the results of the valuation adjustments resulted in a reduction of the contracts gross amount due from Orderers on account of the work under the contract (pricing revenues) to the level of 499 million PLN with 683 million PLN by the end of 2011 (after adjusting for) 6

7 The adjustment to the opening balance of 2012 Recognition of contract valuation adjustments in the result of 2011 the impact on the gross profit on the sale of 1-3Q 2012 Increase in revenues million PLN Reduction of costs million PLN Impact on gross profit million PLN roads and railways million PLN + = general construction 60.6 million PLN roads and railways 48.1 general construction 22.8 power engineering and chemistry 25.4 roads and railways general construction power engineering and chemistry power engineering and chemistry 24.7 million PLN increase in gross profit on the sale of 1-3Q 2012, with million PLN, including: 43.1 million PLN by 3Q 2012, million PLN by 1H 2012, including 26.1 million PLN adjustments made in 1H

8 The Group's financial debt million PLN million PLN 407 The Group s interest bearing debt 1.7% % % % % -0.6% Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q' credits and loans debentures Liabilities due guarantees July 24 - concluding an agreement to refrain from enforcing the obligations of the Company (a standstill agreement) - the validity of the agreement to 31 March September 21 - obtaining performance bond guarantees for investments in Kozienice advanced stage of negotiations with financial creditors - significantly closer to the signing of the Agreement Relating to Granting Financing conversion of bonds worth 250 million PLN for the shares of the Company until the end of the adoption of such a resolution by the Extraordinary General Meeting maintaining liquidity in Q3-9 million PLN positive operating cash flows Group funding in Q with no increase in the level of debt financing - the parent company reduction in debt by 49 million PLN 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 8

9 Operating segments billion PLN 1,50 1,25 1,00 0,75 Sales revenues by segments trailing twelve months Revenue breakdown by segments 1-3Q % 18,6% 17.6% 17,8% 7.8% 7,9% 30.8% 31,1% 24,6% 24.8% 0,50 3Q ,25 0, % 21,6% 6.9% 7,1% 24,0% 24.3% 17.4% 18,0% 29,3% 28.8% production general construction power engineering chemistry roads and railways 9

10 Polimex Group backlog Polimex Group backlog Backlog time structure (billion PLN) billion PLN 18.9% 0.21 billion PLN 1.6% billion PLN 56.3% billion PLN 1.93 billion PLN 15.1% 1.04 billion PLN 8.1% Roads and railways Chemistry Production* General Construction Power engineering Q billion PLN Polimex Group backlog as of , Polimex SA contracts to be implemented with a zero margin at the level of 1.06 billion PLN, including: roads and railways (0.66 billion PLN), general construction (0.32 billion PLN), power engineering and chemistry (0.08 billion PLN), - 58% to be implemented by the end of 2013 signing of the Agreement Relating to Granting Financing being key event that allows the acquisition of new contracts * For Production potential orders were given 10

11 Operational and financial restructuring of the Group 11

12 Identified conditions of the Group s situation normalisation Lowering the level of existing debt meeting the condition at the time of the conversion of bonds into shares of the Company adoption by the bondholders the conversion conditions proposed by the Board and adopting appropriate resolutions at the EGM Acquiring new debt and own financing resolutions adopted by EGM allowing the share capital increase through the issue of shares to the strategic investor and the issue of shares with pre-emptive rights Preparation and implementation of deep operational and financial restructuring Starting the process of operational restructuring Starting the process of disposing of non-operating assets Acquisition of new warranties for new contracts and lower deposit Adjustment of debt maturity to the capabilities / refinancing Meeting the conditions at the time of signing the Agreement Relating to Granting Financing with all Creditors an advanced state of negotiations 12

13 The activities carried out under operational restructuring Activities related to the reduction of costs in the Group : The introduction of segment management : establishing a flexible organizational structure allowing for efficient and dynamic matching of available resources to the situation in individual segments Reduction in general and administrative expenses : improved cost discipline of companies comprising the Group in the areas of : employee benefits purchasing services and materials employment adjustment and partial outsourcing support services Centralized purchasing : streamlining procurement processes and strengthening the bargaining power with suppliers (people) Employment in the Group < employment reduction by nearly 20% in the first stage of restructuring acceptance of the plan of collective redundancies by the Trade Unions on 5 October 2012 including most of the costs associated with redundancies in the results of Q

14 Divestments in the Polimex Group signed contracts of sale of subsidiaries and the organized part of the company with the total value of million PLN: Energomontaż-Północ Gdynia with port assets*: total sale price 99.6 million PLN (46.4 million PLN EPG and 53.2 million PLN of port assets) total advance payment possible up to 49.8 million PLN Boilers Factory Sefako SA*: sale price 72.3 million PLN advance payment up to 36.2 million PLN ZREW Transformatory Division**: sale price 46.7 million PLN additional funds to be raised from the sale of the following subsidiaries and ZCP at the level exceeding 100 million PLN estimated income on account of the sale of development and investment real estate at the level of over 300 million PLN * based on the conditions of sales agreements of the Companies and preliminary conditional contract for sale - current report No. 102/2012 ** based on a preliminary sale agreement - current report no 107/

15 Group Restructuring - financial assumptions Funding received Conversion of bonds into shares advance payment on account of assets sold (Sefako, EPG) issue of series M shares 250 million PLN Issue of shares directed to the strategic investor Share issue directed to certain shareholders (ING OFE and Impexmetal SA) The issue of pre-emptive rights Issuance of warrants to the strategic investor Adaptation of the remaining debt maturity issue of series N1 shares million PLN issue of series N1 shares - 50 million PLN issue of series N2 shares 50 million PLN issue of series O shares 128 million PLN bonds rollover with the value of 145 million PLN for minimum three-year bonds obtain a minimum 250 million PLN The implementation of the divestment process Operational restructuring sale of certain assets of the Group (600 million PLN) savings from operating activities (300 million PLN) The conclusion of an agreement with banks and deferred financial debt The agreement with the lenders for the financing of working capital and guarantees, including guarantees on "Kozienice" and "Opole contracts; 15

16 Full implementation of the adopted emissions - the effects The structure of the new share issue Shareholding structure after the emissions 25.7% 22.0% 8.2% 35.7% 8.2% conversion of bonds (M series) strategic investor (N1 series) strategic investor (O series) selected shareholders (N1 series) issue of pre-emptive rights (N2 series) 24.7% 33.0% 11.4% 30.9% strategic investor creditors shareholders (new shares) existing shares The impact of the emissions on the selected balance items as of and after emissions (estimation) (mln zł) total share of new issues of shares in the increased share at the level of 69.1% target share of the strategic investor in the share capital of the Group % effects of the share issue - significant improvement of the structure of liabilities and acquisition of cash necessary for proper functioning own capital cash financial liabilities as of estimated level after the emissions 16

17 Key terms of the agreement with Creditors The share capital increase Conditions related to share issues and bond rollover Sale of non-operating assets Operational restructuring Improving the management and monitoring of the implemented contracts Repayment of financial debt to banks Deferral of the bonds not converted into shares Maintaining existing and attracting new warranty lines Warranty and financing costs 17

18 Key terms of the agreement with Creditors The share capital increase obtaining total revenues from the issue price in the minimum amount of 250 million PLN by the end of Q1'2013, of which 150 million PLN will be achieved by the end of Q4'2012 conversion of bonds into shares in the minimum amount of 250 million PLN by the end of Q4'2012. adopting resolutions at the EGM on 15 October 2012 to increase the capital by : M series shares issue allowing to convert the required amount of bonds, N1 and N2 series shares - total revenue at the level of 250 million PLN, conditional capital increase on 18 September 2012 the Company signed a letter of intent with the Industrial Development Agency the subject of which is the IDA participation in the Company s capital increase. The Company intends to raise funds through the emissions at the level of approximately million PLN. Conditions related to share issues and bond rollover The realization of the issue of shares is a key element for Agreement Relating to Granting Financing and will take place in the case of the signing of it and the fulfillment of conditions precedent agreed in the Agreement Relating to Granting Financing 18

19 Key terms of the agreement with Creditors Sale of non-operating assets disposal of assets by the Company for an amount not less than 600 million PLN in the period to 31 December signing to date the sale of assets with a total value of more than 1/3 of the income required by the Creditors the company expects to enable the conduct of disinvestment, creditors will commit to the release of the security on the assets to be sold (including development real estate) Commitment to reduce the costs by the total amount of 300 million PLN by the end of starting to reduce operating costs through a number of initiatives that focus on purchasing savings, creating a leaner organizational structure and job cuts Commitment to improve the management and monitoring of the implemented contracts Creditors expect measurable improvements in the system for monitoring contracts, the Company will make the required adjustments 19

20 Key terms of the agreement with Creditors Repayment of financial debt to banks: maintaining the existing bank credit limits, provided that the final payment of financial commitments is deferred to the end of 2016 at the beginning of 2015 the capital of the existing financial debt will be amortized in proportion to the benefit of all creditors (loans, warranties or bonds) repayment of some financial creditors will be in accordance with the Standstill Agreement or other concluded agreements/settlings Deferral of the bonds not converted into shares repayment (or refinancing with new bonds ) the debt for not converted or new bonds (nominal value of approximately 145 million PLN) will bear interest at the same rate as deferred credit and debt repayment will be subject to the same conditions as deferred repayment loan debt the form of bonds is a matter of negotiation (new bonds vs changing the terms of issue of the existing ones) 20

21 Key terms of the agreement with Creditors Existing warranty commitment Banks will be required to ensure the existing warranty commitment until its natural expiry. The bank providing the warranty will be required to extend the warranty period or put a new warranty in its place for an amount not exceeding the expired warranty to secure the implementation of the same contract New warranty line Banks will participate in the new warranty line on a pro-rata basis to existing net warranty commitments providing the maximum level of a new warranty line one year after signing the Agreement the Company will also apply for the issue of warranties for contracts in Opole and Kozienice Warranty and financing costs the level of margin of the loan commitment, bonds and warranties and legal recourse acceptable by all creditors and future shareholders is a matter of negotation 21

22 Financial action plan November 2012 raising funds from the advance payment for the sale of selected subsidiaries November 2012 signing an Agreement Relating to Granting Financing November / December 2012 conversion of bonds into shares and issue of shares to the strategic investor 1Q 2013 approval of a prospectus issue of shares with pre-emptive rights 22

23 The key tasks to be implemented in the near term signing the Agreement Relating to Granting Financing bond conversion and acquisition of shares by the strategic investor getting advance payment warranty for the project in Kozienice agreement with the banks in order to allow the sale of assets (mortgages deletion) completing the review of contracts developing a financial plan for 2013 strengthening the contracts monitoring 23