Presentation for Investor Conference Call Wednesday 30 th September 2015

Transcription

1 Presentation for Investor Conference Call Wednesday 30 th September

2 Facts & Figures 1897 Borets began business in Russia #1 ESP global leader by number of units sold #3 ESP global market position in 2014 sales employees worldwide dedicated field personnel 500+ Clients served internationally 10 Manufacturing Facilities in 5 countries ESP manufactured annually ESPs installed base Permanent Magnet Motor driven ESPs in operation worldwide 24 Service & repair bases in 10 countries Over serviced wells 2

3 Borets Company Position in ESP Global Market 2013 Borets Company had 15% of the global ESP market in 2014 Borets Company leads in the Russian ESP market with over 40% Global ESP Market in 2014 Broken Down by Competitors, % 3% 8% BHI Centrilift SLB Reda 4% 28% 6% Borets 10% GE Novomet 15% 26% Al-Khoraef Alnas Others 3

4 Borets Technologies and Solutions Borets is the world s only vertically integrated ESP provider, supplying complete ESP systems 4

5 Borets Manufacturing Facilities Worldwide 10 Manufacturing Facilities: Russia: Lebedyan, Lysva, Kurgan, Yuryev-Polsky, Stary Oskol; China: Shanghai; Slovakia: Dubnica; Canada: Edmonton; USA: Midland (Texas), Tulsa (Oklahoma). 5

6 Service Capabilities Borets is the world s largest provider of ESP services More than serviced wells 24 Service Centers in 10 countries Borets services and repairs all ESP manufacturers equipment (including competitors) 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 6

7 Borets Service Company Worldwide 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; 7

8 8 ESP System Design and Configuration VFD Cable Pump Intake MLE Downhole Sensor Motor Seal Motor

9 H FINANCIAL RESULTS 9

10 Revenue breakdown Revenues, $mm ,2 268,5 190, ,6 1H H 2015 Consolidated Russia International 78,2 Russia: Revenue decreased in US$ terms due to Ruble devaluation However strong performance is maintained in Ruble terms with increase of 18,5% in 1H 2015 compared to 1H 2014 International Revenue decrease in international segment was primarily due to decline of revenues in the USA and Venezuela 10

11 Real Revenue keeps on growing while nominal being effected by exchange rate Total real and nominal revenue, $mm H H 2015 Actual, actual rate Actual, rate 34,95 RUR/USD* * average rate RUR/USD for 1H

12 Russia revenue breakdown Russia revenue composition, RURbn 12 10,8 10 9,1 18.5% H H 2015 Service+rental Manufacturing 12

13 International Revenue analysis International revenues, $mm Year -15.6% 1H H

14 International Sales Suffer due to US and Venezuela International Revenues breakdown with i/g, $mm 100% 94,8 82,7 90% 80% % % 50% % % 20% % 0% 1H H 2015 USA Colombia Egypt Venezuela Canada Other 14

15 EBITDA and EBITDA margin Consolidated EBITDA ($mm) and EBITDA margin (%) % % % 25% 20% 60 15% 40 10% 20 5% 0 1H H % EBITDA EBITDA margin 15

16 Covenant test 1H 2015 Net debt to EBITDA ratio Consolidated Net Leverage Ratio musd 1H 2015 Net Debt 352,52 Total Debt 415,90 Cash 63,39 EBITDA 129,14 Ratio 2,73 Headroom 9,0% 16

17 Guarantors test 1H 2015 Net Assets and EBITDA of the Guarantors, $mm Guarantors Test H 2015 NA EBITDA NA EBITDA Borets Company 178,0 126,7 201,4 118,5 Lemaz 17,7 0,8 17,7 1,5 SK Borets 17,8 4,3 17,4-0,3 Borets US 76,9-8,8 72,7-14,9 Borets Canada 13,1-2,1 11,9-4,0 ZTS-Kabel sro 12,4 1,4 11,1 1,9 Borets Int. Ltd. including Colombian branch 143,8-3,0 147,4 1,6 Total Guarantors 459,7 119,3 479,6 104,3 Total Consolidated 132,7 144,2 150,3 129,1 % of Consolidated Accounts 346% 83% 319% 81% 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 17

18 Income Statement (1/5) 1. Sales Revenues $353,8 mm Product sales 1H 2014, $mm 1H 2015, $mm $268,6 mm - 24,1% $mm 228,6 177,0 Contribution 65% 66% Sale of services $mm 125,2 91,6 Contribution 35% 34% Total sales $mm 353,8 268,6 1H H

19 Income Statement (2/5) 2. Gross Profit 1H 2015 $mm Δ1H 2014 % Gross Profit $105,5 mm COGS 191,7 (22,8)% Gross Profit 76,8 (27,2)% $76,8 mm - 27,2% Gross Profit margin 28,6% (4,1)% 1H H 2015 Margin: 29,8% Margin: 28,6% 19

20 Income Statement (3/5) 3. Operating Profit 1H 2015 $mm Δ1H 2014 % Operating Profit $43,9 mm SG&A and other operating expenses 53,8 (12,7)% -47,5% Operating Profit 23,0 (47,5)% $23,0 mm 1H H 2015 Margin: 12,4% Margin: 8,6% 20

21 Income Statement (4/5) 4. Profit before income tax Profit before tax $34,2 mm Profit before income tax declined by 29,9% compaired to 1H 2014 PBT Margin fell from 9,7% to 8,9% $23,9 mm -29,9% 1H H Net Profit Net Profit decreased by 34,0% Net Profit Margin fell from 7,4% to 6,4% Net Profit $26,2 mm $17,3 mm -34,0% 1H H

22 Income Statement (5/5) Capex calculation, $mm $ mm 1H H 2015 Purchase of PPE 10,6 8,6 Rental Capex 34,5 7,5 R&D 3,9 3,0 Net Capex 49,0 19,1 Divestments 0,4 0,7 Total Capex 49,4 19,8 22

23 EBITDA (1/2) 1.EBITDA 1H 2014 vs. 1H 2015 EBITDA $69,9mm $ 85,0 mm Down 17,8% EBITDA margin increased from 24% to 26% $69,9 mm -17,8% 1H H 2015 Margin 24.0% 26.1% 23

24 EBITDA (2/2) 2. EBITDA Reconciliation 1H H 2015 Net Profit 26,2 17,3 Adjustments for: Income Tax 8,0 6,6 Interest Expense (net) 16,8 15,8 Service Agreement 7,5 7,7 D&A 26,5 22,5 EBITDA 85,0 69,9 24

25 Balance Sheet (1/6) 1. Cash Cash up 3,1% compared to 1H 2014 $63,4 mm Cash Balance Ratio* 1H 2014: 245 days 1H 2015: 272 days Δ 10,8% up $61,5 mm 3,1% 1H H 2015 * Cash (cost of sales {excluding depreciation}/365/2) 25

26 Balance Sheet (2/6) Cash breakdown by region* Region Currency Amount in currency Exchange rate to US$ 1H 2015 mm$ Russia RUR'm 1 076,0 55,52 19,4 Russia USD'm 20,3 1,00 20,3 Russia EUR'm 0,5 0,90 0,5 Russia KZT'm 5,2 187,12 0,0 Total 40,2 International+Corporate USD'm 10,3 1,00 10,3 International+Corporate CAD'm 0,8 1,23 0,6 International+Corporate BSF'm 80,7 6,30 12,8 International+Corporate BRL'm 3,0 3,10 1,0 International+Corporate RMB'm 1,1 5,54 0,2 International+Corporate RSD'm 67,7 105,76 0,6 International+Corporate EGP'm 4,7 7,62 0,6 International+Corporate COP'm 723, ,1 0,3 International+Corporate GBP'm 0,1 0,64 0,2 Total 26,7 Grand Total 66,9 *Includes overdraft facility with Tatra Banka (Slovakia) of 3,5 mm$ 26

27 Balance Sheet (3/6) Cash breakdown by banks and by segments (mm$)* Banac Mercantil AlefBank deposit AlefBank Nordea deposit HSBC BMG JPMorgan deposit Hypo Alfe-Adria-Bank Other Russia International+Corporate *Includes overdraft facility with Tatra Banka (Slovakia) of 3,5 mm$ 27

28 Balance Sheet (4/6) 2. Trade & Other Receivables 1H H 2015 $mm $mm Trade Receivables 160,2 142,1 $160,2mm $142,1mm - 11,3% Days Receivable* Δ Days Receivable (%) 16,8 (%) 1H H 2015 *Total Receivables (Sales Revenues/365/2) 28

29 Balance Sheet (5/6) 3. Inventories 1H 2014 $mm 1H 2015 $mm $180,5mm Inventories: - 16,9% Total (net) 180,5 150,0 $150,0mm Days Inventory*: Δ Days Inventory (%) (2,7)% 1H H 2015 *Total Inventory (Sales/365/2) 29

30 Working capital analysis Consolidated working capital, $mm H H 2015 Inventory Accounts receivables Accounts payables Net working capital Days working capital 0 30

31 Balance Sheet (6/6) 5. Property, Plant & Equipment ($mm) 10,7 237,7 95,1 111,5 36,4 174,2 36,6 2,1 1,9 28,0 178,8 Additions Disposals Translation Depreciation 31/12/13 & other 31/12/14 Additions Disposals Translation Depreciation & other 30/06/ Non-current Assets 316,2 $mm 1H ,0 $mm % of Non-current Assets 55,1% 56,8% 31

32 Risk Management (1/3) Four largest balances of accounts receivable of the major counterparties : 1H 2015 $mm 1H 2015 % of total AR Days Sales Outstanding* Rosneft Group 45,0 32% 90 Petrόleos de Venezuela S.A. Group Lukoil ECOPETROL S.A. Total 14,5 10% 394 7,4 5% 60 5,3 4% 63 72,2 51% * Days Sales Outstanding (DSO) = (Accounts Receivable / Revenue) * 365/2 32

33 Risk Management (2/3) 2. Currency Exchange Risk Analysis Contractual currency analysis of monetary assets and liabilities is as follows: Monetary assets (30 June 2015 $mm) USD RUR EUR Other Total Trade and other receivables 49,3 86,9 0,1 5,8 142,1 Cash and cash equivalents 26,9 19,4 0,6 16,5 63,4 Total monetary assets 76,2 106,3 0,6 22,3 205,4 Monetary liabilities (30 June 2015 $mm) USD RUR EUR Other Total Loans and borrowings (415,9) (415,9) Trade and other payables (27,1) (57,8) (1,6) (2,5) (88,9) Total monetary liabilities (443,0) (57,8) (1,6) (2,5) (504,8) Net position (366,8) 48,5 (0,9) 19,8 (299,4) If the USD strengthened against the RUR, Euro and other currencies by 10% then this would have the following impact: Foreign currency 1H 2015 ($mm) RUR (4,9) EUR (0,1) Other (2,0) 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. 33

34 Risk Management (3/3) 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 2014 ($mm) 1H 2015 ($mm) Term deposits 24,6 18,8 Loans received (416,9) (415,9) Total (392,3) (397,1) Variable rate instruments Loans received - - Total

35 Cash Flow analysis (1/2) Consolidated Cash Flows, $mm USD'm , H H 2015 Funds from operations Operation Cash Flow Free Cash Flow Funds from operations (FFO) = Operating Cash Flow before adjustment to changes in working capital (FFO = OCF + WC) Operating Cash Flow = Cash Flow from operating activities with rental capex reclassified from WC to capex (OCF = CFO + Rental Capex) Free Cash Flow (FCF) = Operating Cash Flow minus Investing Cash Flow (FCF = OCF ICF) 35

36 Cash Flow analysis (2/2) Cash generation $mm 1H H 2015 FFO 55,7 49,0 WC -65,0-49,0 Operating CF -9,2 0,0 Investing cash flow -13,7-10,8 FCF -23,0-10,8 36

37 Liquidity Risk Analysis Sources/Uses Ratio calculation $ mm 1H H 2015 Sources 143,1 124,5 Beginning cash 87,4 75,5 FFO 55,7 49,0 Uses -81,0-62,0 Net Capex -13,7-10,8 WC -65,0-49,0 Debt repayment -2,3-2,2 Sources/Uses Ratio 1,8 2,0 37

38 Borets International Board Chairman Chief Executive & Director Director and Company Secretary EBRD Director INED* INED* Director Christopher Mackenzie Lev Stulberg Natalia Bryantseva Varel Freeman Stuart Ferguson Ramzi Al-Heureithi Gregory Schtulberg * Independent Non-Executive Director 38