Gabelli & Company s 28 th Annual Pump, Valve & Water Systems Symposium

Transcription

1 NYSE: GHM February 22, 2018 Gabelli & Company s 28 th Annual Pump, Valve & Water Systems Symposium James R. Lines President & Chief Executive Officer Jeffrey F. Glajch Vice President & Chief Financial Officer 2018 Graham Corp. 1

2 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as expects, estimates, confidence, projects, typically, outlook, anticipates, believes, appears, could, opportunities, seeking, plans, aim, pursuit, and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, expected expansion and growth opportunities within its domestic and international markets, anticipated revenue, the timing of conversion of backlog to sales, market presence, profit margins, tax rates, foreign sales operations, its ability to improve cost competitiveness, customer preferences, changes in market conditions in the industries in which it operates, changes in commodities prices, the effect on its business of volatility in commodities prices, changes in general economic conditions and customer behavior, forecasts regarding the timing and scope of the economic recovery in its markets, its acquisition and growth strategy and the expected performance of Energy Steel & Supply Co. and its operations in China and other international locations, are forward-looking statements. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation's most recent Annual Report filed with the Securities and Exchange Commission, included under the heading entitled Risk Factors. Should one or more of these risks or uncertainties materialize, or should any of Graham Corporation's underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation's forward-looking statements. Except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this slide presentation. This presentation will discuss some non-gaap financial measures, which Graham Corporation believes are useful in evaluating its performance. You should not consider the presentation of this additional information in isolation or as a substitute for results compared in accordance with GAAP. Graham Corporation has provided reconciliations of comparable GAAP to non-gaap measures in tables found in the Supplemental Information portion of this presentation Graham Corp. 2

3 Introduction to Graham Corporation Engineered to Order (ETO), custom fabricated equipment and solutions provider Key markets: Refining Petrochemical Q3 FY18 TTM Sales $81.0 million Power U.S. Navy Power 15% Navy/Other Refining 33% 22% Chemical/ Petrochemical 29% Founded: 1936 IPO: 1968 Market capitalization Recent price $20.43 NYSE: GHM $ million 52-week range $17.97 $24.03 Avg. daily trading volume (3 mos.) 29.2k Common shares outstanding: 9.8 million Annualized dividend/dividend yield $0.36 / 1.8% Ownership: Institutional 75.6% Insider 2.8% Fiscal year end March 31 Note: Market data as of February 14 [Source: S&P Capital IQ]; ownership as of last filing date 2018 Graham Corp. 3

4 Wide Range of Projects Project Types % of GHM Sales ASP* ASP* Range Lead Time Large Orders ~ 2/3 $800,000 $250k-$30 million 9-18 mos (Navy: 2-5 years) Short Cycle Orders ~1/3 <$10,000 $500-$250k 1 week - 6 months * ASP: Average Selling Price 2018 Graham Corp. 4

5 Strategically Addressing Key Markets Relative importance Key End Markets Market Size Crude Oil Processing/ Refining >$150 million annually Chemical/ Petrochemical >$150 million annually U.S. Navy ~$50 million annually Power >$250 million annually % of GHM Sales New Capacity Revamps/ Retrofits* Spares/ Replacements* 25-35% Significant Significant Significant 25-35% Significant Moderate Significant 10-15% Significant Not meaningful Not meaningful 15-20% Moderate Significant Significant Other ~10% Significant Not meaningful Significant * Revamps/retrofits and spares/replacements are derived from the installed base 2018 Graham Corp. 5

6 Graham End Market Key Differentiators Graham provides unique value before and throughout project life cycle Consultative Selling Platform Complex Project Management Aptitude Provide engineering and equipment scope analysis regarding Capex, Opex, and best way to achieve user s operating objectives. Able to provide fast, accurate and detailed analysis. Value provided to market before order is placed. Ability to efficiently and effectively stop and start, as needed, throughout project life. Must have this capability. Responsive Operating Model Low volume / high mix operations model where engineering change orders occur frequently while in fabrication. Custom Fabrication to Tight Tolerances Unique capability to custom fabricate large weldments, in special metallurgy to exacting tolerances. Strong quality control with objective quality evidence Graham Corp. 6

7 Investing to Strengthen GHM Performance Lead time reduction Strengthen 1 st pass yield quality Continuous improvement Sales structure CapEx M&A 4Ds of execution Quick response office cells Performance management Topline Growth Improvement Lever Profit Reduce Earnings Greater Improvement Volatility Customer Value 2018 Graham Corp. 7

8 Graham s Channel Management Structure Lapeer, MI Operations North America 30* Batavia, NY HQ & Operations Gulf Coast LA Perf Improvement Ctr EMEA 15* Asia 4* Suzhou, China Sales Office Houston, TX Sales Office Latin America 7* * Number of independent sales representatives in region 2018 Graham Corp. 8

9 Early Signs of Market Improvement North America refining orders drove increase in backlog at 12/31/17 GHM FY2018 Q2 - Q4 may represent cycle bottom results Cycle Recovery Goals Strong Recovery/ Revenue Growth >17% Average EBITDA Margin* >12% Average ROIC* * Average Cycle performance 2018 Graham Corp. 9

10 Gabelli & Company s 28 th Annual Pump, Valve & Water Systems Symposium NYSE: GHM February 22, Graham Corp. 10